For school systems to operate at their fullest potential, they need funding, and that’s true for districts of all sizes. Over the past several years, many K12 institutions have been able to stay afloat thanks to pandemic relief funds. Yet, in most states, federal funds designed to support education have been in decline, according to new data.
Between the fall of 2009 and 2019, public school enrollment saw an increase of 1.4 million students, according to the Department of Education’s National Center for Education Statistics. And greater enrollment means greater funding. Unfortunately, the pandemic took a toll on public school enrollment.
According to the Urban Institute, a nonprofit research organization with a focus on upward mobility and equity, more than one million students left public schools during the first two years of the pandemic, essentially scrapping the positive gains made over the last decade. As the report outlines, this exodus was caused by advances in remote learning options and home-schooling.
While districts may have seen dips in funding over the last two years as a result of the pandemic, these changes have been taking place for the last decade, according to an analysis by HeyTutor, an online tutoring provider. After analyzing data from the Census Bureau’s Annual Survey of School System Finances, the authors uncovered three distinct findings that reveal how education funding has influenced school districts across the nation.
Between 2012 and 2020, education revenue increased in all but seven states.
Local and state authorities contribute to the majority of states’ public school systems’ revenue, including some federal funds, according to the analysis. One of the driving factors for this increase across the majority of the country is the rise in local and state government spending on public school systems. On the other hand, federal spending has steadily decreased and flattened out between 2012 and 2020. However, between 2009 and 2019, the proportion of expenditures for salaries fell from 60% to 55%, according to the National Center for Education Statistics.
Education spending has exceeded revenue.
In 2012, 27 states reported a deficit in K12 education funding. That remained true in 2020, although there was some fluctuation in the years between. While more resources were allocated for services like food, transportation, janitorial services and teachers’ professional development, teacher salaries took a hit.
“Most public education expenditures come from staff and educator salaries,” the report reads. “However, between 2009 and 2019, the proportion of expenditures for salaries fell from 60% to 55%, according to the National Center for Education Statistics.”
Federal aid decreased in most states.
The decrease in federal aid and spending cuts directly correlates with the decline in federal aid to local and state authorities for K12 education funding, the analysis notes. Since 2009, federal spending on public education has continued to fall.
“With federal discretionary spending at its lowest levels since 1989, cuts in federal aid pressure state and local governments to fill the gap,” according to the research. “Local authorities in less affluent areas where many low-income families live are, in particular, feeling the brunt of this, and the lack of federal funding pushed public school systems in these areas into deficits.”
Looming Fiscal Cliff
Despite shrinking federal aid budget deficits across the board, school districts are practically sitting on gold mines thanks to pandemic relief funds, that is, until September 2024.
“The bloodletting,” as it’s been described by one economist, will mark the end of districts’ access to their ESSER funds.
“Public education has not seen this sort of right-sizing, fiscal cliff, whatever you want to call it, of this magnitude at any time in the past, including the last recession,” said Dr. Marguerite Roza, director of the Edunomics Lab at Georgetown University in a recent webinar. “I think it’s going to be quite shocking.”
As districts brace for these upcoming economic shocks, educators are beginning to feel the “perfect storm of financial pressures.”
In Maine, district leaders are drawing up their 2023-24 budgets with growing expenses and the impending loss of federal funds in mind. As a result, they’ll have to ask for “significant” budget increases and job cuts, according to the Portland Press Herald.
“I think the next two years are going to be tremendously challenging,” Portland’s School Board Chair Sarah Lentz told the Press Herald. “We have decreased funding and increased need. Everyone is worried.”
In New Jersey, one school district is preparing for deep cuts this next school year as inflation forces higher spending. The Wildwood City School District is bracing for a 54% cut in state school aid, according to The Press of Atlantic City. This would mean the district would only be allocated $1.9 million instead of $4.1 million.
“There is something systematically wrong with our funding formula if it cannot provide predictable funding as it is constitutionally required,” Wildwood Superintendent J. Kenyon Kummings told The Press.
He said the district’s only option for increasing revenue is by raising taxes, but the “community cannot take on a 20% increase on the local levy. We are the only pre-K-to-12 district in Cape May County that is majority Black, brown and poor.”
As September 2024 nears, district leaders should prepare by understanding what’s coming their way and who is at risk. In short, four major financial shocks are coming:
- ESSER is boosting spending, but that ends abruptly in September 2024.
- Most at risk: Districts using ESSER for recurring financial commitments via budget backfilling, new hires, or permanent raises.
- Enrollment declines mean fewer revenues in the long run.
- Most at risk: Urban districts, districts closed longer, and northern states.
- Inflation, labor scarcity, and new hiring are driving up recurring commitments.
- Most at risk: Those offering permanent raises that are larger than typical and those growing their staff roles.
- An economic slowdown would affect growth in state revenues.
- Most at risk: Districts that are more dependent on state revenue (or in states more affected by economic slowdowns).
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