School districts scramble as federal funding dries up

Nestled in the foothills of my home state of North Carolina, Alexander County is typically quiet and unassuming. However, recent developments have rudely interrupted this peace, thrusting the county’s primary employer, the local school system, to grapple with an enormous financial challenge for the small community.

This month, Alexander County Schools will have to confront the impending end of the Elementary and Secondary School Emergency Relief Fund (ESSER) which will leave them with a $1.5 million shortfall. With enrollment down by 900 students over the past decade and projected to decrease further, the district faces tough decisions, including the proposed elimination of 10% of its staff. Alexander County is merely a microcosm of what is happening in schools across the state and the nation. 

Since the pandemic’s peak four years ago, federal and state funding for various authorized programs is only now slowing down. However, as this additional funding was taken for granted, many counties across North Carolina have come to find shortfalls on their balance sheets. 

Nationwide, school districts received $276 billion in federal aid for COVID-19 recovery and rebuilding efforts. Despite these efforts, public school enrollment dropped from almost 51 million students at the start of the 2019 school year to just 49.4 million in 2020 and 2021. Although that number rose slightly to 49.6 in 2022 with a particular boost to pre-kindergarten enrollments, it couldn’t make up for the loss of federal and state funding due to declining student numbers. With COVID-relief funding drying up, and with more and more families pulling students from traditional public schools, identifying solutions to bridge these funding gaps has become increasingly challenging.

Of course COVID-era levels of funding could never continue in the long term. However, with vaccines becoming available less than a year after lockdowns swept the nation, many policies were not rolled back until months or years later.

For instance, exactly three months after the FDA issued an emergency-use authorization for Pfizer’s vaccine, the Biden administration signed another $1.9 trillion stimulus bill into law. Meanwhile, the Federal Reserve also continued its drastic, expansionary monetary policies until March 2022, when interest rates were changed for the first time in nearly two years. 

While federal fiscal and monetary balance sheets never went back to pre-pandemic levels, the winddown in federal funds left state and local governments in a precarious position: What should they do about this decrease in funding? 

The obvious answer may seem to be to reduce spending to pre-pandemic levels, but given the rampant inflation over the past three years, this would mean a significant reduction in government services. With the 2024 elections only months out, state and local officials who lack the luxury of running massive deficits, like those at the federal level, will either have to adopt fiscal responsibility — and the immediate downsides — or kick the can down the road and continue business as usual.

Although Alexander County Schools is only beginning to feel the impact of the end of federal funds, a much more dire situation is already unfolding in Alaska. While the state may seem to be a barren, icy tundra for those outside its frigid confines, what’s happening there could be a bellwether for what’s to come across the nation. 

The Fairbanks North Star Borough School District started the new year with a daunting $28 million deficit. To bridge this gap, the district, as well as many others in Alaska, turned to the state legislature in Juneau for help. However, state legislators are preoccupied with a federal investigation into the state Department of Education’s misallocation of COVID-era funds, potentially jeopardizing future federal grants. 

Fairbanks officials decided to move forward with an ordinance proposing a $10 million increase in borough taxes. Voters overwhelmingly rejected this proposal, largely due to controversies over the school board’s recent decisions to implement a curriculum centered on critical race theory and LGBTQ issues. These contentious changes had already prompted a significant number of students to switch to homeschooling or private education, intensifying opposition to the tax hike. With many states reporting deficits in the current or upcoming fiscal year, it will likely be up to local politicians to figure out their finances. 

Furthermore, the recent wave of school choice bills is expected to provide new opportunities to students across the US, especially in rural areas like Alexander County where private schools would not be feasible otherwise. With the expansion of school vouchers and other tools, rural areas now have more educational options than ever before, including private schools, charter schools, micro-schools, and high-quality virtual schools. This expanded access is transforming education in rural communities, providing families with the flexibility to choose the best learning environments for their children.

In the case of Alexander County Schools, the school board has chosen both the status quo and staff cuts. On June 6, the Alexander County Board of Education announced a contract to install turf on the high school football field and expand the track, funded partly by $2.5 million from last year’s state budget, complicating its balance sheet even further as enrollment drops by almost 100 students. School districts across the state face similar choices.