Budget & Finance

A Flood of Federal Cash and Then Layoffs. What Gives?

By Mark Lieberman — April 21, 2022 11 min read
Signs in support of keeping Diablo Community Day School open in Concord, Calif., on April 11, 2022. The school is being closed at the end of the school year due to budget cuts.
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In 1999, the Mount Diablo district in California opened a new school for students who were expelled for drugs, fighting, or missing school too many times.

Billy Becker, the first teacher hired at the school, said he’s seen some graduates go on to become lawyers or a molecular biologists.

“Our school is a second chance,” he said.

But after 22 years, that chance will be no more. The Mount Diablo district announced in February that it will close its alternative school at the end of this school year, as part of a broader initiative to tighten the district’s expenses.

That’s despite the district’s $62 million in federal pandemic relief aid, which has helped the district cover some existing salary costs, purchase new technology tools, invest in remote learning, and offer academic support to struggling students, among other priorities.

“When I spoke in front of the school board, I mentioned that I understand we might need to make budget cuts,” Becker said. “But to cut the entire school, to close it, makes no sense.”

Adam Clark, the district’s superintendent, sees the decision from a different vantage point.

The roughly 30,000-student district since 2020 has lost 1,000 students to private schools and neighboring districts where home rentals are cheaper, prompting cuts to state aid. The Day School itself, which has four employees including Becker, has seen enrollment dwindle from an average of 30 students to just 15 this school year.

The district’s federal pandemic aid will dry up in a couple years. And the county and state governments are monitoring the district’s finances after district administrators couldn’t certify that it would meet its financial obligations for the following three years.

“We shouldn’t be cutting. The accounting practices that we need to follow as a district [don’t] make sense to everyone,” Clark said. “But unfortunately that’s our reality.”

A surge in temporary federal funding has created the perception among many commentators and members of the public that schools across the country have more money at their disposal than ever before. But some district leaders say the windfall obscures a less rosy reality, in which declining enrollment, surging inflation, and volatile state funding have squeezed their ability to maintain services, let alone expand them or innovate.

Administrators are juggling numerous priorities while confronting dilemmas that are difficult to explain to staff and the general public. Pent-up frustration over perpetually underfunded programs and resources has led some school communities to engage in contentious fights over proposed cuts, occasionally resulting in protests, walkouts and strikes among workers and students.

“How do you tell someone in one breath that we have to figure out how to spend this [COVID recovery] money, and it can only be used for these specific things, but then on the other end we’re cutting?” said Tanya Monson-Ek, finance director for the Thief River Falls district in Minnesota, which is laying off close to 20 employees before next year. “It’s really hard.”

Teachers, counselors, academic programs are on the chopping block

Budget cuts are a fixture of America’s K-12 landscape every year, and this one is no exception, even as many states are flush with cash, and schools received nearly $200 billion from the federal government to help them endure and recover from the pandemic. Many students lost months of classroom instruction during school building closures, and the trauma from the death and suffering wrought by the pandemic has taken a toll on students’ emotions, behavior, and mental health.

One in 10 district leaders and principals who answered a nationally representative April survey by the EdWeek Research Center said they’re expecting layoffs in their school or district before the next academic year.

Many more districts will trim academic programs, scale back bus service, shrink maintenance projects, eliminate unfilled positions, or raise parent fees for field trips and textbooks. In extreme cases, entire school buildings will close.

Districts’ current budget challenges, particularly in low-wealth areas, highlight the cascade of fiscal pressures schools regularly experience, thanks to the nation’s convoluted and inequitable school finance system.

Here are some examples of districts making budget cuts this year. Each example includes the total amount of federal aid they got from the three ESSER pandemic relief packages in 2020 and 2021, according to an Associated Press analysis of state and federal data.

  • The Fairbanks district in Alaska (roughly $3,000 per student in ESSER funds) is closing three school buildings and laying off dozens of employees as state lawmakers balk at offering additional funds that don’t come with strings. The district’s enrollment-based funding has declined, as has property tax revenue.
  • Schools in Hollister, Calif. ($1,800 per student) will dismiss 59 staffers to meet state requirements that no more than 90 percent of operating funds are spent on compensating staff.
  • Forty percent of school principals in Chicago ($8,090 per student) say they’re getting less money this year than they did last year. District leaders say they’re centralizing some costs that used to be incurred by individual buildings, and adjusting based on declining enrollment.
  • Hopes in the Marlington schools in Ohio ($2,900 per student) are riding on voters next month to approve a levy that will prevent the loss of between two and three dozen educators. Maintenance costs have been far steeper than the state’s annual allotment for capital projects, leaving the district in a deficit.
  • In Saugus, Calif. ($825 per student), all seven of the district’s counselors may be out of work come this fall. District leaders said insufficient base funding from the state is to blame.
  • And in Minneapolis ($7,240 per student), where employees recently engaged in a strike for more than two weeks, 250 teachers may lose their jobs, and 1 in 4 are teachers of color, according to the district. State funding per pupil hasn’t kept up with inflation in recent years, the superintendent says.

Why are schools cutting despite a federal windfall? That money is difficult to spend, and can’t go toward costs that will recur beyond 2024. State funding is generally tied to enrollment and attendance, which have been unusually volatile during the pandemic.

Districts also face a wide range of ballooning expenses that show no signs of letting up:

Schools devote the vast majority of their budgets to salaries and benefits, and they’re often looking to shrink that portion of the budget pie to make room for other essential components like energy costs and classroom supplies. Some districts are even using federal funds to plug existing budget holes.

