With COVID emergency funds set to expire, Mass. education leaders warn districts of budget shortfall

School districts could be facing a fiscal cliff when pandemic-era federal funds start to run out and "are either going to need to develop those wings or prepare for a pretty significant fiscal crash," former Education Secretary James Peyser said Thursday.

The Baker administration's education chief facilitated a seminar at the Harvard Kennedy School on Thursday with Marguerite Roza, a research professor and director of Edunomics Lab at Georgetown University who warned that there is a looming crisis facing districts that have been relying on Elementary and Secondary School Emergency Relief money to help cover recurring costs like operations and salaries. The deadline for districts to spend the cumulative $128 billion that remains in ESSER money is September 2024.

Roza used a budget-planning spreadsheet from Spokane Public Schools to illustrate the issue that other districts around the country could be facing: The district projected expenditures to exceed revenues by $7.7 million in the current school year and by $12 million in the 2023-2024 school year. But as ESSER money expires, that gap is estimated to grow to about $62 million in 2024-2025 and to more than $114 million the school year after that.

ESSER funding for Massachusetts was delivered in three tranches: $200 million at the start of the pandemic in March 2020, $739 million in December 2020, and $1.66 billion more in April 2021. As of November, only about one-third of the roughly $2.9 billion in Bay State ESSER money had been spent, according to the EdImpact Research Consortium. The Department of Elementary and Secondary Education did not respond Thursday to a request for an updated figure.

The availability of remaining ESSER money could come into play as the new Healey administration and state lawmakers debate education funding in the state budget and how much of the revenue from the new income surtax to put towards education initiatives.

"There's been a flood of federal dollars that have come into states, localities and school districts and certainly from my vantage point anecdotally here in Massachusetts, some of those dollars have sort of been kept on the sidelines out of uncertainty for what's going to happen with state and local revenues," Peyser said, adding that "there's a significant amount of money that is being committed or is being planned for new initiatives or adding to general revenues."

Peyser added, "That is setting up a potential problem because the rub, of course, is that these federal funds run out in about 18 months or so. And so there are a lot of school districts that may be approaching or falling off that cliff that are either going to need to develop those wings or prepare for a pretty significant fiscal crash."