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Published in Print: October 31, 2001, as States' Wallets Grow Thinner After Sept. 11

States' Wallets Grow Thinner After Sept. 11

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States throughout the country are feeling the aftershocks of the Sept. 11 terrorism, as lawmakers work to balance lean budgets and blunt the impact of spending cuts on schools.

School districts in New York state will be among the first to be directly affected by the economic fallout from the attacks, the most devastating of which struck the World Trade Center in New York City. Empire State legislators approved a package of supplemental aid for schools last week, but it fell far short of the levels needed to bail out a handful of districts facing sizable budget cuts and layoffs.

But far away from Manhattan's "ground zero," or from the damaged Pentagon outside Washington, schools and education departments in states from Florida to Iowa to California are feeling the pinch. As the attacks' effects continue to filter out through the economy, legislatures are surrendering hope that an imminent economic rebound will spare them from cutting budgets drawn up in more prosperous times.

Even as many state lawmakers say they are trying to protect schools from the budget ax, some analysts note that spending on K-12 education makes up too great a share of total expenditures in most states to emerge unscathed in such uncertain economic times.

Still, they say, in many instances it is too early to predict the full scope of the attacks' economic ramifications for state budgets, as many leaders await firmer revenue forecasts before taking action.

"The 2002 legislative sessions are going to be very challenging," said Cornia Eckl, the fiscal-program director for the National Conference of State Legislatures. "They were already promising to be problematic, and now they're going to be that much harder. Lawmakers around the country are very concerned about what they're seeing so far."

New York Hit Hard

In New York, where Gov. George E. Pataki has said that the World Trade Center disaster could cost the state as much as $9 billion in lost revenue over the next 18 months, the legislature passed a supplemental state budget on Oct. 24 that included $200 million in new aid for schools. The aid package—which Gov. Pataki, a Republican, is expected to sign—fell far short of the $925 million to $1.7 billion in increases for schools that legislators had been discussing in August, before approving what they predicted would be a preliminary education budget of $14.1 billion.

"The expectation was certainly that there would be more aid, because that's what we were continually being told by the legislature," said David Ernst, the spokesman for the New York State School Boards Association. "That changed after September 11."

As a result, some school districts in the state are facing budget crises, with a few, such as Buffalo, planning teacher layoffs to balance the books.

"There is no doubt New York's schoolchildren will suffer statewide as a result of the attacks," Mr. Ernst said.

Schools in tourism- dependent states such as Florida and California are also among those that have suffered budgetary blows from the terrorism, which came as the national economy was already sputtering. ("States Slowing Spending for Public Schools," Sept. 5, 2001.)

Convened for a special session that began Oct. 22, Florida lawmakers appeared to be nearing consensus late last week over competing budget-cutting plans to address a $1.3 billion revenue shortfall in the current fiscal year.

The Florida Senate voted on Oct. 25 to approve a plan that would cut funding for schools by $118 million, far less than the $548 million proposed under an earlier House plan. Under the fiscal 2001-02 budget that Gov. Jeb Bush, a Republican, signed in June, overall spending on precollegiate education was slated to increase to $12.5 billion, a 6.3 percent increase over the previous year.

House lawmakers indicated that they would support the cuts recommended by the Senate, but disagreed with the Senate's plan to shore up education aid by eliminating a $128 million tax cut for investors.

Members of the House would prefer to tap into Florida's budget reserves to make up the difference between the proposed spending cuts and the actual budget shortfall. The differences are expected to be resolved this week.

"Districts all over the state are looking at options, how between now and the end of the year they can pare back the budgets they've already enacted," said David Clark, a spokesman for the Florida Education Association.

Shortfalls Balloon

In California, meanwhile, Gov. Gray Davis said last week that the state could face a budget shortfall this fiscal year and the next totaling anywhere from $8 billion to $14 billion. On Oct. 24, the Democratic governor imposed a hiring freeze for all state agencies and asked Cabinet members to identify $150 million in cuts for the current fiscal year. Some lawmakers are calling on the governor to convene a special session to deal with the funding woes.

