Michigan schools have been affected by the coronavirus pandemic in so many ways. Having just ended the school year, local school board members are now turning their attention to the challenges of crafting a balanced budget for the upcoming year that begins in September. The federal government has made $350 million available to help schools navigate the financial effects of the pandemic. The funds are intended to serve all students; however, the method used to allocate them favors some districts over others, creating winners and losers.

Facing up to a $700 per pupil state aid cut for the current and/or next fiscal years, Michigan school districts are scrambling to piece together budgets without a clear picture how the state will balance the School Aid Fund budget $1.1 billion shortfall. Districts will get some federal financial help to meet budget demands arising from the pandemic and likely state aid cuts through the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in late March. 

Because of the allocation method used to distribute CARES Act dollars, the amount of per-pupil funding received by local and charter school districts varies greatly.  Detroit, the state’s largest district receives nearly $1,700 on a per-pupil basis. This is more than twice the expected $700 per-pupil state aid cut. 

This is good news for Detroit. It plans to use its money to avoid teacher layoffs, pay cuts, and program eliminations. Because others will receive nothing close to Detroit’s per-pupil allocation, the federal funds (average of $200 per-pupil) will not completely offset state aid cuts and the possibility for classroom impacts.

What does this variation in federal stimulus funding look like and what does it mean for school budgets facing state aid cuts of $700 per student?

Elementary and Secondary School Emergency Relief Fund

While school groups nationally lobby Washington for more school stimulus, thus far, Congress has enacted one relief package to assist local school budgets coping with the fiscal pressures associated with COVID-19. The CARES Act directs $13.2 billion for elementary and secondary education through the Elementary and Secondary School Emergency Relief Fund. States receive this funding in the same proportion as their 2019 federal funding allocation under Title I, Part A of the Elementary and Secondary Education Act (Title I for short). Title I provides financial assistance to districts for children from low-income families to help ensure that all children meet challenging state academic standards. 

The Elementary and Secondary School Emergency Relief Fund (or ESSER) requires 90 percent of the funding allocated to be distributed to local districts (including charter schools) to meet unanticipated expenses directly caused by the pandemic (10 percent is reserved for governors to use for emergencies). States, similarly, are required to use the 2019 Title I allocation formula for dividing the funds among districts. 

Michigan received $390 million in ESSER funds and has $351 million to share with local districts, including charter schools. Just as state allocations are based on Title I provisions, so is the formula for states to distribute funds among districts. While regular Title I funds must be used for programs and services benefitting low-income students, districts are allowed to use ESSER funds for the benefit of all children. Few restrictions are imposed on the use of CARES Act funding; however, dollars are only available one-time and must be spent over the next two years. Given the current condition of the state budget, districts are likely to program the dollars to help offset state education spending cuts.

Detroit’s Haul of Title I Funds
The main public school district in Detroit, Detroit Public Schools Community District (DPSCD) receives nearly one-fourth of Michigan’s total ESSER allocation, because of the way the Title I formula works, which is both complex and confusing. 

Generally speaking, it directs greater funding to areas with a high number or percentage of children from low-income families. Student population is also a key determinant with higher weights provided to larger districts. 

What this means is, the most funds are directed to the largest and poorest districts. The top-ten districts receiving regular Title I funding on a per-pupil basis include Flint, Pontiac and Detroit. And with the ESSER stimulus funds, they also benefit the most.

Certainly the largest, and traditionally one of the poorest districts in the state (80 percent of DPSCD’s 50,000 students are economically disadvantaged), Detroit is a huge beneficiary of the Title I formula. It will receive $85 million, or nearly one quarter, of Michigan’s $350 million ESSER funding (the next 23 districts, combined, don’t receive the same share Detroit does). On a per-pupil basis (again, these funds are not limited to serve low-income students), DPSCD receives $1,685 compared to an average of less than $200 per pupil statewide.

As we explained in our previous blog, Detroit’s allocation of CARES Act dollars ($85 million) will largely offset estimated state aid cuts over the next two fiscal years; this will allow the district to avoid teacher layoffs and salary reductions, while maintaining all of its current academic programs. The wide variation in federal funding amounts means that, in a handful of communities, ESSER funds will have a much greater role to play in helping schools cope with the fiscal impacts of the pandemic and coming state budget cuts. However, for most, the federal funds don’t go far enough.

Winners and Losers under ESSER

The pandemic has disrupted school budgets across the country. States, facing budget cuts themselves, are limited in the relief they can provide to local schools to help them transition to new learning environments, maintain healthy and safe classrooms, provide nutritional services and equip students with required technology to engage virtually. This is why the federal CARES Act funding is most needed. 

However, the decision to use the Title I formula to distribute ESSER dollars for federal pandemic assistance creates winners and losers among districts because the funding is intended to serve ALL students, not just those in a state’s largest and poorest districts. All districts and all students are impacted by the pandemic effects. It is the case that poorer districts have been hit particularly hard. But it is also true that no district has been spared entirely. 

At the same time that the federal government is targeting poor districts with additional financial resources, the State of Michigan is contemplating uniform state aid cuts. All districts are preparing budgets for the next fiscal year based on an equal, per-pupil cut in their state aid (up to $700).

Detroit’s substantial allocation of Title I/ESSER funds (nearly 25 percent of the total) skews the district level funding picture. This chart shows the average per-pupil amount for all districts (traditional and charter schools) and those in Wayne County, including a breakout by type of district (traditional vs. charter) in Wayne County. We focus on Wayne County because over 40 percent of the ESSER funding will go to districts in the county. Further, estimated funding amounts are presented both with and without DPSCD included to show the effect that Detroit’s allocation has on the calculations.

Federal Stimulus Funding per Student, Michigan and Wayne County (excluding DPSCD)

Source: Michigan Department of Education; Center for Educational Performance and Information

Statewide, the average district receives $244 per student. However, excluding Detroit’s share of CARES Act funding shows that the actual amount will be closer to $190 per student, a $50 difference. The median district will receive $203 per student. Across schools in Wayne County (and excluding Detroit) the average federal funding amount is $280 per-pupil. Overall, districts in Wayne County do slightly better than the statewide average even with Detroit excluded. This makes sense because of the higher concentration of poor students attending Wayne County schools, both traditional and charter. 

Also of note, Wayne County charter schools receive $437 per-pupil from the ESSER compared to $217 for traditional public school districts in the county. Again, this is unsurprising given charters’ higher concentration of students eligible for free or reduced-price lunch and the way Title I funds flow.

As districts brace for state aid cuts, the CARES Act funding will help cushion the blow.  The help will vary by community; for some, like Detroit, it will make a big difference. But, for most, the federal stimulus will fall well short of making up for the lost state revenue; only 37 districts (of the more than 800 districts) will receive federal funding equal to or greater than the estimated $700 per pupil reduction in state funds. At $190 per-student, the federal dollars will cover about 28 percent of the state aid cut for the median district. Tough budget decisions lie ahead for local schools.