Did Billions in Federal Pandemic Aid Actually Improve Student Test Scores?

Takeaway: A sharp increase in federal pandemic relief funds for relatively affluent school districts did not improve student test scores, primarily because districts used the windfall to lower local property taxes rather than increase overall school spending.

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Key Points

• Districts just above a 5% poverty threshold received an extra $388 per pupil in federal funding compared to nearly identical districts just below the line.

• Instead of boosting overall classroom budgets or hiring more teachers, these districts offset the federal money by reducing revenue collected from local property taxes.

• While the extra money failed to move the needle on math or reading scores, it did help schools reopen faster and keep enrollment steadier.

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Why Should You Care?

When the pandemic upended American education, the federal government responded with the largest single investment in public schools in U.S. history: $189.5 billion through the Elementary and Secondary School Emergency Relief (ESSER) fund. Parents, taxpayers, and policymakers all shared the same urgent question: Did this massive wave of funding actually help our kids recover from historic learning loss?

Understanding where that money went matters for anyone who pays local property taxes or cares about the efficiency of public public services. If federal emergency windfalls don't translate into more resources in the classroom, it forces us to rethink how we fund public education during crises.

Furthermore, this research gets to the heart of how local governments behave when handed a big check from Washington. Do they stack the new money on top of their existing budgets, or do they use it as an opportunity to give local taxpayers a break?

What the Researchers Studied

Economists Jeffrey Clemens, Philip G. Hoxie, and Stan Veuger wanted to isolate the true causal impact of these federal billions. The challenge is that federal aid typically targets poorer districts, which already faced steeper pandemic challenges, making simple comparisons misleading.

To solve this, the authors exploited a literal quirk in the federal Title 1-A funding formula. Districts where the estimated child poverty rate is even slightly above 5% qualify for a massive jump in funding compared to districts just below 5%. By comparing virtually identical districts sitting right on either side of this 5% line, the researchers could treat the extra funding—an average of $388 more per pupil—as a clean, natural experiment.

The Key Findings: A Local Tax Cut in Disguise

The study yielded an unexpected result: the extra federal money did not lead to a detectable increase in overall school district spending. Instead, school districts passed the savings along to local residents. For every dollar of extra federal aid these districts received, they significantly reduced their collections from local revenue streams, most notably local property taxes.

Because the federal money essentially replaced local money, classroom environments remained largely unchanged.

The researchers found:

• No impact on test scores: The extra funding did not mitigate the widespread drops in math or reading scores experienced during the pandemic.

• No changes to core staffing: Districts did not hire more teachers or general support staff, though there was a small upward tick in administrative positions.

• Faster reopenings and student retention: Interestingly, the extra funds did correlate with faster school reopenings (measured via cellphone mobility data) and lower rates of student absenteeism. The authors suggest that the combination of tax relief and local pandemic adjustments likely increased parental satisfaction and engagement, keeping enrollment steadier.

Limitations to Consider

It is vital to note that these findings specifically apply to relatively affluent, smaller districts hovering around the 5% poverty threshold. The economic behavior observed here—using federal funds to ease local tax burdens—might look entirely different in deeply impoverished, underfunded urban or rural school districts where cutting local taxes isn't an option and structural classroom needs are much more severe.

Learn More

• Paper Title: Intergovernmental Grants to School Districts and Educational Outcomes During the COVID-19 Pandemic

• Authors: Jeffrey Clemens, Philip G. Hoxie, and Stan Veuger

• Publisher: National Bureau of Economic Research (NBER Working Paper No. 35447)

• Publication Year: 2026

• URL: https://www.nber.org/papers/w35447

Economic Concept: The Flypaper Effect

In public finance, economists often refer to the flypaper effect—the theory that federal grants "stick where they hit." In a textbook scenario, if the federal government gives a school district $1 million for education, the district should spend that full $1 million in addition to its normal budget, significantly boosting total spending.

However, this study demonstrates a classic case of fiscal substitution or crowd-out. Instead of sticking to the schools, the money essentially slid right through to the community. When local school boards realized federal dollars would cover their baseline costs, they chose to ease the financial pressure on their constituents by lowering local property tax demands. Ultimately, the money stuck to the taxpayers rather than the classrooms.

This article was written by AI but reviewed by a real human.