States are facing massive budget deficits and many have so far avoided cuts to schools. That might not last.
President Donald Trump has threatened to cut funding to schools that don’t fully reopen this fall and while his legal ability to do so has largely been discounted, public schools could still get caught in a budget vice thanks to the coronavirus crisis.
States and localities, which together account for more than 90% of school funding, are grappling with steep budget deficits. Tallying up the estimates on state, city and county losses, more than $700 billion in revenue could ultimately be wiped out of government budgets between March of this year through June 2021.
Federal funding is helping. The Coronavirus Aid, Relief, and Economic Security Act passed in March included $13.2 billion in supplemental K-12 aid, which districts are using to help pay for the additional costs of setting up distance learning.
The Health and Economic Recovery Omnibus Emergency Solutions Act passed by the House and now pending in the Senate includes another $90 billion for education. It would go a long way toward keeping school funding level. Here’s why.
States spend a lot on schools
Public schools account for more than $1 out of every $5 states spend so it’s hard to avoid tapping if a state has a major deficit. In Hawaii, which the Urban Institute estimates is facing a nearly 18% drop in revenue between March of this year through June 2021, the governor has proposed a 20% cut in teacher pay. In Ohio, schools could see up to 6% in funding cuts.
A recent Moody’s Investors Service report noted places “that spend a greater share of funding on K-12 education are most likely to reduce funding” in balancing their budgets. The top five states that spend the greatest portion of their budgets on K-12 education are, in order: Vermont, Kansas, Washington, Indiana and Texas.
States are waiting until after the delayed July 15 tax deadline to get a better picture of their revenue.
“We are looking very anxiously at the July data,” said Colorado Budget Director Lauren Larson at a Brookings Institution virtual conference this week. “Just seeing what actually comes in the door [after] the extended tax deadline, we’re all waiting with baited breath.”
What’s more, most schools still don’t know what reopening model they will follow in the fall and how that’ll affect spending needs. A full-time distance learning model won’t require much in the way of traditional busing, but it will require spending on wireless hotspot buses to ensure all students have internet access. All told, preparing for reopening could cost about $1.7 million for the average school district, according to one recent analysis.
Some states are literally banking on more money from the feds. California’s budget keeps school spending flat. But if expected federal aid doesn’t pan out, lawmakers may be forced to cut up to 7% from schools.
Such midyear cuts are almost more disruptive to schools. The Moody’s report notes it’s “difficult, if not impossible, to make material spending reductions once the school year has started.”
No two districts are equal
The financial situation for schools also varies from district to district. Schools that are less dependent upon state aid and rely mostly on local property tax revenue are less exposed to potentially dramatic cuts. That’s because property tax revenue tends to be a more predictable and stable source of revenue, even during recessions.
Boston public schools, for example, count on Massachusetts for less than 10% of operating costs and the city has included a slight increase in local school funding this year.
Last, there is some good news. States entered the pandemic with a record $72 billion in reserves. Some have already started tapping them to help balance budgets and those places with substantial reserves — such as Wyoming — have more flexibility to avoid cuts.
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