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Districts Struggle to Find the Least Harmful Cuts as Budgets Shrink

In January, district leaders, union representatives, and principals in the Flemington-Raritan schools in New Jersey gathered around a table with copies of the 3,200-student district’s annual $80 million operating budget and a grim task: Cut $5.1 million.

“I reminded my group, everybody’s friendly around the table right now, but when the chicken gets to the table and there’s only bones and scraps, people tend to lose their manners,” said Kari McGann, the district’s superintendent since 2018. “I told them, everybody’s going to remember their manners here. We’re all colleagues.”

Tensions mounted as the group coalesced around switching to a new health insurance provider for district staff, abandoning contracts for technology and professional development, and ultimately cutting 33 positions including counselors, media specialists, and a music teacher. Five people were laid off, and the other 28 either retired, had already planned to depart the school system, or moved to other open positions in the district.

McGann has seen a lot during her tenure with the district: the onset of COVID-19, a devastating cyberattack, and an outbreak of mold in school buildings.

But thanks to a growing population of English learners and students from low-income families, a dwindling allocation of state aid over the same period, and the coming end of federal pandemic relief funds that buoyed it and districts across the country in recent years, “this was the most stressful time, not only professionally but personally,” she said.

Thousands of district leaders nationwide are feeling similar stress as they ponder the least harmful cuts they can make to address shrinking budgets without sacrificing classroom instruction or alienating community members. Canceled summer school and after-school programs, consolidated bus routes, pink slips for educators, hiring freezes, and school building closures are all on the table.

Some of this turbulence is a natural consequence of the long-anticipated end of the federal pandemic relief aid dollars, which expire in the early fall. The massive infusion of $190 billion in federal aid, known as ESSER, fueled a rush of spending on efforts to help mitigate learning loss, chronic absenteeism, and mental health challenges.

But those dollars came with a concrete deadline, and many districts lack other readily available sources of funds to help keep those programs running and staff on the payroll. The Flemington-Raritan district, for instance, is currently applying for its first-ever competitive federal grant in hopes of maintaining a bilingual therapeutic counselor position that ESSER funds made possible.

Districts in many states have announced plans to close school buildings, as in Columbus, Ohio, where the school system is debating nine different plans to close different combinations of up to 20 school buildings. The Chilton County schools in Alabama recently announced they will no longer offer after-school programming after local taxes fell short of replacing the ESSER sum that funded the program in previous years. In Washington state, a researcher estimates that 5,100 educators will lose their jobs to account for the loss of federal aid.

These cuts often feel unavoidable for district leaders struggling to make the math work. But they can be acutely devastating for vulnerable students, said David DeMatthews, an associate professor of educational leadership and policy at the University of Texas at Austin.

A former teacher and school administrator in the Washington, D.C., area, DeMatthews recalls seeing students who only lit up during the school day when they attended P.E. or art class, or an after-school program with a teacher they really liked.

“Districts can always be fiscally more responsible just like families, just like businesses,” DeMatthews said. “But I worry that these cuts, when you start losing after-school programs and those types of things, then you really start to lose some of the kids who we’re just managing to keep in school and keep engaged.”

Costly needs persist in districts even as funding stops

Some fluctuation in staffing and resources is inevitable as public school enrollment nationwide has declined by more than 1 million students since the pandemic began. Large shares of school funding are calculated based on the number of students in school.

That number has declined in many places for a variety of reasons: fewer people are having children, more states are offering public funds to parents to pay for private education options, and hundreds of thousands of students went missing during the pandemic.

Still, enrollment declines aren’t evenly distributed from state to state, district to district, or even within schools in the same district.

Even schools that do see lower enrollment don’t always see lower costs at the same time. Salaries and benefits are growing as workers demand higher compensation and districts struggle to remain competitive in a tight labor market. Relatively fixed expenses like utilities and transportation don’t change dramatically just because of slightly fewer students.

“Districts to some extent are dealt the hand that they have. They have to play as best they can,” DeMatthews said. “But sometimes they have a losing hand.”

That’s the case in the Flemington-Raritan district, where enrollment growth has defied the national downward trend, but it hasn’t translated into the additional aid needed to cover the resulting costs.

