Pandemic could lead to ‘major upheaval’ in school district budgets

It took 10 years for some states to recover from the Great Recession — and to see surpluses they could use to increase funding for K-12 education. 

How they weather the “economic shock” brought on by the novel coronavirus will depend on several factors, including the duration of the pandemic, the size of their rainy day funds, and whether they act quickly to keep budgets balanced by increasing revenue or making cuts, said Barb Rosewicz, a project director focusing on states’ fiscal health at the Pew Charitable Trusts.

“We’re just coming off of a couple of years where states were seeing some budget surpluses,” she said. “States were beginning to make headway, particularly in K-12.”

According to Marguerite Roza, director of the Edunomics Lab at Georgetown University in Washington,D.C., districts won’t see the immediate effects of a recession. In fact, because of the closures, some are now “underspending” in areas such as professional development, substitute teachers, events and utilities.

But as sales tax revenues drop, district finances could be in for a “major upheaval” in the 2020-21 school year. Districts in states where a greater portion of funding comes from the state level will also feel deeper effects than those that rely more heavily on property taxes. 

In addition, higher-poverty districts tend to rely more on state funding, and therefore take a greater hit during a recession. In a webinar Tuesday, Roza suggested districts in cities with large tourism and event industries — such as Las Vegas and Orlando — could be the most adversely affected because of all the cancellations.

“More students will be living in poverty with greater needs,” she said, adding a parent’s job loss also increases student mobility and absenteeism. 

But she also suggested district leaders shouldn’t panic if there isn’t a lot of funding for K-12 schools in an initial federal stimulus packages. “We do have some time,” she said.

Some states already revising K-12 spending

While K-12 tends to not be the first area where state policymakers cut spending, Rosewicz said, she added because it’s the largest part of states’ budgets, it will be affected. 

In Tennessee, for example, Gov. Bill Lee has released a revised budget proposal that trims back what teachers were expecting in raises and drops other major education initiatives, such as mental health services for students and improvements in literacy instruction. 

Policymakers in Louisiana are also expecting they’ll have to scale back proposed spending in areas such as teacher salaries and early-childhood education.

And Maryland Gov. Larry Hogan has already asked the legislature for access to the state’s reserve funds to keep small businesses afloat. The outbreak has also worsened in the state just as the legislature approved a broad new school reform plan expected to cost billions. Lawmakers made adjustments in the bill related to per-pupil spending should revenues come in less than expected.

“Talk about a u-turn,” Roza said, adding just two months ago, governors were announcing large education initiatives in their State of the State addresses. “We blinked and all those things are gone.”

A report released last week from the Center on Budget and Policy Priorities noted states with sizable reserve funds are in a better position to ride out another recession. But it also used North Carolina — where teachers have threatened to strike in recent months over pay — as an example of where those reserves have not been directed toward education. 

“While North Carolina’s reserves may be nearly adequate to avoid substantial additional cuts if the looming recession is moderate, the cuts already imposed have weakened its future economic vitality,” the authors wrote. “And if the recession is more severe, North Carolina may impose additional cuts on a school system that already is badly underfunded.”

What district leaders can do now

Stop spending, Roza said, urging superintendents to protect what reserves they have, institute hiring freezes, and avoid promoting teachers and administrators to higher positions. She also stressed the importance of frequent communication with the community and said principals are the “golden ticket” to remaining transparent with families and employees about the tough decisions districts might need to make. 

In a recession, she said, district costs often increase because veteran teachers — with higher salaries — hold on to their jobs. Layoffs are more likely to affect novice teachers, who earn less money. She also recommended districts not make across-the-board staffing cuts and allow school leaders to make decisions about whether to fill empty positions. 

States, she said, could allow districts to reopen union contracts to address issues such as raises and pension liabilities in future years. But she added in many states, teachers “waited a long time for these raises” and won’t be willing to renegotiate them.

K-12 might also end up competing with higher education for state funds because policymakers tend to prioritize workforce training as part of recovery efforts, Roza said. 

Regardless of whether schools reopen this semester, some large districts, including Chicago Public Schools, are already asking for help covering the costs associated with the closures. 

District leaders are facing “the largest adaptive challenge for large urban public education systems in a generation,” Los Angeles Unified School District Superintendent Austin Beutner and San Diego Unified School District Superintendent Cindy Marten said in a joint statement, calling on state lawmakers to approve emergency funding to help the state’s two largest districts shift to the “new constraints of a distance learning model.” 

More than 40,000 educators in both districts, the mayors said, need training to provide online instruction to students with a range of needs, including English learners, gifted and special education students, and those who are homeless.

“Pick your metaphor,” they said. “This is the moon shot, the Manhattan Project, the Normandy landing, and the Marshall Plan, and the clock is ticking.”