In May 2023, The U.S. Census Bureau released its updated fiscal year 2021 Annual Survey of School System Finances data. These updated data give us our best-yet look into the cumulative fiscal and enrollment impact of the 2020-21 school year, with its mixed school reopening and the first big wave of federal COVID-19 relief funding.

We’ve seen some of these data and estimates before. In February 2023, Bonnie O’Keefe and I released Fortifying Funding, a report that examined education funding (adjusted for inflation) and enrollment data from fiscal year (FY) 2008 to FY21. From our analysis, we identified key insights about state education finance gleaned from the Great Recession and the COVID-19 Recession, and offered specific actions state policymakers could take to address each trend. However, the FY21 data was preliminary and didn’t include data from nine states — Hawaii, Indiana, Louisiana, Maine, Nevada, New Mexico, Tennessee, Texas, and West Virginia.

What does the new data show?  

From our updated analysis, available in our interactive education finance tool, we found that during the 2019-20 and 2020-21 school years, school funding went up in most states, from both state and federal sources. Nearly all states — except for Delaware and Hawaii — saw increases in total per-pupil funding, and 41 states saw an increase in total funding (Figure 1). During this same time frame, 34 states increased their per-pupil state funding, and 18 states had an overall increase in state education revenues.   

Table 1: OVERVIEW OF U.S. EDUCATION PROVISIONS IN FEDERAL RELIEF LEGISLATION DURING THE GREAT RECESSION AND THE COVID-19 RECESSION 

Federal COVID-19 relief funding played a big part in this increase. Normally, the federal government provides a relatively small proportion of K-12 education funding (7.5% in FY20). However, COVID relief increased that share to nearly 11%, totaling $190 billion in federal aid generally intended to enable safe school reopening, address student learning, and proactively address any shortfalls in state revenue from the economic effects of COVID-19 (Table 1). At the state level, every state — except New Mexico — saw an increase in federal per-pupil funding (Figure 2). The FY21 data include all of the ESSER I funding from the CARES Act and the CRRSA Act. These data do not include ESSER III ARP funding. 

Another factor that influenced total and per-pupil state funding was the decline in student enrollment, which declined by 3.3% nationally during this time frame. Every state saw a decline in enrollment, with 32 states seeing a decline of 3% or more (Figure 3).  

There are a number of reasons for this initial steep decline in enrollment, like parents choosing to home-school or delay enrollment for kindergarten students. To address COVID-19 related shock to attendance and enrollment, 22 states implemented temporary hold harmless policies to freeze changes to a district’s state education revenues based on previous enrollment. This means that despite enrolling fewer students, many districts had the same or greater funding from state and federal sources. With fewer students overall, and more funding, per-pupil revenue rose.  

To learn more about your individual state’s local, state, and federal education funding and student enrollment from FY08 through FY21, view our interactive tool. 

What’s ahead for state education funding? 

While this temporary boost is good news for schools and students, federal COVID-19 funding sunsets in September 2024, and enrollment decline is unlikely to fully recover. Every region of the country is projected to experience a public school enrollment decline through 2030, especially in the Northeast and West, due to declining birth rates.  

As states look ahead, there are several actions state policymakers can take to strengthen their education finance system. States should seek to diversify and expand their education revenue sources to better weather economic pressures at the broadest level (e.g., build predictable, temporary supports for districts experiencing enrollment declines). Furthermore, states should not rely on the presumption of forthcoming federal aid, particularly given the recent federal deal on the debt ceiling.  

For more on this topic, read Bellwether’s Fortifying Funding: How States Can Strengthen Education Finance Systems for the Future report and recommended state policy actions here.