Policy & Funding

How the Coronavirus Stimulus Bill Pays Out for Ed

• By Dian Schaffhauser
• 04/01/20

The $2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act, signed into law on March 24, 2020, includes about $30.75 billion directly dedicated to the needs of public education. That allocation, which makes up about 1.5 percent of the total, is split into four different funding buckets:

• $13 billion (43.9 percent) for K-12 state education agencies;
• $14 billion (46.3 percent) for colleges and universities;
• $3 billion (9.8 percent) for governors to use in supporting education needs in their states; and
• $600 million (2 percent) for states with the highest coronavirus burden, as well as Bureau of Indian Education and outlying areas.

Higher Education Funds to Shore Up a "Cashflow Crisis"

Of the $14 billion going to higher education, the bulk of that — 90 percent — will be distributed directly to the institutions themselves by the U.S. Department of Education. Distributions will be based on two variables: the number of Pell grant students enrolled and the number of non-Pell students enrolled, with a prioritization on the first count.

Funding will be sent to schools once ED has developed a new funding formula for the allocations. That's going to be tricky, according to Terry Hartle, senior vice president of government and public affairs for the American Council on Education, because the Department has to rely on two sources of information for that Pell count that don't match each other. One source counted 7.2 million Pell students in 2017-2018 (the most recent year for which data was available); the other reported 6.2 million. "The [Department] has to figure out how to square that circle," he noted during a press briefing. Once the formula has been established, schools will receive their checks.

Half of the money that goes to colleges and universities will be for the schools' use. The other half is intended to be distributed as emergency grants for students, to cover healthcare bills, food, help getting home and similar basic needs, Hartle explained.

Of the remaining 10 percent allocated for higher ed, 7.5 percent, about a billion dollars, will be directed to minority-serving institutions. The other 2.5 percent, or about $330 million, will be kept in a fund by ED for institutions that "were hit hardest by COVID-19," Hartle said. "Institutions at some point in the future will submit an application to the Department to get funds under this very small pot of money." Unfortunately, he added, "These are the schools with the biggest needs. Because of the way this money is going to be distributed, through a grant competition, it'll probably be next year before any schools see any of the money."

What's an unknown at this point is how quickly distributions will made. And that depends on whether ED sees its current goal as making distributions as fast as possible or making sure guidelines and regulations are in place before the allocations are made. "We hope that if they err, they will err on the side of getting the money out quickly," Hartle said.

What's also unknown is where schools will dedicate their portion of the funding. "All institutions are facing a slightly different set of circumstances, depending upon their student populations, the needs of their populations [and] the size of the institution you're dealing with," said Hartle. But one commonality is that "every college in the country is facing an immediate cashflow crisis. University budgets are sapped. They're not terribly flexible. When revenue does not come in, when new expenses like refunds get added unexpectedly, they play havoc with the budget."

The concerns are three-fold. In the short-term, there are costs related to deep-cleaning, security, moving instruction online and having to buy computer equipment for students who might not otherwise have it. There's the loss of revenue associated with hotels, conference centers, student unions, bookstores and parking, not to mention the $450 million the NCAA expected to not pay institutions due to the cancellation of March Madness events.

Also, schools are making a lot of refunds, Hartle asserted. "Residential institutions are refunding room and board charges. And some institutions are refunding tuition charges because students are deciding not to continue their education rather than to move it online." He cited the University of Wisconsin System, which expected to refund some $78 million just in room and board charges; McDaniel College, which is going to refund some $4 million on a total budget of $60 million; and Penn State, which is refunding $40 million. "Institutions have to come up with that money, and it was not in their budget," he said.

In the medium term, a big questions colleges and universities will face is what their summers will look like. Already some schools have announced cancellation of summer camps. But there are also summer programs and adult education activities.

For the long term, the questions focus on whether campuses will be able to reopen in the fall, and if so, how many students will return. "The pandemic is unlike anything we've ever seen. It's hard to imagine whether or not everybody is going to come back as if nothing had happened," said Hartle. It's quite possible, he suggested, that some families will tell their college students to take a "gap year" to wait out a lack of family resources; other students may choose to attend schools closer to home, "particularly if the long-term path of the pandemic is unclear."

Already, noted Hartle, several schools have already announced pending closures, including Notre Dame de Namur University in California and the San Francisco Art Institute, both of which have announced they'll no longer accept new students.

