With ESSER expiring, states are in no position to pick up the slack

Remember ESSER? The money expires this month

With the approaching expiration of the last of the Elementary and Secondary School Emergency Relief (ESSER) funds, some district leaders might have expected / hoped that they could convince state legislators to help plug the gaps. No one is rooting for districts to scale back on summer, afterschool, or tutoring programs. No one wants to be blamed when schools lay off thousands of teachers, nurses, or counselors.

Surely state leaders could be convinced that they need to step up their support to prevent these cuts from happening? Right?!

Well, maybe, except that states are not in a good position to do that. The chart below comes from a recent issue brief from the Pew Charitable Trusts. It shows inflation-adjusted state tax revenues. In general, revenues tend to rise during good economic times, and then fall during recessions (the years shaded in light gray).

Note the incredibly steep increases in 2020-2022. Thanks in part to an influx of $800 billion from the federal government, the states were flush with cash, and they were able to direct big new increases to education funding as well.

But that surge of new revenue peaked in 2023. In real terms, state tax revenues fell by 9% in 2023.

These are national numbers, but Pew has also run the state-level data. Revenue drops in California, Connecticut, and New York were largely tied to declines in the stock market, while decreases in Arkansas, Iowa, and Minnesota were the result of state legislators adopting significant tax cuts.

Now, the budget situation nationally is far from dire. Many states used the revenue surge to bolster their reserve funds. Many districts did as well. Speaking very broadly, they have sufficient revenues at the moment to cover their normal operating expenses.

But the ESSER funding cliff is real. As of a year ago, districts still needed to spend down about $67 billion in ESSER funds. As districts spent that money over the last year, they used it to pay for extra programming, purchasing, and staffing. That money is now all about gone, and the states are not in a position to fill the gap.