Multiple districts — School districts are facing a more “normal” financial outlook as they head into the 2024-25 school year due to the end of COVID-relief dollars that padded district coffers over the past four years.
“Things are certainly going to get back to normal. The last three to four years have been incredibly abnormal,” said Kevin Philipps, Kent ISD assistant superintendent of administrative services.
Unfortunately, however, the return to normalcy means tighter budgets, say education leaders, who faced that reality when approving 2024-25 financial plans last month. They are reducing expenditures, eliminating some positions and programs and spending down fund balances built up in recent years. They are also looking ahead to possible impacts of inflation and declining enrollment on fiscal solvency.
“We are right back into our homeostasis state, which is trying to survive with the impact of declining enrollment on an annual basis,” said Wyoming Public Schools Associate Superintendent Matt Lewis, while noting the district is in a sustainable place currently. “We are trying to make sure we are as lean as possible administratively. We are back to scrutinizing class sizes and staffing levels.”
An influx of funding over the past few years came from a total of $264.15 million in Elementary and Secondary School Emergency Relief Funds spread across Kent County’s 20 school districts in three allotments as part of the 2021 Coronavirus Response and Relief Supplemental Appropriations Act. On top of that, districts have received much larger than typical state per-pupil foundation allowance increases and extra funds known as “categoricals,” which are earmarked for specific purposes, Philipps said.
“The combination of the two (state and federal dollars) infused as much money as I’ve ever seen in my career, for sure,” Philipps said.
Now, more than four years after the pandemic began, districts are coming up on the final deadline to spend ESSER funds. Deadlines to spend ESSER I, II and III allotments were staggered, with Sept. 30, 2024 the deadline for ESSER III, the largest allotment.
Difficult Decisions Expected
Grand Rapids Public Schools received more than $100 million in ESSER funds, and a vast majority of those dollars have been spent ahead of their Sept. 30 expiration, said Rhonda Kribs, the district’s chief financial officer.
‘Having new libraries, new furniture, updated classroom technology — all of those things contribute to us being in a better place than we were, or would have been able to be in, if we didn’t have those COVID funds.’
— GRPS Chief Financial Officer Rhonda Kribs
Kribs said the cash boost allowed the district to buy cleaning supplies and other essentials, hire tutors and mental health therapists, upgrade technology, give stipends to employees, make facility improvements including library renovations and furniture replacements, bolster its summer school program and build up a fund balance that had previously lagged.
As the dollars run out and the district eyes an operating deficit for the coming school year, staying in good financial standing is going to require some work.
“We’re looking at how we’re spending our money,” Kribs said. “There will be hard decisions in our future again. Areas where we may have added to get through the pandemic, we may be needing to make reductions.”
In its 2024-25 budget, the district is estimating around $260 million in revenues and $271 million in expenses, which is an operating deficit of $11 million. Budgeted operating deficits are not unusual for GRPS, Kribs said, but they’re also not normally this large.
The expiration of ESSER funds is one of many compounding factors taking a toll on the district’s finances, along with inflation and declining enrollment, Kribs said.
The district is expecting a 12% fund balance in the coming school year. That’s down from 19% in 2023-24, but up significantly from the state minimum 5% mark, where GRPS often found itself prior to the pandemic, noted Kribs.
“One of our goals going into this influx of a large amount of dollars was to be in a better place when we came out of it than when we went into it,” she said.
One key area that will be affected is summer school, which has used about $2 million in ESSER dollars annually. The program was previously funded using Title I dollars and will revert back to that once the aid runs out.
Title I isn’t robust enough to support the program the way ESSER has, so GRPS leaders are going to have to reassess what summer school looks like next year.
Kribs said some supplemental resources may have to be discontinued as well; before making any decisions, the district’s curriculum team will work with teachers to identify which services have been used and which ones have been working.
Kribs said there are no plans to tighten belts with staffing cuts, but, she said, “It’s going to be a fine line to walk for the next several years.”
Closing down several underused buildings in the coming years as part of the “Reimagine GRPS With Us!” plan and the November 2023 bond will alleviate financial hardship in the long term, but it will take time for the district to reap those benefits.
“It’s a kind of expense avoidance,” Kribs said. “The hope is that, down the line, the results of the bond work will help right-size the district.”
Asked if GRPS managed to meet its goal of being in better shape after ESSER than it was before, Kribs did not hesitate.
“Yes,” she said. “Having new libraries, new furniture, updated classroom technology — all of those things contribute to us being in a better place than we were, or would have been able to be in, if we didn’t have those COVID funds.”
‘A Double-Whammy’
Like GRPS, Cedar Springs Public Schools also faces inflation and downward-trending enrollment. The end of ESSER is making for a “double-whammy,” said Cedar Springs Superintendent Scott Smith.
