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Budget & Finance

Districts Could Get $14 Billion More This Fall. Here Are Five Ways They Might Spend It

By Daarel Burnette II — June 13, 2019 4 min read
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School districts this year appear to be on track to receive a windfall of money from their states. Income and sales tax are at surging with the healthy economy, and few states missed their revenue projections resulting in huge surpluses in some places and the ability for governors to deliver on a key campaign promise: increased K-12 spending.

According to a fiscal survey released this week by the National Association of State Budget Officers, governors collectively proposed to spend around $14 billion more on schools in fiscal year 2020 than they did this school year. It’s still too early to tell how much of that money will land in districts’ coffers. Legislatures this year were at odds with each other over whether to spend the majority of increased revenue on schools, squirrel the money away for the case of another recession, or spend it on other state obligations such as prisons and Medicaid. Many state legislatures, including in Alaska, Kansas, and Texas sent the extra revenue back to taxpayers in the form of tax cuts.

But there are early signs that the majority of states will spend more on their schools this year. So how will superintendents use the extra money? Across the nation, superintendents, their chief financial officers, teachers and board members have had the same sorts of debates as state lawmakers. Some districts, despite the surging economy, will make dramatic cuts this year due to demographic shifts and overall insufficient tax revenue to pay for climbing costs such as in Oakland, Sacramento and Clark County, Nevada. But others are looking to boost spending.

Based on local media reports, databases on school spending trends, and emerging research, here’s a list of options that seem likely for superintendents looking for how to use the extra money:

Repairing from the recession: The Great Recession which peaked in 2008, sparked a steep decline in sales, income, and property tax revenue and wreaked havoc on school districts, forcing mass layoffs, hiring freezes, and the shuttering of extracurricular programs. Average per-pupil spending declined by more than $850 between 2008 and 2013. Despite years of states pumping more money into schools, at least 22 states plus the District of Columbia through 2017 still had not reached pre-recession funding levels, according to the Center on Budget and Policy Priorities, a liberal think tank that pushes for more funding.

That means many districts this year are still in recovery mode: getting class sizes back to legal sizes, paying down debt they accrued during the recession, and addressing growing deferred maintenance costs.

Savings and debt: Some districts may decide to keep things as they are and not spend the money at all.

Superintendents could opt to put the money into their rainy day funds in order to prepare for the next recession. States’ laws vary on how much of districts’ money must be set aside in reserves. After the last recession, many states set up their own rainy day funds and many state departments of education are asking districts to do the same.

In the last 20 years, districts have taken out more than $1 trillion in loans, accruing in 2017 alone more than $20 billion in interest payments, according to a working paper by Cameron Anglum, a Ph.D. candidate in Education Policy at the University of Pennsylvania. Superintendents this year could opt to make large down payments on some of that debt to lower future payments.

Infrastructure: Districts will have to spend an estimated $197 billion to get school buildings to “good overall condition,” according to the 21st Century School Fund. They could decide to spend state and locally generated extra dollars this year on upgrading their facilities. While more than 80 percent of infrastructure costs come from local revenue sources, states including Pennsylvania, Rhode Island, and West Virginia have set aside funds for school facilities.

Teachers: Teachers across the nation have staged massive protests in the last year against stagnant wages. That sort of pressure, resulted in 20 governors promising to increase teacher pay this year, according to an Education Week analysis. Many governors, including in Georgia, South Carolina, and Tennessee are on course to deliver on those promises. Check out Education Week’s database of governors’ proposals. In many states, because governors don’t control teacher pay, teacher unions will have to negotiate for those raises this year.

Health care and pensions: One of the biggest reason that K-12 costs have effectively doubled over the last 30 years is because of rising pension and health-care costs. While governors will brag at their budget-signing ceremonies that their K-12 spending is at a record high this year, a large chunk of that money won’t be spent on academic initiatives. Some states, including Kentucky and New Jersey have attempted to make large-scale reforms to their pension crises. Democratic California Gov. Gavin Newsom last week proposed to spend more than $800 million to reduce districts’ pension obligations by 7 percent.

Teacher retirees in many states haven’t gotten cost-of-living adjustments for years. And as teachers age, districts’ health-care premiums continue to rise. A Houston Chronicle investigation found that Texas hasn’t increased its $75 monthly contribution to teachers’ health-care premiums since 2002, resulting in districts and teachers themselves to pick up the skyrocketing costs.

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