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    Strategic ESSER Spending | ABCs of I, II, III

    Organizing and planning stimulus funding can be overwhelming: large amounts of federal funds come with a lot of scrutiny and high expectations.

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    Organizing and planning ESSER funding can be overwhelming: large amounts of federal funds come with a lot of scrutiny and high expectations. From communicating the role of stimulus dollars in your operating budget to allocating funds to the right initiatives and ensuring compliance with regulations—there's a lot to manage. We're glad you're here! The information below is an essential primer for anyone with a role in budgeting and managing ESSER spending at a K-12 district. We'll cover what you need to know to distribute funds equitably, create a spending plan that's aligned to approved uses of funds, set-up tracking that won't destroy your grants department, and get ahead of community communications challenges.


    This dive into strategic stimulus spending will set you on the path to strategically managing ESSER funds at your district. 


    Strategic Stimulus Spending | ABCs of I, II, III by chapter: 


    Please be advised that some states have implemented stricter guidance than the federal legislation mandates around certain elements of ESSER funding, including how to account for prepayments beyond the grant period. Please confirm with your state agency's guidance. Allovue will make every attempt to ensure the accuracy of the regulatory information presented on this page. However, please confirm with your state agency's guidance and the latest information provided by the federal government in solidifying your ESSER management plans. 


    Part 1: CARES. ESSER. CRRSA. ARP ... SOS!?


    Before we get deep into strategic stimulus spending, let's review the acronyms at play. All of the stimulus funds across legislative packages are referred to as ESSER funds—tranches one, two, and three. These dollars are allocated based on Title I proportionate share. 


    The American Rescue Plan (ARP) also included $350 billion for state and local stabilization. Why is this important? For a district, 93% of its budget comes from state and local government budgets. Shoring up these state and local budgets is just as important as the stimulus dollars directed specifically to districts because state and local dollars stabilize district operating budgets.


    Legislation Name Total Dollars Per-Pupil Dollars*
    CARES Act (March 2020) ESSER I $13 B $250
    CRRSA Act (December 2020) ESSER II $54 B $1,000
    ARP (March 2021) ESSER III $122 B** $2,400
    ARP (March 2021) - for state and local agencies   $350 B  

    * Per-Pupil values are rounded averages. These averages are highly dependent on a district's concentration of poverty. 

    ** In addition to ARP ESSER, the ARP Act includes $3 B for special education, $850 M for the Outlying Areas, $2.75 B to support non-public schools, and additional funding for homeless children and youth, Tribal educational agencies, Native Hawaiians, and Alaska Natives.




    Part 2: Budgets During Normal, Crisis & Recovery Years



    "How do we build trust with communities that we are being good stewards of supplemental resources?"


    1. Under normal circumstances: A district's revenues are slightly larger than its expenditures. The remaining funds can be put into the fund balance. 



    2. During a time of crisis: State and local revenue shortfalls translate into district revenue shortfalls that drive revenue down. Inversely, emergency unplanned expenses drive spending up. Districts have little flexibility to reduce fixed costs. To help communities understand spending during this unusual time, we recommend putting a number on supplemental expenditures (like those incurred at the end of FY20 and FY21). This helps stakeholders place these expenses in the context of what is above and beyond the district's normal fixed cost expenditures.  




    3. During a time of recovery: Stimulus dollars help reimburse emergency expenses incurred by building closures and supplement reopening and recovery efforts. To help communities understand recovery efforts, we recommend showing the breakdown of regular revenue and operating expenses versus stimulus dollars in budget communications. The goal is to be explicit about breaking down the difference between your baseline operating budget and the dollars that are specifically coming from ESSER funds on the revenue and expenditure side. This helps stakeholders to not become accustomed to seeing these numbers permanently. Get your community, board, and legislators thinking about these funds as discrete sources of funding and spending. 


    ESSER_recovery year


    Part 3: Stimulus Divided by Enrollment: It's Not a Ton of Cash



    "Our community and staff are seeing headlines with big dollar amounts and think we're overfunded now. How do we communicate the role of ESSER dollars and how it fits in with our operating budget?"


    The total $197 B stimulus is about a 6% supplement to all K-12 spending over the 4.5- year term of the grants. 




    The headlines seem to imply that legislative packages are flooding schools with cash. On average, stimulus funding works out to about $3,850 per-pupil which can be spent over the 4.5 year grant period, potentially crossing six fiscal years depending on your budget cycle. Consider this: for districts that are chronically underfunded by 20-30% annually, stimulus funding is not a staggering supplement when you factor in the denominator of annual enrollment. 


