This year's budget cycle presents a prime opportunity to use ESSER funds both to stimulate multi-year investments and to support initiatives that will make a difference for students and staff in FY24. Over the last two months we've been working with the members of our CFO Strategy Networks to learn with them about how to respond to this opportunity.
Here, we share the output of these discussions: the six most important adaptations to make in the district and school budget development processes. Given our uncertain or declining enrollment, more complex instructional needs, the level of non-recurring revenue available to us, and finance and school teams who are feeling crunched for capacity, we know that returning to pre-COVID budgeting processes and routines won't work in our next context. We need to adapt.
While individual contexts are varied, especially amidst the ongoing COVID-19 pandemic, the adaptations outlined here can serve as a starting point for your team and district community to prioritize, simplify, and streamline your FY23 budget development process.
6 ADAPTATIONS FOR DISTRICT BUDGET DEVELOPMENT FOR FY23
#1 | Assess ESSER spending YTD to reforecast expected FY23 ESSER ‘revenue’ and to inform decision-making about further investments.
- Many districts are underspending relative to their initial ESSER plans for a variety of reasons, including hiring shortages, procurement timeline challenges, and lack of leadership bandwidth. Districts should reforecast their FY22 ESSER spend, and then reallocate ESSER revenue across fiscal years as part of the FY23 core budget process.
- Districts should actively reflect on their existing ESSER initiatives to decide what to continue in FY23 and what to scale down. If a planned initiative can’t get off the ground, investigate the root causes and determine whether they can feasibly be resolved.
- For many initiatives, the challenge may lie in hiring and retention. Key adaptation #2 for the school budget development process below can help with this challenge.
- Given how new many ESSER initiatives are, districts may not have enough data for a full feedback cycle before creating their FY23 budgets. For the newer programs, look for ways to adjust the budget plan as information becomes available.
“As I’m thinking about this, it’s a little tricky. The actual ESSER dollars are going out the door, but I’m building up reserves and not spending as much as I anticipated now, which I think leads to either a longer runway or a bigger ramp up and then ramp down.” – District CFO
“Being able to estimate ESSER spend is really challenging right now, at least in certain places with historically high vacancy rates, so a lot of it depends on if and when certain positions will get filled, which is much harder to predict than it has been in prior years.” – District CFO
#2 | Get clear about your district’s 1-2 “big bet” investments—and prioritize these investments in your budget process.
- Capacity is constrained across all levels in many of districts. To ensure your district really is using the budget process to invest in your most important priorities, focus leadership energy on one or two “big bets” to get right.
- Resources that help district leadership teams prioritize ESSER investments:
“There’s this layer that we’re working on right now that’s a layer above—and just being clear on what our big bets are. You can have 30-50 people spinning their wheels but not until we have this big commitment on ‘What are some of our two big redesign investments that we are going to be focusing on?’—and that can help point the budgeting direction toward this general North Star direction.” – District CFO
“Certainly literacy is a huge thing and we’ve gotten lots of funds from the state on that. Where we’re putting our dollars is a lot of focus on equity, and looking at how we can use ESSER funds to address some existing issues and then build it into the base.” – District CFO
#3 | Streamline the budget development process. Small line items and “non-strategic” discussions should be resolved by individual chiefs and principals directly.
- To focus leaders’ energy on those “big bets,” work with your finance team to identify areas where barriers can be removed to make the process more efficient given the influx of federal funds and limited capacity.
- Simplify the decision-making process where possible: What really requires group discussion vs. just leadership approval vs. what can just be resolved by individual chiefs or by departments independently?
“It was ‘How can we create efficiency within our budgeting processes?’—but also creating accountability for some of our chiefs and budget owners, and at the same time be mindful of leadership’s time and capacity, and focus on big bets.” – District CFO
“Those small decisions aren’t going to greatly shift the ship but that’s what [leaders] are used to, and one of the things I want to build in our budget is some pots of money and ‘deal with these levels, resolve them at your level as things come up.’ And it saves the time of discussion and the gnashing of teeth on the things that are going to make a huge impact, but gives you the flexibility to deal with the things that are going to make a big impact to small areas.” – District CFO
#4 | Use the budget development process to bring together revenue from all funding sources, including ESSER and general fund.
- Some districts have had two parallel processes for ESSER and general fund decisions over the past year, and the two have sometimes been led by different teams. Merge decision-making into one unified budget process to:
- Promote continuity and alignment between the two processes and those involved.
- Avoid miscommunication between multiple teams.
- Enable an integrated—not piecemeal—approach to new investments, building on previous conversations about ESSER.
- Allow for creation of a coherent plan that is united around the “big bet” redesign investment(s).
- If it is not possible to bring the ESSER and general fund process together, try to maximize transparency and communication between the teams that run each process.