New state-mandated affordable housing has drawn a growing population of families who don’t speak English and whose children need English-language instruction. Demographers predict that trend is poised to continue, McGann said.

The district has added English-as-a-second language teachers, bilingual counselors, and even bilingual secretaries who help make videos to share updates with parents who don’t speak English and can’t read in their native language.

“Those are positions that, when you’re facing a $5 million deficit, you look at those services and think, ‘Those should be off the table to reduce,’” McGann said. But state aid hasn’t kept up with the increasingly costly demands of the district’s population.

In 2018, the state revised its school funding formula in an effort to direct more aid to districts with large shares of high-need students. At that time, the state provided the Flemington-Raritan district with estimates for the next six years that showed the district—which, at the time, had a smaller high-needs population—should expect reductions in state aid.

Every year since, the actual reduction outpaced the projection: $112,000 in 2018 compared with a projection of $99,000, $225,000 in 2019 compared with a projection of $159,000, and so on, McGann said.

This year, the district’s state aid figure rose by $549,000. But the total amount is still less than what the district received from the state a decade ago, McGann said. The one-year increase from the state also made the district ineligible for recently approved funds designed to soften the blow for districts losing money under the new funding formula.

New Jersey is far from an anomaly among states with school funding policies, separate from the expiration of ESSER, that are causing headaches for district leaders.

In Alaska, Gov. Mike Dunleavy, a Republican, has yet to approve or veto the education funding package for next school year that’s been approved by the legislature, leaving districts to allocate resources for next year with little assurance of how much they’ll actually have.

In Arizona, meanwhile, a state constitutional amendment approved by voters in 1980 prohibits districts from annually spending more than an aggregate level set more than four decades ago that changes only to account for changes in enrollment and inflation. State lawmakers voted from 2021 through the current school year to allow districts to ignore the cap. But lawmakers have yet to sign a similar extension for the coming school years. If they don’t, districts will be forced to dramatically slash their budgets.

Regardless of the specific circumstances, a superintendent’s goal in times of financial distress, McGann said, is to prune enough layers of the budget onion without harming the essential student needs at the onion’s center.

“We peel away layers of the onion as far away from the core as we can,” she said. “But eventually we’re going to touch that core.”

Districts face no-win scenarios when needs outpace funding

Deciding how to navigate lean times for budgets can be a minefield for districts.

School building closures are often a go-to move for districts looking to squeeze dollars out of their budgets and signal to the public that they’re taking fiscal constraints seriously. But researchers have found that school building closures rarely contribute to substantial cost savings for districts, and that they tend to exacerbate racial inequities. Advocacy groups are pushing for the federal government to produce guidance for districts that outlines when school closures could run afoul of civil rights laws.

Districts that were already struggling financially before the pandemic are likely to face more existential challenges in the coming years than districts that were financially stable before the pandemic and only began experiencing financial turbulence in 2020, said Chris Candelaria, an assistant professor of public policy and education at Vanderbilt University.

Districts that were already struggling may have been more inclined to use ESSER funds to plug existing holes or make essential investments they otherwise couldn’t have made. By contrast, Candelaria said, some districts had the luxury of using ESSER dollars to strategically invest in new initiatives or build on a solid foundation of staffing and programs.

These two hypothetical categories of districts may now be in different situations, Candelaria said. Districts with longstanding financial challenges may be facing a return to those problems, and may need to cut essential staff members they can no longer pay for. Districts on more stable financial footing, meanwhile, may have the relative luxury of limiting cuts to positions or programs it deems inessential.

What would be most helpful for K-12 schools struggling with budget dilemmas, Candelaria said, is a more robust understanding of which investments schools can make that would be most effective and worthwhile for students—and which might not have delivered and could be eliminated. That’s admittedly challenging, however, as even the most granular federal data on school spending offer few insights.

“What was the money used for? We don’t have a clue,” he said. “The questions we need answered today, we won’t get the data until two years from now.”

Still, some districts are already painfully aware that they’re getting rid of services students need. McGann shudders to think about what will happen if the federal grant for more bilingual mental health support doesn’t come through.

“All my eggs are in this one basket because there’s no other place to turn,” she said.

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