In a Nutshell

• Michigan schools will receive $5.2 billion in total federal COVID relief discretionary funding over the life of three separate installments of aid.
• Of the total $3.5 billion in district spending plans approved to date, 39 percent is dedicated to general school operations while 33 percent has been set aside for a variety of academic interventions and 18 percent will be used for building and facilities improvements.
• There are some notable differences in how districts across the state plan to allocate their portions of the relief funding.

The COVID-19 pandemic solicited a multi-billion-dollar response from the federal government to assist schools in reopening their doors, mitigate the spread of the virus, and address students’ varied educational and health needs arising from the public health emergency. Within weeks of schools being shut down and children being forced to learn from home in early 2020, Congress responded with its first wave of emergency funding to schools. Subsequent aid packages followed.

The steady stream of earmarked dollars flowing to local schools came through three separate installments of Elementary and Secondary School Relief (ESSER) funding. Across all three ESSER allocations from March 2020 to March 2021, the federal government committed $190 billion to aid elementary and secondary schools. The last, and by far largest ($122 billion), round of relief funding was approved a year ago under the American Rescue Plan Act.

At least 90 percent of each state’s ESSER allocation must flow directly to school districts based on each district’s share of its state’s annual federal Title I award. The remaining 10 percent is reserved for each state to program at its discretion. Congress included few restrictions with the funding, instead providing districts with great latitude to use the funds to meet their specific needs.

However, almost an entire year after the passage of the American Rescue Plan Act, parents, students, teachers and taxpayers had little idea how Michigan schools, collectively, plan to use $5.2 billion of federal relief funding earmarked for school districts. Recently, the Michigan Department of Education shared information about districts’ plans for spending the federal dollars. This data provides some, but limited, insights into how schools are programming the federal largesse.

As schools approach the September 30, 2022, deadline set by Congress to use their first installment of relief funding, it is appropriate to take a step back and examine some of the emerging financial trends associated with this funding – including district allocations, planned spending, and actual spending to date. Further, a deeper examination of the historic federal investment in public schools is particularly prudent given the fact that Michigan budget writers are preparing to finalize another record-breaking state School Aid spending plan in the coming weeks.

Financial Trends in the Use of COVID Relief Dollars

Since March 2020, Michigan has been awarded a total of $5.8 billion in ESSER funding. Based on the 90/10 split directed by Congress, the state’s 800-plus public school districts (both traditional public and charter public) will receive $5.2 billion of this total, equating to an average of $3,750 per student. 

As we’ve noted in previous blogs, these relief dollars are not shared with districts on an equal per-student basis. The Title I formula drives more funding to districts that enroll proportionately more low-income students. For example, Flint Community Schools, where 92 percent of the 3,000 current-year students are considered economically disadvantaged, will receive over $51,000 per student in combined ESSER formula funds. Detroit, the largest district in the state where 82 percent of the 49,000 students are economically disadvantaged, is slated to receive a combined $26,000 per student. At the other end of the spectrum, nearly 100 school districts will receive less than $1,000 per student in combined ESSER formula allocations.

The table below shows average per-pupil funding allocations trends across districts based on the National Center for Education Statistics location groupings. On average, city districts will receive $8,581 per student, more than two times the statewide average ($3,751). Less than one-quarter of Michigan’s 1.4 million public school students attend city districts (e.g., Detroit and Flint), but these districts collectively receive more than one-half of all ESSER formula funding. This is because city districts enroll many more low-income students than districts located elsewhere.  Per-pupil amounts across the other district locales are much similar at $2,100 to $2,400.

Federal ESSER Formula Allocations by District Location

Source: Michigan Department of Education, COVID relief budget requests

In order to access relief funds, each district was required to submit their spending plans for each pot of dollars to the Michigan Department of Education for approval. A review of these plans highlights a wide range of uses, from purchasing cleaning/sanitation supplies to investing in school facilities to paying existing staff salaries. Given the wide latitude Congress provided to use these funds, it is not surprising that there is no typical distinct spending plan. Further, districts have the freedom to modify their plans over the course of the federal grant period and many have been taking advantage of the flexibility in the face of rising prices, supply chain issues, and labor shortages.

