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State Are Pulling Back on K-12 Spending. How Hard Will Schools Get Hit?

David Blanchard, superintendent of the Schoharie schools in rural upstate New York, has been hard at work with his team preparing two versions of his district’s operating budget for next school year.

One assumes the 800-student district will get the same amount from the state in the coming year as it did this year. The other incorporates Gov. Kathy Hochul’s proposed cuts and tweaks to state school funding, including an adjusted calculation of the inflation rate and the loss of pandemic-era protections meant to ensure schools don’t see steep, year-over-year funding drops.

The latter plan would result in the district, which is spending $27 million on operating expenses this year, having a $386,000 budget deficit. “It is seriously concerning how we will continue to operate if the governor’s proposal goes through,” Blanchard said.

He’s already begun talks with other districts over sharing programs or even consolidating with another nearby district. But those arrangements take time to craft, and cost savings could take even longer, if they arrive at all. The new financial reality, however, may materialize in just a few months.

“There is opportunity here for sure. It’s just the timing, the planning, the effort that it takes isn’t going to happen in one budget cycle,” he said.

New York is one of several states bracing for a downturn in tax revenue collections—and curtailing the major boosts in K-12 school funding that have been common over the past few years.

The governor of Louisiana has said he’s opposed to permanently extending a pay bonus the state gave teachers last year. Several large Minnesota districts are facing substantial deficits as the state shores up resources for a potential deficit of its own. Alaska’s governor is threatening to veto an education funding bill over concerns about the state’s ability to fund budgetary increases.

And states like Connecticut, Hawaii, and Utah are cutting education budgets or declining to expand them in light of projected budget woes.

Hochul, New York’s Democratic governor, recently pushed back on what she described as unreasonable expectations that the recent boom in school funding would continue unabated. “I assume rational people would’ve understood that that can’t happen,” she said last month.

States’ financial outlooks are rarely uniform or easily summarized. Dan Thatcher, senior education fellow for the National Conference of State Legislatures, surveyed half of states last fall and found that nearly all were planning to increase appropriations for K-12 schools.

But that finding comes with caveats, Thatcher wrote in an internal NCSL document shared with Education Week.

Some states, like Wyoming, are implementing policies that reduce local tax collections, offsetting the impact of state aid increases. Many state investments in K-12 schools come with strings attached—they can only be spent on certain programs or types of staff members, or districts must contribute a share of their own funds in order to receive the additional state aid.

Plus, Thatcher writes, “inflation has severely degraded the purchasing power of federal spending and state increases in education appropriations.”

Inflation persists, and school funding is struggling to keep up

That’s true for the Osseo schools in Minnesota, said John Morstad, the 21,000-student district’s executive director of finance and operations.

The state will supply the district with a 2 percent funding increase for the coming school year. “With inflation still in the threes, that’s negative for us,” he said. The most recent Consumer Price Index report from the federal government showed a year-over-year increase of 3.1 percent in the cost of consumer goods.

State officials last year touted historic investments in K-12 schools. But Morstad said the reality was more complicated.

Much of that money was geared toward particular categories of expenses, rather than letting districts spend it on whatever they decided their most pressing needs were.

Meanwhile, rhetoric around a massive influx of cash emboldened the district’s labor unions to seek substantial raises.

“That money should go to our staff; they’re our biggest expense by far,” Morstad said. “But it’s being eaten up considerably faster than we’re receiving it.”

Some districts in the state have it even worse. According to a survey by the Association of Metropolitan School Districts in Minnesota, the St. Paul and Minneapolis school districts will experience budget shortfalls of $90 million to $110 million this fall if the state doesn’t offer any additional aid.

Fears about the future inform decisions in the present

States often make financial decisions based at least in part on projections of what their finances will look like in the future.

In Louisiana, budget staffers for Gov. Jeff Landry, a Republican, said they’re wary of including a permanent teacher pay bonus in future budgets because they’d struggle to remove it when a fiscal downturn materializes, the Louisiana Illuminator reported.

Connecticut Gov. Ned Lamont, a Democrat, answered concerns about a lower-than-expected increase in proposed state aid for public schools by saying schools still have federal COVID relief money to spend, according to reporting in the Hartford Courant. Schools have to commit the last round of COVID relief money they have by Sept. 30.

In New York, the state has been building up its reserves in recent years, in case an emergency like the COVID-19 pandemic requires a massive unexpected investment. The Government Finance Officers Association recommends governments retain two months’ worth of operating expenditures in reserves.

But New York districts can’t do the same—the law caps their reserves at 4 percent of their annual operating budget.

And some of their reserve funds are “designated,” which means districts can only withdraw them to pay for particular categories of expenses, like construction, if voters approve a project.

In the absence of additional state funds, districts often have no choice but to make cuts.

Every New York district has its own state-mandated cap on the size of tax increases they can levy on property owners. Many districts in the state struggle to convince voters to pay the maximum amount of legally permitted taxes, said Brian Cechnicki, executive director of the New York Association of School Business Officials.

“You have districts where I think there’s both the community perception that they tax and spend too much but also there aren’t enough programs,” Cechnicki said.

There are creative solutions to be found, Blanchard said. His district might partner with another one nearby to offer pre-engineering and agricultural programs that students from both districts attend. The Schoharie schools have also been investing in energy-efficient vehicles, including plug-in hybrid vans, to cut down on energy costs.

Still, a drop in state aid will cost jobs and programs, Blanchard said. That’s especially painful as schools continue to try to help students recover from the lingering effects of the pandemic.

“Every school district is trying to provide a very rich transcript so that kids will be college- and career-ready,” Blanchard said. “Having significant budget shortfalls will hamper our plan.”

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