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Published in Print: September 5, 2001, as States Slowing Spending For Public Schools

States Slowing Spending For Public Schools

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School districts around the country are starting the academic year facing leaner budgets and financial uncertainties, despite widespread efforts by state leaders to shield public education from the full impact of the soft economy.

With the days of bountiful budget surpluses gone in most states, a report by the National Conference of State Legislatures projects that states' general-fund spending on precollegiate education in fiscal 2002 will be 3.7 percent higher than 2001 levels. That number is down substantially from last year, when the Denver-based group projected that school spending would grow by 6.4 percent.

The budget picture for schools this year is not as bad as it could be, some analysts say, given that most states have managed to raise spending on K-12 education.

"Schools in some states are actually feeling the downturn," said Michael P. Griffith, a policy analyst for the Education Commission of the States in Denver. "But in the majority of states ... they're still getting increases above the rate of inflation. They just aren't the double-digit increases they were getting in the past."

Still, school officials in a handful of states report being seriously squeezed by deteriorating fiscal circumstances at both the state and local levels. Those states include Alabama, Michigan, and Tennessee, which all depend heavily on sales-tax revenue as a source of income.

And more worrisome to many educators and policymakers than this year's fiscal situation is the possibility that states' economies will get worse before they get better. The result would likely be tighter times for public schools, which rely more on state aid than any other source of revenue.

"There's still room to play," Mr. Griffith said, noting that some states have tapped budget reserves and tobacco-settlement money to balance the books. "But it's a finite amount of money. Another year of this and there won't be room to play anymore."

In light of such uncertainty, some experts say, just how deeply the weaker economy will affect schools remains unclear.

"In many ways, it's just too early to know," said Corina Eckl, the fiscal program director for the NCSL. "But we do know that state lawmakers see K-12 education as a top priority, and they do their best to maintain spending levels there even when times get tight."

Struggling in Tennessee

Compared with the budgetary conditions that schools faced in the wake of the recession a decade ago, the spending increases for education that many states approved for the 2002 fiscal year look relatively generous. For example, NCSL projections pegged states' increase in general-fund spending on education in fiscal 1994 at only 1.6 percent.

Yet states clearly have less money in the bank than they have in the recent past, with aggregate state balances at the end of June 22 percent lower than reported at the same time last year, according to the NCSL report on state budget and tax actions in 46 states. The report was released last month.

In Tennessee, some district leaders are struggling to make ends meet, after the legislature voted Aug. 7 to override Gov. Don Sundquist's veto of a $19.6 billion "bare-bones" state budget that provides $2.6 billion for schools. The Republican governor said he vetoed the budget in part because it did not finance improvements for education, such as a statewide reading initiative and an early-childhood-education program that lawmakers approved in June. ("Education Funding Looms Large in Tenn. Budget Fight," Aug. 8, 2001.)

The budget resulting from the legislative override includes a 2.5 percent salary increase for teachers, but no other improvements, said Stephen Smith, a government-relations specialist with the Tennessee School Boards Association. Last month, Gov. Sundquist announced that there would be $15 million cut from the K-12 budget, resulting in layoffs at the education department and the elimination of some state-level programs.

In addition, Mr. Smith said, declines in local tax revenues mean that some school systems are facing possible budget cuts.

"It's tight all across the state right now," he said. "Some school systems are looking at eliminating athletic programs, cutting back on art and music classes. There are a lot of tough decisions being made."

In the 46,000-student Shelby County schools near Memphis, for example, county officials recently voted to help fill in a $29 million gap in the district's $261 million budget by raising property taxes and increasing the local fee for vehicle registration. The district still had to make $8.1 million worth of cuts, however, and did so by cutting back music, art, and physical education programs, eliminating some administrative and support positions, and trimming technology expenditures.

In Shelby County, reliance on the county's sales tax to generate revenue has become a particular problem because local residents can easily cross state lines into Mississippi to pay lower tax rates on purchases, said David A. Pickler, the chairman of the Shelby County school board.

"Couple that with the overall slowdown in the economy, which makes people even more concerned about any tax increases, and you have a real funding crisis," Mr. Pickler said. "None of us wants to pay additional taxes, but sometimes you've got to do what's right for schools."

'Brakes On' in Alabama

Alabama schools were among the first to be seriously affected by the economic downturn, when state officials announced in February that the $4.3 billion budget for precollegiate education would have to be reduced by 6.2 percent, or $266 million, for the fiscal year that ends Sept. 30. Gov. Donald Siegelman, a Democrat, softened the blow to schools by moving forward in July with a $94 million bond issue that allowed state officials to reduce cuts to the K-12 budget to 3.8 percent.

School leaders' best hope for the new school year is that funding levels will remain the same, said Susan Salter, the spokeswoman for the Alabama Association of School Boards. The governor signed a $4.1 billion education budget in May, but included a provision allowing the legislature to cut the budget by an additional 1 percent if collections of sales and income taxes did not appear to be rebounding by Aug. 31.

"If the economy were to begin to recover, you could argue that while we're not in great shape, we'll still be moderately better off in 2002 than we were in 2001," Ms. Salter said. "But that's a shaky argument. It depends on whether or not you're an optimist, because the cost of doing business has gone up."

