This column contains an update.
This column builds on a previously published analysis of ARP ESSER state spending, including new data and analysis of ARP ESSER funds rescinded by the U.S. Department of Education.
In March 2025, the U.S. Department of Education unexpectedly rescinded its extension for spending more than $2.5 billion of American Rescue Plan (ARP) Elementary and Secondary School Emergency Relief (ESSER) funds, creating a sudden fiscal cliff and greater uncertainty for states and local districts already facing budget gaps.
ESSER funds, provided through three federal COVID-19 relief bills in 2020 and 2021, were intended to help schools safely reopen and address the pandemic’s impact on students, educators, and communities. Districts used these funds to retain educators, provide high-dosage tutoring to students, address chronic absenteeism, expand broadband access, hire school-based behavioral health staff to support students’ social-emotional needs, and more. While these investments helped mitigate learning loss, they have not fully resolved it. Recent data from the 2024 National Assessment of Educational Progress (NAEP) show that 69 percent of fourth graders scored below the NAEP proficient reading level. Moreover, no state performance in eighth grade math has returned to pre-pandemic levels.
The Education Department had previously allowed states to apply for an extension to fully spend obligated ARP ESSER funds until March 30, 2026, acknowledging challenges such as inflation and supply chain delays for school-based capital improvement projects, including technology. However, in a March 28, 2025, letter to state education chiefs, the department abruptly reversed course, rescinding extension approvals for ARP ESSER funds while alleging that states had “ample time” to spend down funds. It also asserted that the use of these funds “years after the COVID pandemic ended is not consistent with the Department’s priorities.”
The department’s action demonstrates a willful neglect of its responsibility to support states to recover from academic learning loss.
The department’s action demonstrates a willful neglect of its responsibility to support states to recover from academic learning loss and other pandemic-related threats that have adversely affected student achievement. The letter further states that only project-specific extensions would be considered but specifies neither a submission deadline nor when states would receive a decision—only that they must justify each request. This has created additional administrative burdens for states and deepened uncertainty about the federal role in supporting public education.
Impacts of the funding rescission on states and districts
According to the Department of Education’s most recent report on ESSER spending, nearly half (46 percent) of local education agencies’ ESSER expenditures were spent on academic, social, and emotional needs, such as tutoring and out-of-school programs. Meanwhile, 30 percent accounted for operational continuity, including expenditures to maintain operations and employ staff; 20 percent accounted for physical health and safety, including building upgrades and meals assistance; and 3 percent accounted for mental health supports.
A total of 41 states, the District of Columbia, and Puerto Rico had received extensions to spend their remaining ARP ESSER funds. As of March 6, 2025, the total amount of funding left unspent by those states and territories totaled more than $2.5 billion. Unspent ARP ESSER funds, ranging from $2.5 million in South Dakota to $331 million in Puerto Rico, had been designated to specific projects with contracts in place. Losing them so suddenly is causing financial strain for districts nationwide.
Recently, 16 states and the District of Columbia took to undo the rescission of ARP ESSER extensions. On May 6, 2025, a federal judge ordered the Department of Education to reverse the cancellation of funding extensions for those who sued while the litigation continues or until a further court order. The order also instructed the department that it may only modify the extensions for the 16 states and the District of Columbia if it provides at least 14 days’ notice, opening an opportunity for the Education Department to again rescind funding.*
However, while this legal battle plays out, the immediate impact of the department’s initial decision to terminate funding is already being felt across the country:
- A school district in Arizona had been approved to use extended ARP ESSER funds to cover expenses for math and reading tutoring, as well as infrastructure repairs necessary for the health and safety of students. Yet following the rescission, the district had to stop both and direct its limited reserve funding to cover outstanding costs that the department has yet to reimburse. Now, the district worries it may need to lay off school staff to stay afloat.
- Baltimore City Public Schools has terminated in-school tutoring and after-school academic programs as a result of the rescission. These programs, which collectively served an estimated total of 4,000 students, were suddenly shut down within two weeks of the announcement, leaving parents with little time to rearrange their schedules and find an alternative to after-school care. The district noted that when it received the department’s extension to spend down the funds, it adjusted its spending plans to be more strategic. Now, the sudden reversal is leaving the district with questions on what else it will have to cut and how it will cover some projects that can’t be halted, such as building renovations that are midway through.
- Oregon has ended efforts to develop high-quality instructional content to improve students’ literacy and numeracy skills. In a state where only 27 percent of fourth graders are reading at or above proficient level on the NAEP assessment and where eighth grade math achievement levels have consistently fallen below the national average, the loss of research-based and high-quality content will only weaken educator effectiveness and student progress.
- The state of Massachusetts reported a $106 million cut to its K-12 education budget following the reversal of ARP ESSER extensions, with one district—Springfield—losing $47 million, or nearly 7.5 percent, of its total current budget. These funds were to be used to address pandemic-era learning loss and support professional development and retention of educators. In addition, they would help modernize school facilities to improve security and air quality, a critical need amid growing concerns of the effects of extreme heat and debilitating school infrastructure on student health and academic outcomes.
These examples only scratch the surface of the many states and districts across the country feeling the impacts of this abrupt reversal of funding, resulting in the termination of critical programs that support student academic achievement, professional development for staff, school facility upgrades, and more.
Conclusion
Recent cuts to federal education programs, coupled with the workforce reduction at the Department of Education and slow state revenue growth, will have deleterious effects on K-12 student achievement. Evaluation of ESSER spending has shown that states and districts have diligently, not haphazardly, used funds in ways that have prioritized students’ needs. But now, the reversal of ARP ESSER extensions will contribute to poorer academic outcomes due to the loss of educational programs and the absence of high-quality instructional materials. It will also prevent educators from receiving the professional development necessary to be effective in their roles while terminating capital improvement projects, such as greening school infrastructure upgrades, that many districts have long awaited.
* Update May 13, 2025: A U.S. district court judge issued an injunction on May 6, 2025, preventing the Education Department from enforcing or implementing its rescission of ARP ESSER funds for the 16 states and the District of Columbia.