- For example, if a decision is made about ESSER spend, can that decision also apply to the general fund? Instead of bringing the cabinet together to make a decision about using ESSER money and then bringing them together again to make the same decision using other revenue, it is important to make sure the processes are in sync to build cohesion and to preserve already limited capacity.
“It’s not about just ESSER or budget, it’s about ‘We have to be responsive to where we are as a district with student enrollment.’” – District CFO
“With ESSER, it is a unique challenge this year because of just the sheer size and dollar amount. It can make your year 23 budget growth look abnormally high. Asking for funding becomes more of a challenge because you have such growth on your unrestrictive funds.” – District CFO
#5 | Use sustainability to inform—not stifle—decision-making that supports schools and students in FY23, while also investing in outyear design.
- Sustainability isn’t a binary construct where investments are either sustainable or unsustainable. Instead, work to build common understandings of sustainability as a lens to apply to individual decisions and your budget plan overall.
- Many investments and innovations will require recurring support. Districts will need to be transparent about which tradeoffs will need to be made for better sustainability.
- This is especially true for schools with enrollment declines or a significant number of students in virtual models. Districts should be clear about which supports and tradeoffs are being provided to soften the transition to lower enrollment.
- Use a multi-year outlook to make clear the outyear consequences of FY23 actions—getting to a budget that positions your district well for long-term sustainability. See Getting Real About Sustainability and ESSER Funding (a 90-second video explainer and companion brief) for concrete examples.
“What we’re finding with this infusion of ESSER dollars [is that] the needs are different across different campuses. So if enrollment is still declining but the [staffing] needs are still great, how do we strategically onboard new staff members while strategically repurposing or abandoning some of the practices as it relates to sustaining some of that staff? Any new positions that are coming on board that we’re starting this year, there’s a few sentences in the job description and in the contract that specifically states that this is a temporary position funded for a two-year time period.” – District CFO
“There is a thought that if we’re trying to spend all of this not on people, it’s hard to figure out how to spend that well. If we need to spend that on people, we need a longer time horizon. And we need to basically place general funds and put them in a savings account.” – District CFO
#6 | Reach outward to collaborate with other district leaders, your school board, principals, and families to build joint accountability around resource decisions.
- Given the dynamic of one-time ESSER funds and the need to make them sustainable long-term, collaboration is especially critical this year. This starts with communicating the district's "big bets," explaining the rationale, and identifying which resources are centrally deployed.
- Some stakeholders may not be willing to invest one-time funds in investment areas that generate recurring costs, so some difficult decisions will need to be made together.
- Finance leaders need to build joint accountability with stakeholders—including other district leaders, school board members, principals, and families—in order to bring them into the decision-making process around FY23 planning and redesigning sustainably. This accountability needs to be for the multi-year period. When committing to expenditures for FY23, 24, 25, and beyond through the “big bet” investments, finance leaders need stakeholders to jointly own the outyear cost—and potential promise—as part of their input and approval of this year’s budget decisions.
“ESSER had its own unique way of requiring us to engage with stakeholders in the budget development process, and we are going to take some of the lessons learned from how we were able to gauge and get really good feedback from parents during that process and implement some of that in the way we engage with parents now.” – District CFO
“Having a survey readily available and then a simple phone call where you lead them through activities so that you can get their perceptions of what is needed. Just being intentional in that way and inserting ourselves and reaching outward, instead of just sending something out and expecting parents to respond, but creating intentional time and space to engage our parents—we believe is going to be very beneficial for us as we prepare to really accelerate the budget development process.” – District CFO
SEE EXAMPLES OF Strategic practices for district budget development
6 ADAPTATIONS FOR SCHOOL BUDGET DEVELOPMENT FOR FY23
#1 | Identify and clearly communicate about which resouces you plan to deploy centrally in support of your district's "big bets," wich a focus on equity.
- Review your investments and school allocations through an equity lens, considering enrollment changes, staffing levels and vacancies, and teacher quality and diversity—as well as alignment with students’ needs at each school.
- Tell school leaders which central resources they will receive to help them work toward the “big bets”—this can help set expectations about overall school designs and simplify the decisions the school leader has to make.
#2 | Have a clear plan for retaining talent, while addressing vacancies and continuing hiring.
- Given the current labor market and high number of vacancies this year, districts should align efforts to address retention, hiring, and vacancies into one process.
- Given how school leaders are experiencing hiring and vacancy issues first-hand, adjust hiring timelines or internal processes to better support principals through this school planning and budgeting cycle.
- For districts that are “right-sizing” school staffing down to smaller “post-Covid” enrollments and…
- Are projecting significant number of vacancies… ensure placement processes are equitable and coordinated to maximize retention of displaced staff.
