California schools gained billions during pandemic. The money is running out

After years of cash windfalls, California schools are bracing for a stretch of austerity that could jeopardize students’ already-precarious recovery from the pandemic.

An end to billions of dollars in federal Covid relief funds, declining enrollment, staff raises, hiring binges and stagnant state funding should combine over the next few months to create steep budget shortfalls, with low-income districts affected the most. 

“The fiscal cliff is going to vary,” said Marguerite Roza, director of the Edunomics Lab at Georgetown University. “The districts that got the most Covid relief dollars, those that have the most low-income students, are going to face the biggest losses.” 

In his budget proposal released in January, Gov. Gavin Newsom largely spared schools, keeping intact popular initiatives like transitional kindergarten, universal school meals, community schools and after-school programs. He proposed dipping into reserves and delaying some expenses to make up a projected multibillion-dollar shortfall.

But the exact numbers are shifting. The Legislative Analyst’s Office predicted that the shortfall may be much higher than Newsom calculated and cuts will be unavoidable. Newsom will release a revised budget in May, and the Legislature has until June 15 to pass a final budget.

Meanwhile, federal Covid relief funding for schools will end in September. In a series of grants known as Elementary and Secondary School Emergency Relief, the federal government gave California schools $23.4 billion to pay for everything from air purifiers to after-school tutoring. 

That funding was distributed based on the number of low-income students districts have. Districts with lots of low-income students got more money, which means they’ll lose the most when the funding ends. 

In the beginning of the pandemic, schools tended to spend the money on one-time expenses, like tablets and Wi-Fi hotspots for students attending school remotely. But as schools reopened, they started spending money on ongoing programs intended to help students catch up academically and recover from the mental health hardships of remote learning. That could include tutors, longer school days or summer and after-school programs.

San Bernardino City Unified used $8 million of its $230 million in Covid relief funds to beef up its after-school program. Thanks to the extra funding, the district has been able to offer free after-school activities, tutoring, transportation and mental health support at every school. 

Mia Cooper, a parent with three children in San Bernardino City Unified, said her children's after-school program has been a lifesaver. In fact, it’s the main reason they want to go to school, she said.

They not only benefit from tutoring, but they also get to enjoy ballet and acting lessons, field trips to science museums and Disneyland, robotics classes, performances by folklórico dance troupes and other fun activities. 

During the pandemic, one of Cooper’s daughters was withdrawn and depressed, but the after-school program helped her reconnect with friends and fall in love with school again. Keeping the program intact should be a priority, Cooper said.

“The kids were exposed to so many different activities and cultural things,” she said. “If a program is working for kids and we’re seeing good outcomes, I think it’s something we need to keep. … We shouldn’t lose that sparkle in kids’ eyes.”

But some district’s use of Covid relief funds could worsen their budget prospects, Roza said. Districts that invested one-time funds in ongoing expenses, such as new staff, raises and bonuses, might be headed for a reckoning. Nationwide, school staff has increased by 2% since the pandemic, while enrollment has decreased by 2%, according to Georgetown’s Edunomics Lab.

Salaries for existing teachers have risen, too. Districts in San Francisco, Oakland, San Diego and Los Angeles—all of which have declining enrollment—agreed to hefty teacher raises and bonuses in the past year. 

Still, the fiscal outlook is not as dire as it was during the 2008 recession, said Julien Lafortune, a research fellow at the Public Policy Institute of California. School funding generally in California has risen dramatically since then, lifting California from the bottom half of states in school funding to above the national average. In addition, the state’s shift to the Local Control Funding Formula a decade ago has provided more money for students with higher needs, although inequities persist.  

But that doesn’t mean these cuts won’t hurt, Lafortune said, especially for students who were most affected by the pandemic. Low-income, Black and Latino students disproportionately bore the brunt of school closures, research has shown, because they were more likely to suffer economically from the pandemic, less likely to have adequate technology at home, and less likely to have a parent available to help them with distance learning.

“It’s not like the Great Recession, but I think the challenges are greater now,” Lafortune said. “A lot of the academic progress we made was erased by the pandemic.” 

Roza worries that arguments over potential cuts in the next year will eclipse concern over learning loss. Potential school closures and teacher layoffs will inevitably elicit loud protests, but school boards should stay focused on services that directly help students, such as math tutoring and literacy, she said.

“Some districts will be focusing on staff retention instead of kids’ needs,” Roza said. 

These decisions may be so divisive that Roza predicts a high rate of turnover among school administrators and board members unwilling to make unpopular decisions. She also expects to see some districts refuse to make sufficient cuts and risk insolvency or state takeover.

Fresno Unified is among the districts facing a double whammy of declining enrollment and a large loss of relief funds. The 70,000-student district received more than $787 million in state and federal relief money, one of the largest allotments in California.

But the district was careful to build reserves, rely on state grants when possible and not overly invest in ongoing staff salaries. Instead, it used most of its money to train teachers in math and literacy, extend the school day and provide a high-quality summer program. It also brought in social workers, restorative justice counselors, attendance specialists and other staff to boost students’ mental health.

The investments have apparently paid off. The number of students meeting California’s math benchmark rose almost 3 percentage points last year, even as the state average remained unchanged. And chronic absenteeism fell significantly, from 51% in 2022 to 35% last year.

Still, the district expects to make some cuts, probably affecting the district office but not schools directly—at least at first, said the district’s chief financial officer, Patrick Jensen.

“It’s like we’re in a boat and we can see a storm coming,” Jensen said. “We’re not going to be dashed against the rocks, but we still need to find a safe harbor.”

San Bernardino City Unified, among California’s lowest-income districts, also received a high relief funding payout: $230 million for 46,000 students. But the district isn’t anticipating a financial disaster once the funding expires. It plans to shift some of its state block grant money to pay for programs funded with relief money, where necessary, and has been conservative with planning. It’s also closely monitoring the state budget and economic outlook, said Associate Superintendent Terry Comnick.

But there’s still likely to be some cuts, and the district will have to look closely at what programs have been effective and which didn’t live up to expectations. In addition to the after-school program, a “resident guest teacher” program had positive results, Comnick said. The district hired substitute teachers to work one-on-one or in small groups with students who were the furthest behind. The $4.5 million program, which was at every school, resulted in higher test scores among the highest-needs students.

So far, it looks like the district will be able to keep both programs, at least for the next few years, Comnick said.

“People call it a (Elementary and Secondary School Emergency Relief) cliff because the money just ends,” Comnick said. “But for us, it will hopefully be a gentle slope.”