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The Biden COVID stimulus: Big spending can bring big liabilities

K–12 public education has won the lottery in the current coronavirus stimulus bill, with a $123 billion bailout package—more than six times the size of annual Title I grants. It remains to be seen whether public districts and schools will be permanently better off or, like too many winners in state lotteries, end up in a financial mess.

A cash infusion is needed to help school districts stand up interventions to set students’ academic progress back on track, and to meet the mental health needs of students who are—and will be for some time—reeling from the stress, anxiety, and trauma wrought by a pandemic that inflected both human and economic costs. Experts have already identified a number of sound potential uses.

The stimulus amount for K–12 education may be more money than strictly needed to mitigate pandemic effects, which is great news. Of the total funding, 90 percent, or nearly $110 billion, goes to school districts in proportion to their share of state Title I funds. Districts must spend 20 percent of these funds to address learning loss, but have a great deal of discretion to determine what that means, and even more discretion over the remaining 80 percent of the funding.

But that this money comes in one big tranche also poses dangers.

One-time bonanzas can have harsh aftermaths. One need look no further than the federal bailout after the 2008 recession to see that fast spending can create new problems. Big initiatives like Race to the Top and School Improvement Grants discredited the US Department of Education and left some of the districts and schools that got the most money in no better condition than before the extra funds came.

We recently convened state and local superintendents to discuss the issues and challenges they will be taking on over the next year. They said they are delighted the new rescue plan has become a reality, but they also feel uneasy. One superintendent summed up his worries this way:

The [academic] regression students are demonstrating and the social and emotional needs they now have is not going to be cured in a single year. This is our journey and we are going to try to accelerate it as much as possible. But I am concerned that this huge investment, if not spent in the most strategic way, may once again arm those who believe that large investments don’t get school districts anywhere. We certainly saw that [criticism] with Race to the Top.

Yes, it is unlikely that the US Department of Education will commit the same kind of regulatory overreach that happened in 2010. But districts and states will now be on the hook to show that they can use the money effectively. If they don’t, future efforts to raise or even maintain education funding could be discredited.

Here are the big dangers experienced state and district leaders see:

Wasteful-looking uses of funds. Sensational amounts of new funds will surely attract scrutiny and with it could come negative narratives about the competency of school systems. Superintendents caution that, despite assurances that relief funding should supplement planned state and local funding, they may not have the level of control over this funding that the public and legislators imagine. If states and localities respond to the school districts’ windfall in the relief bill as an opportunity to divert or simply not replace flagging state or local revenue intended for schools, districts may not see the net gain implied by the federal stimulus.

Districts will need to be prepared with a plan for spending and prepared to adapt as they see what is working. For the funding that does arrive, states and districts must create strong cases about why their spending plans are needed and how they will pay off.

Having the discipline to say what effects should be seen and when, commissioning independent evaluations, and being forthright with the results could help avoid discrediting stories.

Low-quality, behind-the-times vendors. The adage “good enough for government work” resonated all too well with state and local superintendents, based on hard experience. They remember the Supplementary Education Services element of No Child Left Behind, which elicited a new supply of private (profit and nonprofit) vendors that states and districts hired without much attention to their track record or quality. Many feared that districts would use part of their windfall to fund online and other private providers that overpromise or dump obsolete programs and hardware on unwary educators who are not procurement experts.

At the same time, relief funding could be an opportunity to push the private sector to be as innovative for education as it is for other industries. One leader commented:

Districts need the private sector to be more dynamic than they have ever needed them to be, and [districts] are going to have cash on hand. I think there is a question as to whether district and state administrators have the wherewithal to organize their asks, make specific asks that pay long-term dividends from their commercial vendors. Let’s not take off the lens of being a critic of the way that the government works with the private sector to drive innovation because it has historically been deeply problematic. That’s why we have the very lackluster commercial sector we have in [education].

While believing that independent providers could contribute a great deal, superintendents called for caution. One suggestion for districts and schools: seek procurement advice from local business experts who are not connected to potential vendors.

Short-term funds, long-term obligations. With new money, districts and schools naturally seek to hire excellent new people to support students and teachers. But the superintendents feared using a one-time infusion of funds to hire individuals who would remain on the payroll indefinitely. That, and funding across-the-board increases in incumbent educators’ salaries, will increase district costs long after the extra funding is gone. Newark’s recent experience—using a one-time foundation grant to fund a teacher salary increase only to build a long-term deficit—was a cautionary tale. At a time of high unemployment, districts and schools should be able to hire good people on limited-term, not permanent, bases.

These are all downsides of a very important upside: before the huge new federal investment, schools and districts were expected to struggle financially, due to both extra costs and, for some, overall declines in local and state revenues and spending. No state or local superintendent would want to turn the clock back to the time before President Biden signed the new bill.

But we are left with strong words for the wise. Big spending can create big liabilities. District leaders in particular, who normally consider themselves experts in instruction, not procurement or finance, need to think hard about what they do, and play out the long-term implications of short-term spending decisions. Like new lottery winners, leaders of districts and schools will have lots of new friends, as well as old ones who feel entitled. Carefully thought-through actions now can lead to real benefits for children, and avoid regrets for educators.

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