- Were unable to fill ESSER-funded temporary positions… consider whether this “right-sizing” provides an opportunity to “staff up” previously unfillable positions, focusing on highest-need areas first.
#3 | Make steps toward sustainability by planning for how to staff down schools that experienced enrollment declines or have a significant number of students in virtual models - and communicate these plans with school leaders.
- It will be critical to adjust school budgets to match project enrollment in FY23 to avoid big cuts for schools in FY24 or FY24. ESSER funds can be used to soften this transition.
- For example: One urban district is “right-sizing” school budgets for FY23 in alignment with their actual projected enrollment. To account for uncertainty in their projection, they plan to hold back some ESSER funds to add back funding in the fall to schools that end up having a higher-than-projected enrollment. Any school that ends up having fewer-than-projected enrollment numbers will be held harmless in SY23. This can be an effective way to soften the transition back to “normal” budgets for each school, while still ensuring the district is beginning to address any sustainability concerns regarding enrollment decline.
- Communicate your decisions and rationale with school leaders and share your timeline for when you will provide your next update.
#4 | Reach outward to collaborate with other district leaders, your school board, principals, and families to build joint accountability around resource decisions and to provide schools with visibility and guidance around multiyear trajectories.
- Be transparent about how school budgets are expected to change in outyear(s), to the best of your ability, so school leaders can plan for multiyear investments this year to take advantage of still having two years of ESSER funding ahead of us.
- Changes in enrollment, service delivery, the extent to which the district plans to hold schools harmless, and which recovery investments districts will or will not continue impact the projected school budgets in the next few years.
- Consider simplifying the metric you share with school leaders (for example, by using arrows or color coding) and explain the assumptions behind it if your district, like most, will not have clarity in projected enrollment to be able to predict exact budget projections in outyear(s).
- These estimations should change as we learn more about enrollment at in-person vs. virtual schools and the ROI of certain ESSER investments.
- Be clear about which positions or dollars are temporary vs. permanent to enable principals to better plan how they can achieve the “big bet” priorities over multiple years.
- Plan for how to support principals in understanding the multiyear guidance and using it to inform their planning this year.
- With limited finance team capacity, direct support to every principal is likely not possible. Find ways to triage who needs the most direct support (for example, highest-need schools or new principals), while supporting all school leaders in lighter-touch ways, such as written guidance or whole-group supports.
#5 | Deliberately plan for how to navigate - and communicate about - uncertainty.
- Create a process that allows for adjustments to school designs and budgets through summer 2022 as more information becomes available about which recovery investments you will or will not continue, enrollment numbers, and the types of pain points schools will face in FY23.
- Consider offering two moments (for example, May and August) for schools to revise their budgets after they’ve been submitted, when you expect to have more certainty in enrollment and funding.
- Proactively communicate to school leaders when you will (or will not) have information and answers, and when you will provide updates.
- Consider managing funding to allow for solving unpredictable FY23 pain points. For example, this could look like:
- Using ESSER funding to distribute higher-than-usual average holdbacks for schools with higher-than-projected enrollment numbers. ESSER funds could “buy” stability so that you do not have to take back funds from schools that are under-enrolled. ESSER funds can soften the landing as those schools true down to actual enrollment.
- Transparently holding back certain resources or amounts of funding to address unexpected challenges.
- Resources that help leadership teams prioritize redesign investments:
- School-level planning support tools: see metro Nashville public schools budget form and faqs.
- Guides for esser spending, scheduling, & staffing: district teams can use these series of guides to support school-level implementation of key covid recovery strategies, such as tutoring, credit recovery, and collaboration time for teachers. Each guide identifies important investment opportunities and shares concrete examples of staffing and scheduling models.
#6 | Reach outward to collaborate with other district leaders, your school board, principals, and families to build joint accountability around resource decisions.
- Given the dynamic of one-time ESSER funds and the need to make them sustainable long-term, collaboration is especially critical this year. This starts with communicating the district’s “big bets,” explaining the rationale, and identifying which resources are centrally deployed.
- Some stakeholders may not be willing to invest one-time funds in investment areas that generate recurring costs, so some difficult decisions will need to be made together.
- Finance leaders need to build joint accountability with stakeholders—including other district leaders, school board members, principals, and families—in order to bring them into the decision-making process around FY23 planning and redesigning sustainably. This accountability needs to be for the multi-year period. When committing to expenditures for FY23, 24, 25, and beyond through the “big bet” investments, finance leaders need stakeholders to jointly own the outyear cost—and potential promise—as part of their input and approval of this year’s budget decisions.
SEE EXAMPLES OF STRATEGIC PRACTICES FOR SCHOOL BUDGET DEVELOPMENT
