Threatened with budget cuts from falling tax revenues on one hand and unprecedented expenses on the other, superintendents are faced with difficult decisions regarding layoffs and program cuts this fall.

While some states are now revising budget projections and making plans to rework the numbers, others have stayed silent on whether, or how deeply, K-12 will take a hit. Some leaders have claimed their districts will be shielded, at least for the time being, from the economic crisis by healthy reserves and budgets.

Marguerite Roza, director of the Edunomics Lab at Georgetown University, said in a webinar Thursday that this “mixed messaging” could factor in to federal bailout decisions. And if states choose to alter their budgets down the road, districts that didn’t plan ahead could be left in a bind. 

Less warning means hurried cuts

According to data from The Center on Budget and Policy Priorities, less than half of states have warned their districts of revenue cuts. 

With less warning, districts could delay financial decisions until the summer or even after the start of the next school year. If delayed, cuts could be deeper and have bigger impacts for students. 

Data from the Center on Budget Policy and Priorities shows some states have revised revenue projections for fiscal years 2021 and/or 2022, but many have yet to announce any impact. 

Retrieved from Edunomics on May 28, 2020

 

“If you can’t start saving money now, you’ll have to start saving more, and possibly more suddenly, once school starts at the end of the summer,” Roza warned. 

Dallas Independent School District Superintendent Michael Hinojosa said his district, which has a healthy reserve for 18 months, has avoided layoffs for next year. But as time goes on, that could change. 

“We’re losing oil revenue and we’re losing sales tax revenue,” Hinojosa said. “That’s going to be a big hit.”

Policy Analysis for California Education, a think tank, points out even if districts are currently in a “strong position with regard to their reserves” — which total approximately $12 billion in the state — those funds “will be needed further down the road” when tax revenues continue to fall. ​

With less warning, districts will likely move to freeze hiring and travel, permit contracts to expire, dip into their reserves, postpone maintenance and offer early retirements, Roza predicted. 

Anticipate changes in order to save and plan

That’s already coming true in some places. In Florida, for example, Osceola County School District Superintendent Debra Pace said she has already started saving in anticipation of cuts and will spend cautiously until she knows for sure how much her state has allocated for reserves. Florida’s budget is heavily dependent on sales tax revenue, which fell about 25% during March.

“We are looking right now at every dollar that we have been able to save or capture during the school closures from an operational standpoint,” Pace said. That means saving electricity and limiting transportation costs while school buildings are closed or partially reopen. 

Hinojosa suggested a hiring freeze. Typically, he said, Dallas ISD hires around 1,000 teachers every year. As of May, it was expecting less than 500. 

“You can’t be tone deaf about how you’re going to get salary increases,” Hinojosa said.​

PACE suggested attrition as “a more humane” alternative to layoffs and also suggested ramping up retirement incentives. 

And where money must be spent, some leaders are only spending for what’s necessary. “We are looking at every contract, every grant possibility, and every position to make sure we are able to prioritize kids and people,” Pace said, adding she will be “very cautious” about new commitments and programs. 

“Now is the time to look at refinancing debt, now that interest rates are so low, and renegotiate with partners,” said Luvelle Brown, superintendent of the Ithaca City School District in New York.

What to expect

But Roza said many of these options won’t be as effective. 

“It’s a deer-in-the-headlights move that helps people wake up to the issue, but you haven’t done much in the way of savings,” she said. 

Districts in more than half of the states have not been warned or cautioned against revenue changes.

Retrieved from Edunomics Lab on May 28, 2020

 

Even decisions like trimming contracts and payments to community partners, eliminating professional development days, cutting central office positions and consolidating departments would only have a 1-2% impact on savings “if things go well,” Roza said. 

On average, districts should be planning for between a 2-10% reduction in revenues. 

“Get those plans in place and get them going now, because if you’re going to wait until October to do them, those cuts are going to be deeper and those cuts will be destructive,” she said. “It will be a different kind of horrific.” 

States with early warnings weigh labor costs

The Georgetown Edunomics Lab predicts four mechanisms that could achieve an equivalent reduction in labor costs: 

  • Shifting all retirement costs to teachers (which could require state policy changes) 
  • Across-the-board temporary salary reductions of approximately 5%
  • Across-the-board furloughs (which could mean fewer learning days for students) 
  • Layoffs of approximately 4% of employees

States such as Oregon have already begun to furlough staff. And in Hawaii, Gov. David Ige proposed a 20% pay reduction for public employees, including teachers. Roza calculates this move, if made immediately, could avert nearly 2,000 teacher layoffs or furloughs amounting to two months of schooling in the state. 

California Gov. Gavin Newsom has proposed a 10% reduction in state worker pay. Whether districts will follow suit is unknown. 

In states where districts have already been warned of K-12 cuts, the Edunomics Lab has noticed inaction on budgets, freezes and program cuts, delays in state pay raises and regional furloughs.

Researchers raise concerns that in the fall, fiscal inaction and delays could continue as across-the board-furloughs reduce learning days for students and last-in-first-out layoffs disproportionately affect low-income areas. 

Instead, John King Jr., CEO of The Education Trust and a former U.S. secretary of education in the Obama administration who spoke in a webinar hosted by assessment organization NWEA,​ suggested financially planning to prioritize highest-need districts and students.

“They should be thinking about minimizing harm for students that are highest in need and most vulnerable,” King said. “Think about students that are most reliant on state aid and where states are in most need of revenue.” 

Financial decisions made now will likely drive choices around instructional delivery and operational planning in the fall. Cuts, King warned, could have a “dramatic” impact on learning. With predictions that suggest widening achievement gaps and learning loss for the start of the next school year, there is added cause for concern. 

Districts that prioritize students will make decisions differently than those prioritizing keeping staff whole, Roza suggested.

“Some decisions are better for students, some decisions are better for staff. And that’s the struggle: They’re absolutely at odds,” Roza said. “And that’ll be the mess of the K-12 financial story in the months to come” 

In the meantime, leaders are advocating and looking to the federal government for help. But some are anticipating that a bailout is not going to come, and no matter how smart leaders spend, many agree it will be nearly impossible to stay afloat without federal funds in addition to those provided in the already-passed Coronavirus Aid, Relief and Economic Security Act.

“There’s no silver bullet,” King said. “There’s no creative funding mechanism that would make up for 30% cuts in support. The advocacy over the next few weeks and months is critical.”

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