Lawrence T. Walters, the superintendent of the 8,900-student Decatur school system in northern Alabama, said that working under the current budget constraints is like "moving forward with the brakes on." After cutting travel and maintenance expenses this past spring, and putting off some maintenance projects this summer, the district is now starting the school year with 28 fewer employees out of a staff of 1,200. Some of the positions were eliminated, while district officials determined not to fill others when vacancies occurred.

"No one is giving us much reason to be optimistic for the foreseeable future," Mr. Walters said. "We're trying to do everything we can to avoid making cuts that affect students and that don't impact instructional programs, and that's tough."

Michigan Feels Pinch

Michigan school administrators, meanwhile, are starting the school year under a cloud of uncertainty. Under the gun to cut state spending in the face of declining revenues, lawmakers are slated to return to Lansing later this month to hash out revisions to the state's precollegiate education budget.

Layoffs in the car-manufacturing industry and others have contributed to a slowing economy, and Michigan leaders say that if things don't pick up soon, it will be hard to avoid paring the three-year, $33 billion school budget passed in May of last year. If legislators aren't able to agree on a compromise K-12 budget plan, Gov. John Engler, a Republican, has said he will trim the $6,500 per-pupil allotment state officials promised to schools by $73 per student.

Even without additional budget cuts, the 26,000-student Grand Rapids school district is already reeling from the faltering economy. To make up for an $18 million deficit in this year's budget of $238 million, the district eliminated busing for high school students, closed two schools, and made additional budget cuts at its remaining 70 campuses.

Parents at a district secondary school known as City High/Middle School ensured that the school wouldn't have to cut programs by embarking on a fund-raising effort that generated more than $62,000. Though the school was targeted for a $137,000 cut, the fund-raising efforts will mean the school can keep a counseling position and maintain block scheduling.

"Grand Rapids is a community that is not going to let its schools fail," said Susan M. Krieger, a spokeswoman for the district. "You make lemonade out of lemons, especially because kids are involved. What else are you going to do?"

Budget Delays Breed Doubts

School officials in New York state and North Carolina face similar uncertainties, as tighter economic times have made it harder for state leaders to pass budgets on time.

New York lawmakers last month broke a budget deadlock by passing a tightly constrained state budget that provided schools with a $382 million, or 2.8 percent, increase in state aid.

State legislative leaders are in ongoing negotiations with Republican Gov. George E. Pataki, though, and say they hope to approve a supplemental budget that would provide additional aid to schools in the coming weeks. ("N.Y. Legislature Passes Bare-Bones Budget That Incenses Educators," Aug. 8, 2001.)

North Carolina's budget woes are more severe. Gov. Michael F. Easley last month proposed raising the state sales-tax rate to 7 percent, an increase of a full cent, as a way to pull the state out of a financial crisis he described as "unlike any our state has seen in recent history."

In a televised address on Aug. 16, the Democratic governor touted North Carolina's public school accountability system as a model for the rest of the nation and blamed the estimated current shortfall of $800 million on the legislature's decision to cut taxes by roughly $1.5 billion over the past decade.

"I am not willing to make deep cuts to our public schools and community colleges at a time when we need them most," Gov. Easley said. "It's wrong for our state, and it's wrong for our children."

Even though North Carolina lawmakers have yet to agree to a budget for the fiscal year that started on July 1, the state's school districts have been able to open on time, thanks to the passage of stopgap budget measures that freed up state aid. But the districts are doing so without knowing what the budget that eventually passes will spell for schools, said Leanne Winner, the director of governmental relations for the North Carolina School Boards Association.

"The legislature will certainly make cuts in the budget," Ms. Winner said. "Whether or not they're going to protect public education is still up in the air."

Missouri Pares Spending

In Missouri, school administrators are starting the new year with more peace of mind, after Gov. Bob Holden announced late last month that the state's current economic crunch would have little impact on schools. The governor, a Democrat, has indicated that, because of a decline in state revenues, he needs to reduce spending by about $156 million to balance the state's approximately $19.3 billion budget for fiscal 2002.

While the so-called budget withholdings will affect all state agencies, the Missouri Department of Education will feel them to a lesser extent than other agencies.

In an Aug. 22 announcement, Gov. Holden said he would freeze only $3.1 million out of the education department's $2.5 billion budget. The state's social services department, in contrast, was asked to reduce its $1 billion budget by $25 million. Cuts at other agencies will be announced in the coming weeks.

"Our children are our greatest asset, and funding for our local public schools must be protected to the greatest extent possible," the governor said during his announcement.

But while school leaders greeted the news with relief, they say they are already concerned about what will happen to education spending next year, if economic forecasts remain bleak.

Brent Ghan, the director of education policy for the Missouri School Boards Association, said he was already concerned about the state's ability to pay for the $200 million increase in basic state aid to schools scheduled for fiscal 2003.

"Districts are doing some belt-tightening this year, but it's not a big burden on them at this point," Mr. Ghan said. "Our real concern is next year, considering that revenue projections are running well behind. The chickens are coming home to roost."

Vol. 21, Issue 1, Pages 1,35-36

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