Earlier this month, Gov. Davis also sounded the alarm on state spending next fiscal year, asking the heads of all state agencies—including the department of education—to submit budget proposals for next year that would incorporate 15 percent cuts.

"We're being asked to cut back our operational capacity and not cut back our services, and that seems to be an impossible objective," said Doug Stone, a spokesman for the California education department. "We're talking about something that hasn't hit the state in 10 years, where these operational cuts have been required."

Even those states that aren't dependent on tourism are feeling a greater fiscal pinch since Sept. 11, as the revenue forecasts for sales taxes and other sources of state income show no signs of improvement.

In Iowa, for example, Gov. Tom Vilsack, a Democrat, recently ordered a 4.3 reduction in state spending across the board to deal with a $158 million budget shortfall. The legislature will begin a special session on Nov. 8 to restore funding to certain priority areas, including public safety, but has not yet agreed on how or whether to restore the $85 million in cuts to public schools.

Kathi Slaughter, a spokeswoman for the Iowa education department, said that schools would begin to see reductions in state aid in mid- November unless the education budget is restored.

"We don't know how much will be restored and in what areas," Ms. Slaughter said. "Most districts would like to be in a better position to plan, but we don't know what to tell them to plan for."

Midyear Cuts Common

In South Carolina, meanwhile, some districts are already looking to tighten their belts as the state faces a $310 million deficit in the current fiscal year—a shortfall that will likely result in 4.25 percent midyear budget reductions for every state agency. Such cuts would be a significant blow to schools, said Scott Price, the general counsel for the South Carolina School Boards Association.

"This definitely will cause, and probably already is causing, some pain at the local level," Mr. Price said.

Robert A. Morales, the chief financial officer for the 60,000- student Greenville County school district, said that he had been aware of South Carolina's growing budget concerns since mid-August. By Sept. 18, with the Sept. 11 attacks only compounding the fiscal problems, Mr. Morales reported to local school board officials that the likely state cuts would result in a $6.2 million reduction in state aid to the district, out of a total budget of $600 million.

The district responded in ways large and small: leaving employee vacancies unfilled, trimming the budget for equipment and supplies, prohibiting schools from carrying over their budget balances from last school year, and tapping district reserves. Officials also canceled a retirement dinner for people with at least three decades of experience, an annual tradition.

"Right now, we can't afford to do it," Mr. Morales said. "It's not tied to direct instruction. The kids come first."

Yet even as they feel increasingly squeezed by falling revenues, lawmakers in a handful of states say they will strive to shield schools from feeling the impact—a desire some analysts attribute to states' not wanting to halt the momentum of standards-based initiatives enacted during flush economic times.

Generally speaking, higher education budgets are taking a much greater hit than precollegiate budgets, said Jim Watts, the vice president for state services at the Southern Regional Education Board in Atlanta.

"K-12 is holding its own," Mr. Watts said. "Lawmakers can't see the results in higher education that they do in K-12 education, thanks to accountability and targeted investments."

In North Carolina, Gov. Michael F. Easley and legislators last month approved a half- cent hike in state sales taxes, and a variety of other tax measures. Their objective was to fill a budget gap by generating $1 billion in revenue over the next two years. A compelling reason to support the tax increases, the Democratic governor argued, was to avoid balancing the budget "on the backs of children."

Likewise, in Georgia, Gov. Roy E. Barnes, a Democrat, told a group of superintendents this month that even as the state has asked the heads of all state agencies to cut budgets for the current fiscal year by 2.5 percent to fill a budget shortfall, he wants to protect basic state aid to school districts.

"We'd just about be shutting up the Capitol before I'll be cutting funding for direct instruction for education," Mr. Barnes said. "I feel too strongly to let us lose some of the improvements we've made."

Still, Don Rooks, the legislative specialist at the Georgia School Boards Association, said that while he hopes that instructional programs will be spared, he is also realistic about the implications of a budget crunch.

"There are all these demands for funding," Mr. Rooks said. "And if you take 2 percent or 5 percent from one demand, obviously that has to be balanced in some way. There comes a time when you have to say that everybody's got to share some of the burden."

Vol. 21, Issue 9, Pages 1,22-23

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