As of mid-April districts had submitted initial budgets covering $1.7 billion (94 percent) of the $1.8 billion allocated under the two earlier relief packages – $350 million of ESSER I funding and $1.5 billion of ESSER II funding.  Also, the state data reveal that districts had submitted plans to program $1.8 billion (53 percent) of the total $3.4 billion allocated to them under last year’s American Rescue Plan Act (ESSER III). Overall, the Michigan Department of Education has received, and approved, plans tied to $3.5 billion, or two-thirds, of the total $5.2 billion of ESSER funding earmarked for Michigan schools.

While the federal law provides schools with considerable discretion and few restrictions on the use of funds, it does list 20 broad allowable uses. Further, the state’s grant application process required districts to align each spending item with one of these allowable uses. 

By grouping the allowable uses into a handful of major categories and looking at planned spending across the different waves of federal aid, it is possible to see some general trends in the use of funds. This includes statewide trends as well as trends across similarly situated schools. The chart below provides a statewide picture of schools’ current approved plans to use $3.5 billion of the total $5.2 billion they have been allocated.

Districts’ Planned Spending of Federal COVID Relief Funding

Source: Michigan Department of Education, COVID relief budget requests

Addressing students’ academic needs through various interventions accounts for over one-third of planned relief fund spending. Budgeted items/services include new/improved curriculum, extended school days/year, educational technology purchases, and tutoring services. 

Plans to improve buildings and related facility projects is the next largest category for the use of these federal funds. Based on approved budgets to date, Michigan schools plan to spend $641 million (18 percent) on capital outlay projects; projected total spend in this category approaches $1 billion once districts access their full allotments of relief dollars. Governor Whitmer’s budget recommendation for next year includes $171 million towards school infrastructure projects.

The largest share of schools’ overall planned spending, accounting for 39 percent, falls into a catch-all category of “other”. This is not too surprising given the broad nature and flexibility provided in federal and state guidance for the use of ESSER funding. Given the varied demands arising from the pandemic across the nation’s schools, it makes sense that this catch-all category would capture the lion’s share of planned spending. 

A separate analysis of planned spending broken down by specific federal relief package suggests there has been a gradual shift in priorities. We found that the combined budgets for the two earliest rounds of relief (ESSER I and ESSER II) leaned much more heavily into the “other” category (55 percent), while the ESSER III budgets show a larger commitment to academic interventions (47 percent). This makes sense as most districts likely employed a “first-in, first-out” spending approach to allow them to devote earlier rounds of funding to current operations. Moving forward, schools are shifting focus to provide more attention and resources to address the academic disruptions from COVID. These efforts are also driven, in part, by a provision in the American Rescue Plan Act that requires a minimum of 20 percent of the resources to be dedicated to addressing student learning loss.

Planned spending based on where schools are located has some notable variations (see the chart below).  City districts, as a group, generally plan to spend more on the catch-all “other” allowable use category (46 percent) compared to districts in other locales (29 to 32 percent). As a result, their share of total spending committed to academic interventions is 33 percent and the lowest among district types (towns plan to spend the most on this category at 39 percent). This might be partially explained by the fact that the city district grouping has only programmed 62 percent of its total federal allocation as of mid-April. Districts in other locations have budgeted at least 75 percent of the federal dollars made available to them.

Federal COVID Relief Planned Spending by District Location

Source: Michigan Department of Education, COVID relief budget requests

This notable difference with city districts may be explained, in part, by timing issues. With the general shift in mix of spending observed with the latest round of federal aid (ESSER III), it is likely that city districts that have a greater share of dollars to still to commit will direct relatively more of those future dollars to academics. This will likely bring city district spending shares more in line with other districts across Michigan by the time that all federal relief fund budgets have been approved.

Again, these are initial spending plans and many schools may shift their priorities over the duration of the various grant periods in response to student needs and community input. Overall, Michigan schools appear to be prioritizing the earlier rounds of federal aid towards maintaining their current operations, while there is a greater emphasis on student academic needs with the planned use of the most recent round of aid. Whether plans align with actual spending will not be known for some time because schools still have two and a half years to exhaust their latest round of funding. As of mid-April, Michigan schools have spent less than $1 billion across all three relief packages, leaving more than $4 billion unspent (nearly all of funding from the American Rescue Plan Act).