Budget Stress Presents Added Obstacle for School Reopening

As school district leaders across the country try to figure out when and how they can have students safely return to classrooms, the bite the coronavirus outbreak has taken out of state and local tax revenues hangs heavy over their plans.

Reducing class sizes, hiring additional custodial and nursing staff, and purchasing goods like disposable gloves and masks, hand sanitizer and disinfectants are all factors that could run up costs.

At the same time, states, which typically funnel money to K-12 schools, are facing budget crunches as revenues are down and the virus response drives up their own costs. 

Local property taxes also provide a substantial funding source for school districts. And another concern is that homeowners and businesses could miss payments as the virus outbreak and the economic disruption that it is causing drag on.

“How to cover the escalating costs as state revenue is declining,” said Michael Pagano, director of the Government Finance Research Center at the University of Illinois at Chicago, “I think that's going to be the big dilemma for school districts.”

Pagano made his remarks during an online panel discussion that was part of a Municipal Finance Conference that the Brookings Institution and other groups kicked off on Monday.

AASA/The School Superintendents Association and the Association of School Business Officials International have put forward rough estimates for what school reopeinng costs could look like. 

These groups say that for an average school district, with about 3,600 students, eight buildings, 183 classrooms, 329 staff members and 40 buses, the additional costs to reopen safely could be about $1.8 million. But expenses will vary widely depending on factors like school size.

Pagano pointed out that when states have slashed spending in past downturns, higher education is often targeted for sharp cuts, while K-12 tends to fare better.

But the virus outbreak has created an unprecedented level of financial turmoil for many states. And budget experts warn that even as the economy bounces back, the effects on state budgets could linger.

Lauren Larson, director of Colorado’s Office of State Planning and Budgeting, noted that lawmakers there recently approved budget legislation that cut the state share of K-12 spending by 10%.

Colorado officials are expecting to tap federal funds available to states and localities under the coronavirus relief law known as the CARES Act, to cover education costs, she noted.

A budget forecast for the state from June, she said, showed about a 16% decline in general fund revenues over the fiscal year that just closed and into 2021. “We burned through about two-thirds of our reserves just in the last few months of the fiscal year,” she said.

Cost increases on top of the slack revenues made the state’s budget gap even worse.

“Things are looking pretty grim,” Larson added. “There's just the basic math here where for the next, at least three years, we’re going to be in a really difficult situation without additional federal aid.” 

Exactly how many school districts will try to hold in-person school in the fall is unclear. Districts across the country are rolling out various plans, which include offering in-person classes for the entire week, all online classes and a mix of remote and in-person learning. 

The Los Angeles Unified School District on Monday, one of the largest in the country, announced it will start next month with an online-only offering. Superintendent Austin Beutner told the Los Angeles Times that he needs to weigh public health concerns and what is best for students’ education. But Beutner also emphasized that he needs more financial support to properly prepare. 

Fitzroy Lee, deputy chief financial officer and chief economist for Washington, D.C.'s office of the chief financial officer, said that the district had strong budget reserves heading into the public health crisis and has so far avoided major cuts to schools.

“Going into the next school year, it's going to be very difficult and there’s going to be extra spending that was not anticipated before Covid,” he added.

Pagano highlighted that while there’s still uncertainty over how states and cities will respond to the budget problems that the coronavirus has caused them, additional spending on public health programs that extend beyond the initial response to the virus is to be expected.

Meanwhile, one-time measures like spending down reserves will only serve as a budget fix for so long.

And the prospect of imposing tax hikes to raise additional revenue, at a time when many businesses and residents are dealing with significant financial strain, is unlikely to be an attractive option for elected leaders in many places, at least in the near term.

“The question is: What's going to get crowded out at the end? Would it be K-12 spending?” Pagano said. “Those demands that are coming from the taxpayer and the residents are going to come up against some limit.”