Most K-12 Dollars to Be Spent Locally

On the K-12 side, the amount of funding allocated to each state and district will be based on the relative amount of Title I funding the state or district receives, according to the Alliance for Excellent Education. States will be required to pass through at least 90 percent of their funding to school districts — including charters that are their own districts. "Most of those dollars are going to be spent locally," explained Anne Hyslop, the Alliance's assistant director for policy development and government relations.

Districts can spend those funds on any allowable use under the various education laws, including the Every Student Succeeds Act (ESSA); the Individuals with Disabilities Education Act; the Carl D. Perkins Career and Technical Education Act; the McKinney-Vento Education for Homeless Children and Youth Act; and others.

Although the funding is quite flexible, said Hyslop, "The CARES Act does tend to give a shout-out to uses of the funds that are more tailored to the coronavirus crisis, like providing school meals, online learning and special education services during these extended periods of school closures, coordinating with public health departments, purchasing technology and connectivity for students who are now transitioning to learning virtually, for summer learning programs and just maintaining ongoing operations and staffing."

ED is developing an application and timeline for applying for the funds.

One sticking point identified by the Alliance is a "maintenance of effort" requirement. This stipulates that states commit to providing at least as much funding for K-12 and higher education in subsequent fiscal years 2020 and 2021 at a level that isn't less than the average they have provided over the last three years. "You might think that's kind of crazy, given what's happening with the economy," Hyslop pointed out,

However, that same requirement can also be waived by Secretary of Education Betsy DeVos in those states that "experience a 'precipitous decline' in financial resources." And districts themselves can apply for a waiver from the maintenance of effort requirement at the local level, "which is something they can't usually apply for."

Hyslop suggested that it's too soon to know how districts will spend their share of the allocation — or even how much they'll receive. It could be that they choose to spend funding on immediate and "emergent needs" such as providing school meals, making the transition to online learning "or even just paying staff." Some districts may "squirrel away" some of their funds to address the longer-term costs of extra support for addressing the "learning losses" they anticipate as a result of current school closures or to tide them over through future budget gaps. "Local budgets might be taking a hit if they rely on sales tax predominantly to fund education," she noted.

The Flexibility of the Governors' Fund

The governors' fund is "arguably the most flexible" of the allocation, said Hyslop. That money is intended to provide ways for state government to support the hardest hit education entities, whether that's K-12, higher ed or something else, such as early childhood education, child care, social and emotion support and protection of education-related jobs.

The amount each governor will receive will be based on two measures: 60 percent on their relative share of the population between the ages of 5 and 24; and 40 percent on the state's relative share of Title I-eligible children (K-12 students who are low-income).

What Was Left Out? Technology

Both Hyslop and Hartle were surprised that the CARES Act didn't directly address the shift to online learning underway by K-12 and higher ed.

Hartle said his organization had "been told very directly" by some congressional officials that they were interested in providing funding "for technology assistance for all of education." So, the Council expected targeted coverage for that. "The bill does provide significant flexibility to institutions to use money for technology purposes, but there wasn't a dedicated fund."

Likewise, Hyslop pointed out, there was no mention of E-rate, the Federal Communications Commission program that funds internet connectivity for schools. She would have expected some acknowledgement of that program and allowing funding to be used for upgrading home internet access for students. "A lot of organizations have been advocating for this," she said, "and it was not included in the CARES Act. But it could be something to look for in future stimulus actions."

Education as a "Second-Tier" Priority

While the total amount of funding provided by the bill for education was "helpful," said Hartle, it was also, "frankly, a disappointment."

Considering that education in the United States "is roughly a $1 trillion industry" representing some 5 percent of the gross domestic product, education should have received 5 percent of the $2.4 trillion total expenditure, he suggested, closer to $120 billion — four times the amount it was allocated.

"I think this particular bill was designed to accomplish a [few] things," said Hartle. "It was obviously intended to put a lot of money into the healthcare system to try and shore it up. Second, it was designed to provide money for individuals who suddenly find themselves out of work .... It was designed to prop up working families. Third, it was designed to bail out some industries and to do it in a way that was transparent and open. Those were sort of the big thrusts of that bill. Education simply was a second-tier priority at best. We are hoping that as Congress turns to a fourth supplemental bill, they will be thinking more about education and the enormous financial hit that elementary and secondary schools and colleges and universities have taken as a result of the virus."

The full text of the bill can be found at Congress.gov.