John Locke Update / Research Brief

Reality Morphs Covid Funds into Windfall for NC K-12 Education, Part 1

posted on in Education, Education (PreK-12), Spending & Taxes
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  • Under the growing threat of a coronavirus combined with the government-imposed economic shutdown, Congress approved $6 billion in Covid-19 relief funds for K-12 public schools in North Carolina
  • A recovering economy has taken the worst-case scenarios off the table and resulted in more aid for K-12 schools than at any time in recent history
  • These dollars should be returned to taxpayers; otherwise, state leaders should take proper steps to ensure they are spent wisely and accomplish intended purposes

The year 2020 is not one many parents, students, and educators will soon forget. In mid-March Gov. Cooper’s executive orders closed schools and businesses and slowed the economy to a crawl. Classroom learning ended, and students and teachers were thrust into the new world of virtual learning. North Carolina’s unemployment rate ballooned from 3.9% to 13.5% in April 2020. The number of unemployed North Carolinians grew to over 634,000 and peaked in May 2020 at over 647,000.

A host of gloomy scenarios engulfed public education. A stumbling economy would fail to generate sufficient tax revenue for schools. To make matters worse, costs for school districts are usually expected to rise during an economic downturn. A decline in teacher turnover because of a bad economy usually adds to salary and benefit costs. In addition, rising unemployment usually boosts the number of students living in poverty and normally increases public school enrollment since some families are not able to meet the cost of private school tuition. At the time, those fears generated calls for massive layoffs among public school employees and cutbacks in services.

Covid-19 Legislation

To deal with the gloomy prognostication, educators began to ask for additional funding to maintain staff and service levels, deal with the expected loss of funding, clean schools, and aid schools transitioning to virtual learning. Lawmakers in Raleigh and Washington heard those calls, approving bills to provide state and federal aid. The General Assembly approved about $56 million in state aid.

The focus of this article, however, is on federal dollars approved via three huge federal aid packages: the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSA), and the American Rescue Plan Act (ARPA). Highlights of each include:

CARES Act (signed March 27, 2020)

  • $13 billion for K-12 education and $14 billion for higher education
  • $3 billion in discretionary funds for governors
  • Total education-related spending: $30.7 billion

CRRSA (signed December 27, 2020)

  • $54 billion for K-12 education, $23 billion for higher education
  • $4 billion in discretionary funds for governors
  • Total education-related spending: $82 billion

American Rescue Plan (signed March 11, 2021)

  • $123 billion for elementary and secondary schools, $35 billion for higher education
  • $5 billion in discretionary funds for governors
  • Total education-related spending: $163 billion

The total in Covid-19 relief package spending is $274.6 billion, of which $202 billion is designated for K-12 education. It should be noted, $274.6 billion is almost four times the size of the normal discretionary budget for the U.S. Department of Education (about $72 billion).

But back to North Carolina. By late spring, the combination of spending and improvements in the economy were having a significant impact. The money helped to shore up school districts, and a slow reopening of the economy helped to stave off layoffs and cutbacks.

Those developments took the worst-case scenarios off the table in many areas. The changes allowed many schools and school districts to look at life after Covid. Most significantly, the sheer size of Covid relief funds has improved the financial situation of schools so much so that one year later, school funding for many districts is at levels not previously seen.

How much aid is flowing to North Carolina public schools?

The North Carolina Department of Public Instruction (NC DPI) provides a document, “Summary of COVID Funding” from April 9, 2021, that lists the funds North Carolina has received or is scheduled to receive in Covid-related allotments to schools or education-related entities. Click here for highlights of the NC DPI’s “Summary.”

The money listed in these tables is money that has either been distributed or is scheduled to be distributed to North Carolina but has not necessarily been spent. In fact, some of the money will be spent over a number of years. For example, some of the money states receive from the American Rescue Plan Act (ARPA) can be spent for several years after funds are actually received.

So exactly how much money has North Carolina received in Covid relief funds? According to the NC DPI, North Carolina has received $6,029,328,880 in Covid funding fork-12 education. While some funds have come via state appropriations, the majority of funds comes via federal legislation. The three Covid relief packages have provided significantly more federal money to North Carolina than typically gets distributed through regular budget sources. The table below lists federal spending to North Carolina from the three Covid relief packages as well as K-12 federal aid funding in North Carolina apart from Covid.

How big are Covid dollars? 

Six billion is a number so large, it is difficult to wrap our minds around it. But let’s try. How much is $6 billion in Covid funding? If all the Covid funding were divided equally among all North Carolina public school students, each student would receive $3,845 in additional funding. In 2019-20, the average K-12 student in North Carolina received about $994 in federal aid. As such, North Carolina K-12 schools have received almost four times as much per-pupil Covid relief aid as they received in federal per-pupil aid last year. Moreover, $3,845 in per-pupil funding is 58 percent of the annual average state per-pupil appropriation ($6,637) and 39 percent of the total state per-pupil expenditure ($9,951). No matter how you compare it, $6 billion in Covid funding is a lot of money.

How is Covid aid distributed?

It is easy to get lost in the complexity of how the three federal programs distribute dollars. This article focuses on how aid is distributed under ARPA, by far the largest and most relevant of the aid packages.

ARPA provides about $123 billion for the ARP Elementary and Secondary School Emergency Relief (ARP ESSER) Fund. Of that amount, North Carolina is scheduled to receive about $3.2 billion. Initially, those funds are distributed to state education agencies (SEAs). The funds that each state receives are based on the proportion of Title I money the state receives. The money is intended to help states deal with impacts of the coronavirus pandemic and safely reopen schools.

SEAs can hold on to 10 percent of allocation before distributing to school districts. When SEAs use the funds, they are required to spend at least 5% on learning loss mitigation, 1% on summer learning, 1% on after-school programs, and 0.5% on administration.

The majority of ESSER funds will be distributed to school districts or local education agencies. LEAs are required to spend 20% of monies for learning loss mitigation.

Aside from the money dedicated to learning loss and suggested interventions, money can be used for a variety of other expenses, ranging from cleaning supplies to keep schools disinfected, technology to bridge the digital divide, and activities to address the needs of low-income and homeless students. Districts that receive funds have 90 days (till August 24) to develop a plan “for the safe return to in-person instruction.”

Restrictions

There are several restrictions limiting how ARPA money can be used. Districts are expected to use funds to assess and redress learning gaps. States can choose either formative or diagnostic assessments to help them plan how to distribute learning technology so that students can function effectively in the event of future closings or shutdowns.

With regards to restrictions, it should be noted ARPA does have provisions requiring Maintenance of Effort and Maintenance of Equity. ARPA limits the degree to which school districts or schools can reduce funding for K-12 education, and it also limits spending reductions in higher education and in funding for poverty programs and high-need schools and school districts. The specific language is not as strict as “supplement does not supplant” provisions, but it still provides protection to ensure stable funding for LEAs and schools serving high-need communities.

How are local schools spending ARPA funds, and what can be done to ensure school districts spend billions of dollars in Covid relief funds wisely? Those are two important questions that we will address in part 2 of this series.

For the better part of the last three decades, Dr. Luebke has been involved in improving education and expanding educational opportunity. Prior to joining the Locke Foundation, he wrote about education policy and served as the Director of Policy… ...

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