Urgency is mounting as states and localities must designate the final round of American Rescue Plan funding for specific pandemic recovery initiatives within the next year. These investments, which include $122 billion in the Elementary and Secondary School Emergency Relief Fund and $350 billion in the State and Local Fiscal Recovery Fund, have played a vital role in sustaining the historically and critically underfunded child and youth sector. But as the deadlines for allocating these funds rapidly approach, states, communities, and school districts are left to figure out how they will replace this funding going forward. September 30, 2024, is the deadline for allocating funds from the Elementary and Secondary School Emergency Relief Fund and December 21, 2024, is the deadline for allocating State and Local Fiscal Recovery Fund dollars. Once these funds reach their designated end dates, state and local leaders expect budget shortfalls and setbacks to recovery initiatives due to the sudden and severe drop in funding. To mitigate these effects, state and community leaders must invest in equitable, sustainable funding solutions to ensure a comprehensive recovery for children and youth after federal relief expires.

Progress of American Rescue Plan Spending

As of September 2023, states and districts have spent around $121.9 billion or 64.3% of overall Elementary and Secondary School Emergency Relief Fund dollars as reported by FutureEd. Around 49.5% of third-round Elementary and Secondary School Emergency Relief dollars have been spent although spending rates are “uneven” across recipients, and tracking spending accurately is hampered by the absence of detailed (or, in some cases, any) mandated reporting.

States have spent 45% and local governments have spent 38% of allocated State and Local Fiscal Recovery Fund dollars as of March 31, 2023, according to the most recent data available from the U.S. Government Accountability Office. Reporting requirements vary depending on the size of the recipient. For example, units of government with populations under 250,000 are not required to file quarterly reports. Federal data from March 31, 2023, reveals that smaller cities and counties (that received less than $10 million in State and Local Fiscal Recovery Fund dollars) are spending these funds more quickly than larger cities and counties.

Post-Pandemic Challenges and the Impacts of American Rescue Plan Funding

Nearly all students have returned to full-time in-person learning, yet the repercussions of the pandemic persist. Nationwide, millions of children and youth face a continuing mental health crisis, significant drops in test scores, and chronic absenteeism. The imminent loss of American Rescue Plan funding is expected to further exacerbate these challenges.

School districts that have exhausted their Elementary and Secondary School Emergency Relief Fund dollars are struggling to maintain the same staffing levels, leading to mass layoffs or reduced hours for newly hired staff. Once funds expire “[budget] cuts will be especially challenging in [high-need] districts that used relief money to add staff or maintain excess capacity that they would not have been able to afford otherwise,” according to the Brookings Institution.

Inflation also remains a concern. Rising costs have forced school districts to reconsider the rest of their American Rescue Plan spending. Due to inflation, “[i]n some districts, leaders may even have to wrestle with closing schools, raising class sizes, and postponing pay raises,” according to the Brookings Institution. Some districts have been using Elementary and Secondary School Emergency Relief Fund dollars for labor and staffing costs. When these districts have to prepare for their final budgets, especially districts that plan on passing deficit budgets, district leaders anticipate making more cuts to staffing and programs.

Meanwhile, the State and Local Fiscal Recovery Funds provided direct relief to governments of every size, and afforded flexibility that allowed governments to innovate and create solutions that addressed the unique needs of their communities. The U.S. Department of Treasury reports that state, local, territorial, and Native nation governments budgeted $1.2 billion for 439 projects within the “Childcare and Early Learning” spending category from January 1, 2023, through June 30, 2023.

State and local governments have used their State and Local Fiscal Recovery Fund dollars to pursue cradle-to-career initiatives, such as investing in child care providers and early childhood educators through scholarships, grants, and wage bonuses. These funds have enabled more families to afford child care and have allowed some communities to advance universal pre-K and universal home visiting programs. State and Local Fiscal Recovery Funds also supported focus areas such as affordable housing, after-school and summer programs, higher education, homeless youth services, and youth employment and workforce development. Children’s Funding Project’s American Rescue Plan database highlights the breadth of these children- and youth-centered spending examples.

Given the vast investments in children and youth that states and communities made with American Rescue Plan funds, local leaders will need to make plans to continue funding these investments as deadlines near. Evaluating the success of programs and services can inform how to prioritize and obligate their remaining American Rescue Plan dollars. While these funds ultimately support every community member at the state and local levels, it is critical that programs and services launched or expanded during the pandemic have a path to continue supporting children and youth once the federal relief dollars run out or expire.

Community Partnerships Make Positive Impacts Using Relief Funds

The end of the American Rescue Plan underscores the need for state and local leaders to identify equitable and sustainable funding solutions. Without sustained federal, state, and local support, achievements in pandemic recovery could stall or even backslide

Community-based partnerships and collaborations have been instrumental for localities aiming to leverage their American Rescue Plan funds to support children and youth. Research from organizations like the Urban Institute highlights how these types of local partnerships facilitate impactful and lasting change for children and youth within their communities.