    On average, if a district spreads out these stimulus dollars over the total duration of the grant, the district hardly receives an additional $800 per-pupil on any single year. When you start applying the denominators of number of students and number of years to the equation, the total funding amount begins to seem much smaller very quickly. Carefully consider how will you spread this funding out over the years to come to avoid reaching a fiscal cliff. 


    Also, it is possible that stimulus per-pupil allocations will intersect with year-over-year inflation growth with careful fund distribution (see the example below). This means that successful new programs funded by stimulus dollars can be incorporated into your operating budget indefinitely. Think about the trend line for your baseline revenue growth and where that point of intersection lies—these don't have to be one-time funds. 


    Create your own year-by-year ESSER fund distribution plan using our free multi-year planning Excel workbook. 


    Part 4: How ESSER III Dollars Can Be Spent



    "What can and can't we spend ESSER dollars on?"


    While ESSER III stimulus dollars from the American Rescue Plan (ARP) flow based on Title I proportionate share, the funds do not follow Title rules for spending. Districts have a lot of flexibility with these dollars and the breakdown below represents set-aside minimums. 


    States must spend ...  Districts must spend ... 
    • 5% on learning loss
    • 1% on summer enrichment
    • 1% on after-school 
    • 0.5% on administration
    • 2.5% on other

    ... and districts get the remaining 90%

    • 20% on learning loss: evidence-based interventions, SEL & Academic, focus on special subgroups (FRPL, ELL, SPED, Homeless/Migrant, Foster)

    • 80% remaining: Title I, IDEA, CTE, and Adult Literacy authorized activities; buildings, facilities, and sanitation; mental health/SEL;  virtual learning/mixed modalities; emergency response preparedness; interagency planning/communication



    Part 5: Maintenance of Effort Matters



    "Will we see a reduction in our "regular" funding?"


    Supplanting occurs when the state or local government reduces state or local funds because federal funds are available. Typically with Title I or other federal dollars, there is a stringent mandate that federal dollars cannot supplant or replace state and local funds—they have to be supplemental. States can use these dollars to supplant, but they still have to uphold the maintenance of effort provision. What this means in a nutshell: if a state has a revenue shortfall of 10%, the state can also cut the education budget and supplant ESSER dollars up to 10% of the previous year.


    For example, if a state's education budget for FY17, 18 and 19 had an average of $5 B for state education funding and the state has a 10% shortfall, they can supplant 10% of those dollars—cutting the state education budget down to $4.5 B and using ESSER funding to fill in the gap. States have to show that they are being consistent with either 1) absolute dollar amounts or 2) percentage amounts in order to avoid a maintenance of effort violation.



    Part 6: Stimulus Management Best Practices



    "How do we allocate ESSER dollars to students who were most severely impacted by the pandemic? How do we organize ESSER spending plans to make sure that we are in compliance with the regulations? How do we make the best use of funds over several years?"


    Equitably allocate dollars by targeted subgroups.

    Consider creating a separate funding formula upfront for how your district will be allocating these dollars to those subgroups. This will help you specifically communicate how stimulus dollars were targeted to special subgroups like FRPL, ELL, SPED, homeless/migrant, and foster youth. It is highly likely that the student groups you need to target with these dollars and the way you need to target them will look different than your operating budget.


    Consider sub-enrollments like:

    • School-level (elementary, middle, high)
    • Chronically absent (0-9%) - mild
    • Chronically absent (10-19%) - moderate
    • Chronically absent (>20%) - severe
    • FRPL-eligible students 
    • English Language Learners
    • Economically disadvantaged
    • Students with Disabilities

    In building your ESSER allocation formula, think about the priorities for your district and how those priorities can be reflected in the formula. If you wait to do this at the budget-level, you'll already be too late because you'll have missed the window to allocate these dollars in a way that matches the "now needs" of those subgroups.


    Consider priorities like:

    • Buildings and maintenance
    • Credit recovery for high school
    • EdTech Supplements
    • Emergency preparedness
    • Enrollment and absenteeism intervention (especially in states with attendance-based funding mechanisms) 
    • FRPL and ELL supplements
    • SEL support
    • Tutoring


    Building documentation around your methodology supports fiscal transparency within your district and with regulatory agencies that may require reporting on use of funds in the future. The methodology will help site-level leaders like principals understand the differences between school allocations. What's more, if the state asks for your multi-year plan to unlock additional stimulus dollars, you'll be ready with a clear justification for your funding distributions. 


