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Layoffs, Shortages, and the ESSER Cliff: Making Sense of a Paradoxical Labor Market

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Solving Teacher Shortages blog series: Navigating the Teacher Workforce Paradox

This blog is part of the series, Solving Teacher Shortages, which highlights innovative and evidence-based initiatives and explores policy options and other approaches to building a strong and stable teacher workforce.

Nationally, as of this past school year, an estimated 400,000-plus teaching positions are either unfilled or filled by teachers who are not fully certified for their assignments, and yet reports of teacher layoffs are still surfacing. It may seem counterintuitive, but teacher layoffs and teacher shortages can coexist. A look at the details can help us better plan and act to secure the most important in-school factor to student learning—teachers—at a time of an acute need to accelerate student learning.

Teacher shortages have been a chronic challenge for our country and have existed alongside teacher layoffs for decades. During the Great Recession, the K–12 teacher workforce shrunk by 120,000 teachers. Yet in the 2009–10 school year, nearly all states reported shortages of teachers in special education, math, and science (49, 48, and 47 states, respectively). Today, even as shortages are widespread, some districts are having to consider layoffs.

Federal Funding and the “ESSER Cliff”

During the early part of the pandemic, the federal government provided nearly $190 billion to K–12 schools to help them deal with the impacts of COVID-19. The last and largest tranche of this funding, about $122 billion, was provided through the American Rescue Plan Act’s (ARPA) Elementary and Secondary School Emergency Relief (ESSER) Fund and had to be allocated by September 30 and must be spent (unless states apply and are approved for an extension) by the end of January 2025.

Together, the ESSER funds represented a 7% boost for K–12 funding levels, assuming the funds were spread evenly over the three years they were available. Looking at this another way, these funds also increased the federal share of K–12 education spending from pre-pandemic levels of about 8% to 13.2%. The expiration of these funds has led many to speculate that “the ESSER cliff” will be the primary and universal driver of teacher layoffs. However, the reality is more complex.

District and school spending will depend on:

  • the level of state and local funding and how it is allocated;
  • policy decisions that impact funding;
  • changes in public school enrollment;
  • whether relief funds were spent on recurring personnel expenses (salary increases and new permanent positions); and
  • the amount of flexibility districts have to carry state and local funding into future years.  

The State Context

States’ level of funding and poverty. ESSER’s sunset will be felt differently by states because states vary considerably in how much funding they provided out of their own budgets to K–12 education and their population of children in poverty. For example, the ARPA ESSER Fund made up 10.5% of Mississippi’s K–12 education spending but only 1.4% of Maine’s, so Mississippi’s overall education budget will take a greater hit than Maine’s, which has implications for layoffs.

States’ education budget decisions. Between the 2019–20 and 2021–22 school years, most states reduced their contribution to K–12 education funding (39 states decreased state education funding overall while 36 reduced it on a per student basis). But some states increased their contribution to K–12 education funding, including Nevada, New Jersey, and California, which increased funding the most during this time period.

Policies that can impact education spending. Additionally, states are contending with different policy decisions that can compete with or reduce overall funding for public K–12 education. In the first year of its operation, Arizona’s expanded universal voucher program represented about 8.8% of the state’s primary funding program for public schools. Estimates found that Arizona’s universal voucher program will cost the state at least $700 million in the 2023–24 school year. In Florida, about $4 billion is available for voucher programs at a time when the state’s funding for public schools has fallen to one of the lowest levels in the country.

How state funding addresses, ignores, or exacerbates student poverty. How equitably states allocate their funding to districts will also matter for layoffs. Only 22 states have moderately progressive funding systems that allocated at least 5% more funding to high-poverty school districts than low-poverty school districts. Sixteen states have regressive funding formulas, providing fewer resources to high-poverty school districts than to low-poverty school districts. High-poverty districts in states with progressive funding systems, such as Utah, Delaware, and Minnesota, will be better protected from the absence of ESSER funds than high-poverty districts in regressive states, such as Nevada, Oregon, and Pennsylvania. 

How reliant districts are on federal funding. Entangled within states’ budget allocations in general are two other key factors: Funding for students in poverty and declining enrollments. The greater share of students in poverty that a district serves, the greater fiscal impact they’ll face when ESSER funds dry up. This is because ESSER funding was allocated to states and districts in the same proportion as Title I-A’s allocations, which target funding to areas where there are concentrations and large numbers of students in poverty.

Enrollment declines. Enrollment in public education has declined by about 1.2 million students from its 2019 high point of 50.8 million students to 49.6 million in 2022, with variation in enrollment changes across districts. Declines in enrollment can impact state and local allocations of funding for districts and schools. In states where enrollment has declined but state and local per-pupil funding has not increased, layoffs may be one of the ways districts are forced to contend with having less funding.

District Context

Districts that are the most at risk of layoffs will likely have an amalgamation of all of these risk factors. These “perfect storm districts” may rely heavily on Title I-A funding and thus have had large ESSER allocations, and they may also be experiencing lower levels of state funding due to declining enrollment or other state funding cuts associated with the factors outlined above. In addition to federal and state factors, there are several factors that will impact districts’ fiscal picture.

Districts that invested pandemic aid in recurring expenses, such as maintaining staffing levels, hiring additional teachers and other school staff, or boosting teacher salaries, may also be faced with shortfalls in the absence of additional funding.

Districts with less flexibility in their budget processes will have more roadblocks in moving around non-pandemic aid in a manner that allows them to appropriately match funding sources and uses. For example, districts with more flexibility may have been able to move nonrestricted state/local funding forward to a future year, and assign ESSER funds to one-time uses.

What Can States and Districts Do to Mitigate Shortages While They Deal With the Prospect of Layoffs?

While districts will be heavily impacted by state and federal policies, there are strategies states and districts can employ to mitigate how funding shortfalls negatively impact teachers and the students they teach.

Examine pink slip notification processes (notifications that warn of potential layoffs). Researchers studying the effects of teacher layoff processes during the Great Recession in Washington state and Los Angeles Unified School District found that issuing pink slips, which happens before state budget decisions are finalized, can bring about substantial teacher turnover even when the pink slips are eventually rescinded. In short, ironically, sometimes protections associated with layoffs, such as blanketing pink slips, actually help create shortages. States, districts, and unions can work together to find more productive approaches to this complex problem so that teachers are well supported and shortages are not exacerbated.

Implement protections for teachers teaching high-need subjects, with priority for those in high-need schools. Districts can work with teachers unions to develop protections for teachers while also accounting for school community needs. Protections for teachers in high-need subjects and school areas are incorporated in many districts’ contracts.

Where the Solutions Lie

In short, teacher layoffs and teacher shortages are not an “either/or” proposition. They can exist simultaneously and often interact. While the expiration of federal pandemic education funding will certainly impact teacher jobs, the long-term solutions to teacher labor market issues would benefit from a shift in focus on the ESSER cliff to what states and the federal government are or can be doing to ensure all students have access to well-funded schools and a diverse, well-prepared, and stable educator workforce. Research has long shown that money matters in education, so let’s focus on whether the feds and the states are providing enough of it, allocating it fairly, and spending it wisely.


Policy and research analysts Michael Griffith, Emma Eglington, Emma García, and Susan Kemper Patrick contributed to this story.