Below are some examples of such partnerships that used Elementary and Secondary School Emergency Relief funds:

• Maryland’s $12.2 million investment in the Maryland Works Grant, a partnership between the State Department of Education, Baltimore City Public Schools, and Baltimore’s Promise, aims to create career pathways for Baltimore City students, generating more than 3,000 new apprenticeships and 400 business partnerships.

• Illinois’ REACH Initiative, funded with $11.5 million from the Elementary and Secondary School Emergency Relief Fund in 2022, trains educators and mental health professionals to recognize trauma in students. It also expands an existing program that supports students’ social and emotional well-being. For the 2022-2023 school year, the State Board of Education partnered with the Illinois Department of Public Health and Center for Childhood Resilience to further grow REACH using pandemic relief funds.

• In August 2023, Minneapolis Public Schools invested $20,000 in summer programs in collaboration with eight community partners, building on Gov. Tim Walz’s commitment to expand summer programming. An essential aspect of Walz’s package involves helping schools develop partnerships with community organizations to support learning recovery. Minneapolis Public Schools partners represent this approach through initiatives that enhance language skills, promote cultural identity, and other programs to improve student skills and emotional well-being.

States and communities also used their State and Local Fiscal Recovery Fund dollars to support community partnerships:

• The state of Minnesota invested $4 million to support the Education Partnerships Coalition. The pre-existing coalition represents a network of evidence-based support services in eight communities that align services to improve educational and developmental outcomes among children and their families. By investing in this coalition, the state invested in initiatives that provide cradle-to-career support.

• The City of Memphis, TN, invested more than $1.5 million to support the Memphis Ambassadors Program, a year-round development and enrichment program that serves 400-500 youth in grades 8-12. The city likewise invested an additional $3 million of State and Local Fiscal Recovery Fund dollars to support the Youth Summer Experience, which provides around 2,000 youth with internship and job opportunities. Both youth programs will receive their allocations over a three-year period. The city expanded enrichment and workforce development programs by increasing the number of young people who can participate in these experiences.

For additional examples of how these partnerships have maximized the impact of federal relief funds on children and youth across the country, check out Children’s Funding Project’s series of American Rescue Plan community profiles.

Recommendations: How State and Local Decision-Makers Can Take Action

States, localities, and school districts face a significant drop in funding once federal relief expires. To mitigate the impact created by the loss of these dollars, policymakers and advocates should consider the following recommendations:

• Prioritize one-time system and capacity-building investments: The Volcker Alliance foresees that states using American Rescue Plan aid to invest in one-time projects are less likely to encounter a high budget deficit compared to states that cover ongoing expenses. When communities prioritize recurring investments, such as hiring employees to manage American Rescue Plan projects and support new or expanded programs, government entities and school districts must prepare for how to pay for maintaining these new positions when federal relief ends.

• Increase transparency: State and local governments and school districts should increase transparency in reporting. The Volcker Alliance finds that among the seven expenditure categories set by the U.S. Department of Treasury, revenue replacement comprised the largest share of states’ State and Local Fiscal Recovery Fund allocations. This category is the most flexible category in the program, which means that funds can have streamlined reporting and reduce administrative burden. This reporting structure, however, also means that state and local governments aren’t required to identify which government services they will fund with relief dollars. As state and community leaders continue to spend American Rescue Plan funds, they should be transparent with spending data and update reports to maintain trust between their communities and families. Recipients hold accountability when they can share how funds were used and can demonstrate the success of programs that received funds by reporting on outcome metrics.

• Align existing funding streams for maximum impact: State and local governments and school districts should align child-centered funding and utilize new funding sources beyond American Rescue Plan dollars. Local leaders can explore other federal funding streams and the viability of developing voter-approved children’s funds to plan how to sustain existing services. In doing so, governments and schools can use this opportunity to align programs and services to avoid duplicative efforts and make a far-reaching impact on improving outcomes for children and youth. Children’s Funding Project’s Federal Funding Streams for Children and Youth Services database contains information about more than 280 federal funding programs—funded across 12 different federal agencies—that support cradle-to-career initiatives. For additional information about voter-approved children’s funds, read our 101 fact sheet or watch our overview video.

• Build relationships and partnerships with community-based organizations in service of collaborative advocacy: In addition to partnering with community-based organizations to use remaining federal relief dollars, leaders and advocates can collaborate on advocacy efforts for increased funding for children and youth programs and services. Collaborative advocacy is essential for securing dedicated funding and expanding opportunities for children and youth. Increasing community engagement allows the pooling of resources, leading to the creation of more inclusive, impactful programs and initiatives. Implementing sustainable solutions ultimately creates a cradle-to-career continuum that not only addresses recovery from the COVID-19 pandemic but can equip communities to serve the longstanding needs of children and youth.

Nicole Villagomez and Avy Osalvo are interns at Children’s Funding Project.