    Example of distributing funds equitably: allocation formula built in Allovue with formula rules that document the methodology behind ESSER fund distribution, especially to student subgroups.

    Resource Allocation Formula



    Align funding plan to approved funding activities with evidence-based justifications to simplify reporting.

    By building in the evidence-basis for learning loss programs right up front, you'll be sure that the initiatives you've funded with ESSER dollars will meet the evidence-based standard specified in the legislation. Have your curriculum specialists like principals, teachers, Chief Academic Officers, and instructional leads go through the funding plan and build in the evidence-based justifications from the get-go. 


    Consider setting your top-level priorities to correspond to the use of funds specified in the legislation. In this way, every expense will be tied to the dollars and the right grant up front. Make a retroactive plan for how you already spent dollars and keep it going moving forward.


    Consider including strategies like: 

    • Learning loss (to account for 20% of ESSER fund spending)
    • Buildings, facilities, and maintenance
    • Mental health and SEL support
    • Virtual learning and mixed modalities
    • Emergency response, planning, and interagency communication
    • Chronic absenteeism reduction 

    Example of strategic planning aligned to approved use of funds: budget built in Allovue with evidence-based justifications for learning loss strategies aligned to actual budgeted expenses.

    Learning Loss Budget


    Track ESSER I, II, and III funds separately with detailed accounting of expenditures.

    Make sure your accounting system has ESSER I, ESSER II, and ESSER III as fund sources and build a distinct budget for each grant. This will simplify the burden of reporting because you will be able to easily filter and submit reports for each funding source. 


    Resist the temptation to spend ESSER funds too quickly.

    If your district runs on the July/June fiscal year, you have six fiscal years to get these dollars out the door. If you're not looking at how your funding plan will escalate and ramp down compared to your regular growth, you are at risk of spending the funding too quickly. Keep the timeline for encumbrances and spending in mind when budgeting your ESSER funds:


    • ESSER I: Obligate by 9/30/2021; Tydings amendment extends obligation period to 9/30/2022
    • ESSER II: Obligate by 9/30/2022; Tydings amendment extends obligation period to 9/30/2023
    • ESSER III: Obligate by 9/30/2023; Tydings amendment extends obligation period to 9/30/2024
    • There is an additional 120 days after the obligation period to actually spend funds, so as long as funds are encumbered by the obligation period


    Create your own year-by-year ESSER fund distribution plan using our free multi-year planning Excel workbook. 


    How can stimulus dollars intersect with your operating budget in a sustainable way? The more you spread out your funding, the more likely you'll reach a point where your regular operating budget growth will intersect with the rate of inflation. Consider creating a model to figure out where your operating expense cut points are against the regular rate of inflation growth. When this occurs, the supplements from the stimulus will essentially equal your regular per-pupil spending—stimulus dollars effectively become the baseline budget. Programmatically, your recovery should hit a cut point around FY23-25 if you plan spending in strategic intervals, although this will vary by district.


    Don't assume hold harmless will be extended next year.

    Many states have extended a hold harmless provision so that the unusual enrollment and attendance patterns from the past year are not held against a district from a funding perspective. Do not plan on states doing this again in the future.


    How can stimulus dollars be used to mitigate layoffs or school closures in the short- and long-term? If you have high degrees of enrollment or attendance volatility (depending on whether you are funded on membership or attendance), use some of these ESSER dollars to build in your own hold harmless pool. If you are looking at a 5% enrollment loss next year, ask yourself, "What is 5% of my operating budget right now?" Hold it aside as your own personal hold harmless pool. In this way, you can mitigate layoffs, school closures, and other major changes. Think about the worst case scenario for enrollment decline and build in a failsafe cushion. Consider explaining to your stakeholders, "We're worried about the outcome of enrollment loss and state funding over the next two years. We're building in measures to protect teacher jobs now." That's a strong message to share with your community.




    That's all for now. We'll leave you with our latest #EdFinTok where Allovue Founder & CEO Jess Gartner does the #FiveFingerChallenge—ESSER edition.


    Give a shout to if you're curious about how we can help your district navigate strategic stimulus spending and beyond. 



    Wondering how you can improve your district's communications plan for ESSER budgets and spending? Check out our guide to overcoming public misperceptions and improving your district's ESSER transparency efforts!





    Allovue works with districts and state departments of education across the country to allocate, budget, and manage spending. Allovue's software suite integrates seamlessly with existing accounting systems to make sure every dollar works for every student. Allovue also provides additional services such as chart of accounts and funding formula revisions.