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3 Ways Districts Can Prepare for Financial Woes to Come

Districts will weather a slew of financial storms in the coming years—but school finance experts believe those that take time to carefully strategize investments will have an easier time navigating the chaos.

That could mean developing employee recognition programs to help improve retention of valued staff members; making detailed budget projections four or five years in advance; and scrutinizing the ongoing impacts of new programs to determine whether they should keep going.

Those efforts will help districts navigate a slew of fiscal challenges: reduced federal funding, persistent inflation, volatile state investments, and wavering voter support for tax increases, finance experts argue.

In some cases, the district leaders in charge of those efforts may not be the same ones who made the original decisions about how to spend federal ESSER dollars, said Julie Williams-Muz, director of financial operations for the Bay-Arenac intermediate school district in Michigan, which provides support services to several local districts.

“The decisions made years ago are really going to show up financially now,” Williams-Muz said during an Education Week webinar on May 30. “The hope is that those decisions were really thought out. We know sometimes that’s not the case.”

The federal government invested close to $200 billion in emergency relief funds, colloquially known as ESSER, to help schools and students recover from the COVID-19 pandemic. Schools have spent those dollars on everything from tutoring programs and recruitment bonuses to technology upgrades and building improvements.

But after this fall, the last, and most sizable, round of those funds will expire, leaving many districts with the largest year-over-year decrease in funding they’ve experienced in at least a quarter-century, said Jonathan Travers, president and managing partner of consulting for the firm Education Resource Strategies, which helps districts with spending decisions.

“These next two fiscal years are going to be really challenging to be able to deliver the experiences we want our students to have and remain good fiscal stewards over time,” Travers said during the Education Week webinar.

Here are three lessons districts should absorb in order to position themselves well for the financial future.

1. Districts can use ESSER dollars to pay for strategic planning

Travers and his colleagues evaluated efforts by big-city districts to improve students’ academic performance with the help of targeted investments. Two cities that stood out, according to Travers, were Nashville and Indianapolis.

Both put in place monitoring systems to evaluate in real time the extent of the positive impact of new programs like expanded tutoring and summer school. Both used ESSER funds for initiatives that were already part of their existing strategic plans for district improvement.

And both developed programs with an eye toward embedding them in the district for the long haul.

All of these efforts to evaluate programs take resources of their own, of course. Districts can use a portion of their ESSER dollars to pay for efforts to align spending with strategic planning, such as setting up data systems to track academic progress, or paying consultants to recommend cuts or additional investments, Travers said.

2. Anticipating the future is crucial for excelling in the present

Williams-Muz recommends district leaders forecast expected budgets three to five years ahead of time, by taking the current year’s budget and rolling it forward, eliminating all the previous year’s one-time funds and making adjustments for projected enrollment, and union-mandated salary increases.

“Look at what that fund balance is going to do over the next at least three years to have some data to bring back to the table that you can then share out,” she said.

That’s useful in part for knowing how much wiggle room the district may have in the future to make additional investments or hire additional staff. And it’s important for the broader goal of ensuring transparent communication between the district and the public.

“You’re trying to explain the financial information to people so it’s digestible,” Williams-Muz said.

3. The most obvious cuts aren’t necessarily the best ones

District business officials have plenty of tried-and-true techniques for staving off budget woes—hiring freezes; shutting down procurement early in the school year and transferring unused funds to other priorities; canceling extraneous contracts.

Those moves aren’t always the best ones for students, though. A better approach, Travers argues, is for spending decisions to be tied to a coherent broad vision for the district and its future goals.

Education Resource Strategies is urging its clients across the country to embrace unconventional staffing models, shift staff resources to the buildings with the greatest needs, and even shift investments in the last two years of high school to spend more on support for 9th grade, a pivotal year in determining a student’s academic trajectory.

All of these efforts aim to make the most of available resources while acknowledging that funding constraints may grow, Travers said.

“There’s an opportunity right now for a lot of strategic thinking and shifting,” Travers said. “You really do need to focus on the investment and benefit of that investment.”

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