‘Financially we would have been devastated had we not had the ESSER funds. We had to make so many changes so quickly that we would be in a real difficult situation had we not had those extra monies available to us.’
— Cedar Springs Superintendent Scott Smith
However, Smith noted the district is “not in panic mode.”
“At the end of the day, it’s not a crisis,” Smith said. “We just have to figure it out.”
Cedar Springs received around $7.9 million in ESSER funds, spending those dollars on academic interventions, instruction, maintaining staff levels, counseling and social-emotional support, technology and furnishings.
The ESSER dollars are on track to be entirely spent by the end of September, and now the district has to reevaluate its financial position. The goal is to reduce spending by around $1.3 million in the coming year.
“We wanted to try to land things slowly and do targeted reductions over a period of time,” Smith said, adding that the district has a healthy fund balance that offers “some room to work” in clarifying which investments have been the biggest help to students.
Smith said the district will inevitably have to make some cuts, and there could be some layoffs here and there, but right now the district is focusing on consolidating wherever possible.
For instance, in the 2024-25 school year, eighth-graders from Red Hawk Intermediate will move into the middle school with sixth- and seventh-graders, all under one principal. This will save around $450,000 in duplicated costs, Smith said. District services will then move into the Red Hawk building, and the current, outdated administration building will likely be taken down.
“You just have to be thoughtful and creative,” Smith said. “What can we do to get the most momentum possible out of our previous resources of time and money so we can maximize our students’ growth?”
Though readjusting will be a challenge, Smith said Cedar Springs is in a better position than it would have been without the aid dollars.
“Financially we would have been devastated had we not had the ESSER funds,” he said. “We had to make so many changes so quickly that we would be in a real difficult situation had we not had those extra monies available to us.”
Leaner Times Ahead
In Wyoming Public Schools, the district finished the 2023-24 school year with a $1 million surplus, which is attributable to ESSER funds and three historically high consecutive per-pupil foundation grant increases. By Sept. 30, the district will have spent “every penny” of its $12.4 million in ESSER dollars, Lewis said.
He said the end of extra funding along with declining enrollment is leading to a much leaner financial picture moving forward. District enrollment is projected at 3,700 students, down from 3,776 this year. Fewer students are beginning kindergarten than their senior year, he said.
The district hasn’t made cuts, though it did lay off five teachers as it shifts focus to more student-centered intervention.
Four layoffs were a result of eliminating teacher instructional coaches. Those seasoned teachers were moved back into classroom teaching, which bumped other teachers from their positions. Another teacher was eliminated due to a reduction in K-4 classroom sections. Four of the laid-off teachers found other positions in the district, and one did in another district, Lewis said.
At Kenowa Hills Public Schools, Superintendent Jerry Hopkins said the district was intentional about spending its $5.2 million in ESSER funds to make sure investments were sustainable over time. The plan now is to use funds from other sources to continue funding reading and math intervention positions created in response to students’ learning gaps during and post-COVID.
“We had to be strategic about how we deployed our resources for students. We’ve seen the benefits and want to continue those benefits,” Hopkins said. “We hope to mitigate those (learning) gaps and hope at some point those positions won’t be needed. We plan to retain people and move them to different positions they’re qualified for.”
Kenowa Hills also plans to retain contracts with HealthBar for school nurses added in 2020 for “at least” the 2024-25 school year, and with Pine Rest for the School Assistance Program.
The Outlook Ahead
The state increased the per-pupil foundation allowance $458 to $9,608 for 2023-24, which followed a $450 increase for 2022-23. The state also allocated hundreds of millions for other district needs including school safety and mental health, special education and offsetting transportation costs.
The state’s $23 billion education budget approved June 27 does not include a per-pupil funding increase for 2024-25, but instead allocates $598 million to offset district payments to the Michigan Public Schools Employee Retirement System. The payments are equivalent to a 4% — or $400 per pupil — increase, according to information from the Governor’s Office.
In years ahead, continued funding will be determined by a variety of factors related to the economy, said Kent ISD’s Philipps.
“It’s been a long time since we’ve been in a true recession. At some point that’s going to happen. … At that point, can the state continue to afford the mental health and school safety funding, transportation funding and other things added to the School Aid Fund that have made districts a lot healthier financially?”
Whether districts can maintain staffing numbers is also a question moving forward.
“We are coming off this very inflationary economy which drove up private market wages,” Philipps said. “As districts have been going to the negotiating table, they’ve given bigger raises than in the past. What was a competitive salary five years ago, isn’t that same salary now. If funding slows down to a more moderate crawl, can those positions be afforded going forward?”
Reporters Riley Kelley and Alexis Stark contributed to this story.
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