Not all cuts have equally severe ramifications. Some district budgets are littered with excess and redundancies. Eliminating long-vacant positions hurts far less than putting someone out of work. And particularly steep declining enrollment can sometimes mean less investment is necessary. The massive K-12 layoff crisis that appeared possible in the early days of the pandemic didn’t come to pass.

But any job loss in a precarious field like education can be painful for the employees, for the community, and for the students.

Costs are rising faster than funding is keeping up

States contribute roughly 45 percent of annual K-12 spending in the U.S., and some property-poor districts rely on an even higher percentage to make up for shortfalls in local funding.

States take a variety of approaches to incorporating inflation when calculating their contributions to school budgets. Montana, for instance, has a law that requires the state to calculate inflation each year and adjust school funding accordingly.

But some states don’t have a codified approach to ensuring school budgets meet inflationary pressures. According to an analysis prepared for Education Week by the Education Commission of the States, bills currently under consideration in at least three states—Arizona, Colorado, and Minnesota—aim to tie school funding to the annual change in the nation’s GDP or the Consumer Price Index. Advocates in Tennessee just announced a push for a similar change.

In the meantime, many school district leaders say their states aren’t supporting them enough to maintain the robust services families and accountability hawks expect.

In Des Moines, Iowa, a 1 percent year-over-year increase in state education funding tends to translate to half of 1 percent of an increase in staff wages, said Shashank Aurora, the district’s chief financial officer.

The state recently passed a 2023 budget that increases school aid by 2.5 percent, or slightly above the average increase the state has offered in each year of the last decade.

The only problem? “If I were to keep that 1.25 percent increase in wages, I can’t retain employees, I can’t hire employees,” Aurora said.

Instead, Aurora is aiming to raise staff salaries by 2 percent or 3 percent, which means he has to cut $12 million to $14 million from the district’s $470 million general fund.

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The district has shed 1,600 students in the past two years, causing a reduction in per-student aid from the state. Aurora and his team have had to get creative to minimize the pain of laying employees off.

One approach they developed is an early retirement offering that allows senior employees who have worked a decade or more in the district to retire early, at age 55.

“The hope is, if you pay them money and they retire at this amount that you give them, we can hire younger teachers at a lower cost,” Aurora said.

The district is required to pay staff using funds that come from local property taxes, rather than the general fund, which includes money from state and local sources. Without that requirement, “Why should I be paying an employee to retire?” Aurora said. “If we had the liberty of spending $650 million the way we want to versus how it has been budgeted today, there are some decisions we’ve been making which we would just not make.”

Many districts are bracing for employees to expect big salary increases this year, to account for the hard work they’ve done to maintain schooling throughout the pandemic and the pain their wallets are feeling due to surging prices of consumer goods.

Eighty-five percent of the annual operating budget in Minnesota’s rural Faribault schools, where students of color make up more than half the enrolled population, encompasses salaries and benefits.

“I can’t tell you how much our teachers deserve, but they deserve a lot,” said Todd Sesker, the Faribault superintendent.

But, the district has a $2 million deficit, a growing population of English-language learners who need costly specialized services, and the looming possibility of a state takeover if that deficit doesn’t shrink. “We can only go so far to provide them with that funding,” Sesker said.

Separating necessary reductions from painful cuts

Some cuts are no-brainers for districts.

Lois Standring, assistant superintendent for business and operations for the Novato schools in California, felt no pain excising from this year’s budget $6,000 for magnetic calendars, or a $30,000 contract for a marketing consultant.

“I just don’t think an ad is going to do that much of a difference in parent choice,” she said.

The Thief River Falls district was outspending nearby districts on maintenance and administrative salaries, said Monson-Ek, the district’s finance director. Trimming those allocations didn’t take much effort.

But what looks like right-sizing to an administrator doesn’t always appear that way to a parent or a staff member.

In the Novato schools, Standring is cutting 30 teaching positions. The district has seen class sizes as low as 18 students; these cuts will bring the average to around 24 students.

“We like to say we’re the Chevy, not the Lexus,” Standring said. “We offer great education, but it’s not a private school.”

Students in Minnesota’s Thief River Falls district won’t have the option of learning German next year. Some students liked online learning, and the district wants to keep them happy, but it doesn’t have the financial breathing room to invest in a high-quality online program, Monson-Ek said.

Teacher Billy Becker, who has been with Diablo Community Day School for 23 years, poses for a portrait at the school in Concord, Calif., on April 11, 2022. The school is being closed at the end of the school year due to budget cuts.

And in the Mount Diablo district, administrators decided to shift students in the Day School program either to a county-run program further away or an online equivalent.

District leaders have tried to be receptive to public feedback: They decided to shrink investment in supplemental music classes for elementary students, after a public outcry at the initial proposal to eliminate it entirely.

“It is very difficult to keep cuts away from the classroom because everything is pointed to the classroom,” said Clark, the superintendent. “If I cut two positions in my business office, those one way or another are related to the classroom—they’re paying the employees who are responsible for manning the classrooms, or they’re paying for the supplies.”

Becker, meanwhile, would be thankful just to have a job. The district has said it will offer to transfer him to another school, but he’s been told he won’t learn the details until the end of April.

He worries even more for the students. Some have recently told him they would rather quit pursuing their education than attend a regular school again.

“A lot of these guys and girls tell me our school got them thinking a little bit better, about why they did what they did to get expelled, that ‘I have a lot of self-worth, I’m a good person, I can think better of myself,’” Becker said. “If this kind of environment doesn’t exist, that doesn’t happen for an entire population of kids who we’re getting.”

A version of this article appeared in the May 11, 2022 edition of Education Week as A Flood of Federal Cash and Then Layoffs. What Gives?

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