Fiscal Recovery Buoys K-12 Budgets as School Year Opens
Most states feel some lift, but aid stream unstable
The modest but steady recovery of state K-12 budgets over the past few years is expected to continue, national experts on education finance say, although to what extent schools and districts will feel a real impact from budget changes for the 2014-15 school year is an open question.
In the current budget year, most state lawmakers have decided to continue reinvesting in public schools through their traditional "foundation" programs, which generate much of the state aid for K-12. Roughly a dozen states, though, including Nevada and Pennsylvania, are at least in the early stages of considering new funding formulas.
Even as revenues continue their climb back from the huge declines brought about by the recession that officially lasted from December 2007 to June 2009, the revenue streams that school budgets rely on so heavily remain unstable in various ways.
Illinois, for example, is already wrestling with the question of how to remake its school funding formula to place a new focus on equity and high-needs students, as it faces the "sunset" of a 2011 income-tax hike at the start of 2015 that by some estimates will create a $2 billion budget shortfall.
More broadly, the increases touted by governors in press releases often don't match what local officials might expect, said Michael Griffith, a senior school finance analyst with the Denver-based Education Commission of the States.
"Is it just slightly more, and is it enough to keep up with inflation or not? This is the complaint we've heard," he said.
For fiscal 2015, the budget year covering the school year that is just beginning, the appetite for more spending on public schools was evident in governors' proposed budgets. Chief executives in all but three states—Alaska, Illinois, and Nevada—proposed general- fund spending increases for K-12, according to a survey published by the National Association of State Budget Officers, in Washington. (Nevada passed a two-year budget in 2013.)
State legislators, in turn, largely stuck to their governors' proposals, said Kathryn White, a fiscal-policy analyst with the state budget officers' group, known as NASBO. In a few states, lawmakers reduced the higher spending levels governors sought.
In terms of governors' proposed budgets, public schools received "by far the largest amount of new dollars" allocated through states' general funds, compared with other program areas, Ms. White said. Governors proposed a total of $10.9 billion in general-fund increases for K-12 for fiscal 2015.
"Governors are certainly prioritizing K-12 education spending when looking at where to allocate new dollars that are becoming available with slow, steady growth," Ms. White said. She added that she wasn't aware of any state where legislators approved budgets that had higher K-12 spending levels than the ones proposed by their governors.
But the nominal growth rate of states' general-fund budgets (growth not accounting for inflation) has actually declined, from 5 percent growth in fiscal 2014 to just 2.9 percent in fiscal 2015. That's the lowest such rate since fiscal 2010, when state general-fund spending declined in the wake of the recession.
States with large enrollments that continue to struggle with their K-12 budgets, Mr. Griffith noted, include Illinois and Pennsylvania. The latter had its bond rating downgraded by Moody's Investment Service last month. Pennsylvania lawmakers have inaugurated a special commission to revamp the school finance system.
The only state to hit a "home run" and dramatically boost K-12 spending this year—California—did so on the back of a significant income-tax increase passed in 2013, Mr. Griffith noted. The state boosted its basic aid to public schools by $3.6 billion for fiscal 2015, up to about $54 billion.
Over the last calendar year, the number of jobs in local public schools increased by 0.5 percent, after a dramatic drop during the recession and then a flat period, said Michael Leachman, who studies K-12 budgets as the director of state fiscal research for the Center on Budget and Policy Priorities, a Washington think tank that advocates for more resources for public schools.
"That's an improvement, but a very modest one; ... there are still a lot fewer education jobs than there were before the recession," said Mr. Leachman.
According to his research, public school employment has recovered about 20 percent of the jobs lost since the start of the recession.
By contrast, state education employment opportunities are faring better. An analysis from Dan Thatcher, a senior policy specialist with the National Conference of State Legislatures, in Denver, found that job growth for state education positions—roughly 2 percent during the first quarter of 2014— virtually matched the growth rate in private-sector education jobs during the same period.
Vol. 34, Issue 02, Page 17
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