The Intersection

School Funding in the Age of COVID-19

April 30, 2020

Schools and districts across the country are facing significant challenges as they seek to keep students safe, healthy, and learning. States have had to react quickly to transition to new systems of learning and to new issues that they have not had to tackle in the past – how to provide high-quality online learning opportunities, how to keep students fed, and how to support students’ physical and emotional well-being, among other needs.

These responses have come at a cost – states have had to figure out how to pay for new ways to distribute meals, ensure students have access to internet and the requisite technology, acquire distance-learning resources, and more. Fortunately, state leaders and the federal government have stepped in to provide financial support:

  • As of April 8, 28 states have been approved by the U.S. Department of Education for additional flexibilities in how they spend their federal dollars;
  • The Coronavirus Aid, Relief, and Economic Security (CARES) Act – which was signed into law on March 27, 2020 – includes an Education Stabilization Fund that will provide a total of $30.8 billion for K-12 schools, institutions of higher education (IHE), and other purposes.
  • Many states, like North Carolina, are repurposing funds to be used in new ways, such as for child nutrition or remote learning needs.

Pressures on schools and districts from these increased costs will be felt even more acutely in upcoming months as state revenues decline during the economic downturn – and the projected revenue declines are steep. States need to think critically about how to use these additional funds to incentivize districts to help students – especially those who will be most sharply impacted by the pandemic – excel academically and recover from learning losses during the school closures and the summer.

Recent funding trends

Funding for K-12 schools relies upon a blending of federal, state, and local revenues and looks different state-to-state. Over time, many states moved from funding schools more heavily through local revenues, which have inherent disparities and cause inequities, to increasingly funding schools through state funds. The average U.S. school funding from state revenues in the 2016-2017 school year sat at 47 percent with places like New Hampshire, at 32 percent, and Vermont, at 90 percent, highlighting the drastic variation across states. 22 states had more than half of the school revenues coming from state funds.

When schools rely upon state funds, they then also feel the effects of shifting state economies. School budgets become very susceptible to recessions, especially in states where their revenues fund schools at higher rates. During the Great Recession, the negative economic shifts that were felt in states across the country were also felt in K-12 budgets. Prior to the recession, the national average for state revenues for schools was around 48% but dropped around five percentage points after 2007-2008 – hitting the lowest post-recession point a few years later in 2009-2010 at 43.5%. Many states are still not funding schools to levels prior the recession. As K-12 funding is still reeling from the last recession, states and schools are bracing for the economic impact COVID-19 will have on budgets while students now have greater needs resulting from the pandemic.

During the Great Recession, the federal government stepped in and provided an additional source of funds through the American Recovery and Reinvestment Act (ARRA) in early 2009. The federal government went from providing school revenues at around 8-9% to almost 13%. In a time of shortfall, ARRA funding helped to lessen the hit on school budgets.

What we know about funding & student outcomes

School funding helps provide schools with resources necessary to support students. Researchers have found school spending increases have led to improved student outcomes, especially for low-income students, on measures such as attainment levels, wages, and poverty rates. It is likely that schools across the country will face a decline in revenues and have fewer resources to support more students with heightened and differed needs as a result of this pandemic. As funding cuts loom, it is important to consider the impact this will have on student outcomes in years to come.

Recent studies have found an association between the impact of Great Recession school funding cuts and declines in math and reading scores that grew over multiple years as well as lower college-going rates. Students whose communities were hit harder during the economic decline were even more adversely affected by the funding cuts, particularly low-income and minority students. Another study found that statewide job loss results in the decrease of eighth-grade math test scores – affecting all students, not just those whose families directly experience job loss. Divestment in schools is likely to negatively impact students who are already feeling the traumatic effects in their homes and communities from COVID-19.

Upcoming challenges

As much of the fallout from COVID-19 remains to be seen, there are anticipated challenges for school funding now and in upcoming years.

State Funding Projections | As revenues fall, many states are predicting budget shortfalls and thus significant cuts to the budget. In Hawaii, where schools are heavily reliant on state funds, there is a projected $300 million revenue loss and Governor Ige has proposed 20% cuts to teacher and public employee pay. Schools in states that rely more heavily on state revenues to fund their budgets will potentially feel the effects as soon as the fall. If current state funding projections become the reality,  the CARES Act funding will likely not provide enough relief to schools as states consider projected cuts up to 20%, causing a significant decline in per-pupil aid.

Rising Costs | COVID-19 has caused unanticipated costs to schools across the country. These costs will continue into and beyond the 2020-2021 school year as schools will likely need to do more with less funding. Schools will likely need to invest more in technology and broadband access to prepare for the potential of remote learning into the next school year. Supporting students who fall behind (COVID Slide) given the abrupt disruption to learning this school year will be an additional cost, and may include costs for tutors or other support programs to ensure students have received the content needed to succeed in their new grade levels. Growing pension costs also impact both state and school budgets – and as the markets declined in response to the COVID-19 disruptions, pension plans are estimated to take a hit, which will result in states and schools having to cover increased pension costs in the upcoming years.

Student Outcomes | When students return to their schools across the country, they will likely return academically behind and anxious as a result of the uncertainty and rapid changes to their typical day-to-day life and schooling as COVID unfolds. Students whose families are low-income, have faced job loss, lack of food access, and resources, will be especially vulnerable. These same students also face a potential loss of various support services (i.e., counselors, ELL programming) that could be trimmed when budgets are reduced. Negative student outcomes on measures like achievement and college-going rates must be anticipated and considered as states determine funding and policies related to K-12 education.

Policy considerations

Federal Stimulus Funding | States are in the process of applying for CARES funding with dollars to be released within a month of receiving state applications for funds. There are important considerations for states as they determine whether to apply, and if they do, how funding will be used to support schools.

  • States must determine if they will apply for funding under the CARES Act which requires commitments from states to maintain state funding in 2020 and 2021 fiscal years that are equal to the average support from the previous three years. This maintenance of effort may be waived by the secretary of education if states experience declines in financial resources. States can view their initial estimates of funds here.
  • CARES funding outlined specific uses of funds and states and schools will work to determine how to spend those funds during the upcoming months. State decision-makers should consider how they allocate funds to districts to ensure funds help the students most in need of support.
  • Not all schools will receive funds under the Elementary and Secondary School Emergency Relief Fund (ESSERF) portion of the CARES Act. Those who are allocated funds under the Title I formula will have access to the funds. States must determine if they will use Governor’s Emergency Relief Fund dollars to support K-12 schools who are not receiving funds under ESSERF.

Future State Funding of K-12 Schools | Soon states will understand just how much of an impact COVID-19 has had on their state revenues and how that will impact school budgets in the upcoming fiscal year. Below are some important considerations for policymakers.

  • COVID-19’s impact will vary across the nation’s regions and local areas and economies. Looking at disaggregated data will be important in determining if funds need to be distributed to targeted areas and regions more impacted by the pandemic, particularly in areas where families have faced job loss and students and families will need additional support.
  • The equitable spending of funds will be crucial and, in a time where there is now access to individual school budgets, it will be imperative to ensure that schools with populations of low-income and vulnerable populations are not unintendedly shortchanged as budget shifts occur.

Share This