The Intersection

Addressing State Budget Cuts in Education Amidst COVID-19

November 3, 2020

The Challenge

Over 50 million public school students and around three million public school teachers started this school year with the coronavirus pandemic altering the way K-12 schools operate. District stakeholders have been left to substantially adjust their budgets during a global pandemic-driven recession while costs to operate have increased. In July 2020, states announced an average total budget cut of 15 percent, and with education remaining a top expenditure in almost every state, these cuts quickly trickled down to schools. Governors have warned for months that budget cuts of up to 20 percent might become inevitable, should Congressional gridlock deny financial relief for states facing declining tax revenue. Subsequently, school administrators are forced to reexamine their expenditures for the school year at a time when investing in safety equipment such as masks, disinfectants, and janitors becomes increasingly necessary.

Cuts to K-12 education spending are likely to have a pronounced effect on student achievement. In the years that followed program cuts resulting from the 2008 recession, stakeholders saw the largest decline in national pupil spending in more than a century. Researchers calculated that a $1,000 reduction in per-pupil spending after the 2008 recessions led to a reduction in reading and math test scores by about 1.6 percentile points and college readiness rate by 2.6 percent. These declines provide some evidence of the relationship between education spending and learning outcomes, which has been a matter of debate for decades. With predicted state budget shortfalls expected to be larger than the Great Recession, there is concern about how great an impact these shortfalls could have on students in the coming years.

Graphics source: Modan, N. (2020, August 19). 5 financial issues schools will face due to the coronavirus-induced recession. Education Dive.

Budget cuts will affect schools in various states differently, but spending is more likely to fall in states where schools depend more on state funding rather than local property tax. Therefore, students will experience budget cuts differently depending on the funding structures in their state.

School finance experts have concluded that achievement losses caused by public school spending cuts in the 2008 recession were disproportionately experienced by students in high-poverty districts. Evidence suggests that declining state support and subsequent cuts in local school budgets can slow student progress with potentially lasting consequences, such as declines in higher education participation and readiness.

Amidst a pandemic-driven recession, policymakers and education stakeholders should be prepared to address constrained state budgets with the possibility of facing further, harsher cuts soon. States should aim to minimize the consequences for students, especially those most vulnerable, and aim to prioritize their education budget during financial recovery.

Various States Responses

As state policymakers are forced to grapple with balancing a budget during an economic crisis, there have been stark contrasts in how policymakers have addressed funding cuts. Even with supplemental federal funding, many states had to tap into reserve accounts, delayed specific activities, or even delayed payments to districts. With an unprecedented global pandemic, states, districts, and schools are experiencing increased costs with declining revenues, forcing policymakers to consider how to best address stark budget cuts.

Ohio’s Governor, Mike DeWine, has implemented an innovative approach to address school funding distribution that supports low-income schools who rely more on state funding by shifting cuts to fall heavier on wealthier districts that rely less on state funding. This approach has also been used in California, who distributed federal CARES Act funding based on a district’s demonstrated student need. This approach attempts to provide an equity lens and shield high-poverty districts from the bulk of budget cuts. This approach is markedly different from New York’s recently passed state budget which cut state funding from each district by the same percent. While implied that school districts would equally shoulder the burdens of the economic downturn, evidence suggests that districts with the most children from low-income families will likely shoulder most of the burden.

Policy Considerations

Public education is facing an unprecedented financial crisis with the ongoing consequences of the COVID-19 pandemic. Financial stress on schools will vary widely based on many factors, but the financial decisions made by state and district leaders will be key to providing a sustainable equitable education for millions of students.

Increase Innovation and Flexibility: As states face cuts to education funding, policymakers should consider providing local districts the opportunity to control their funds in an equitable way. California has done this by replacing its prescriptive education finance formula with a weighted student formula. Under this formula, California granted districts with both substantial new total dollars – designed to be more equitable with greater increases to districts with a higher percentage of low-income students—as well as greater flexibility in using those dollars. The new weighted formula stripped a long-term constraint on district spending, which allowed more financial control at the local level. With more control at the local level, this approach could create more equitable and responsive funding systems.

Critically evaluate lay-offs and program cuts: As states grapple with the economic consequences of the global pandemic, spending should be critically analyzed before cutting various programs. Stakeholders should be careful when considering which programs to cut, keeping student success as the focus of decision making. Many district employees and programs are funded through grants that operate outside the constraints of state formulas, which are typically the first to get cut during economic downturns. School districts are critically considering reducing their teacher workforces, which are likely to be inevitable steps with upcoming budget cuts. Districts have historically used a “Last-in, first-out” layoff policy which places novice teachers at the top of the list for layoffs. Research suggests that educator layoffs have often hurt schools and negatively affected student performance. Teacher layoffs bring a subset of negative consequences such as increased class sizes and increased employee turnover, all while increasing state unemployment numbers.

Advocate for Increased Federal Aid: While Congress introduced the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March, this investment has fallen short of what is needed to relieve and maintain public education from financial burdens. Education advocacy groups have estimated a need for aid ranging from $100 billion to about $250 billion to stabilize state K-12 budgets, close gaps in remote learning, and provide a safe school environment for educators and students should schools reopen for in-person instruction. Federal assistance will be required to address the current disparities that exist in educational state funding.




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