Education Funding

Devastated Budgets and Widening Inequities: How the Coronavirus Collapse Will Impact Schools

By Daarel Burnette II — May 08, 2020 10 min read
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Almost half of the nation’s 13,000 school districts may be forced to make the deepest cuts to education spending in a generation—slashing programs and laying off hundreds of thousands of administrators, teachers and other staff—to fend off financial collapse brought on by the coronavirus.

But while the economic impact on schools will be historic, it will not be random.

The districts most at risk share demographic profiles—student populations that are heavily black, Latino and low-income—and one crucial trait of their budgets: They get more than half their revenue from state aid.

The reliance on state funding has always been precarious because that money tends to come from volatile revenue streams such as sales, oil and income taxes. But in the economic standstill triggered by the virus, those tax lines have nearly been wiped out.

See Also: Is Your District Recession Proof? Find Out Here.

The result is a recession that threatens to make the divide between rich and poor school districts even more profound.

Even before the coronavirus pandemic, these 6,000 districts identified in an Education Week analysis were underfunded and had yet to recover from the recession between 2007 and 2009. The districts enroll 24 million students—nearly half the population of all U.S. public schools.

With states now collectively projecting spending cuts in the coming years in the range of $500 billion, administrators in these districts will be forced to dismantle their central enterprise of teaching and learning. Their choices will be stark.

“What’s so stunning about this recession is that poor districts are going to bear the brunt of these cuts because they rely so heavily on state aid and they don’t have the capacity to raise their property taxes,” said David Sciarra, the executive director of the Education Law Center, a law firm and advocacy organization which has sued states for having inequitable funding systems.

Schools at Greatest Risk

The district in Rochester, N.Y., is among those most at risk.

Of the 25,000 students in Rochester’s schools, 86 percent are black and Latino. Ninety percent of them qualify for free and reduced-price meals. Just 13 percent of elementary school students in the district can read on grade level.

The city has a median household income of just over $33,000, far below the nearly $62,000 median for the United States, according to the U.S. Census Bureau. The share of city residents who live in homes they own is 36 percent, compared to 64 percent nationally. Today, the upstate district gets more than 85 percent of its money from the state.

The school district in Rochester, N.Y., already in financial distress, will likely face even more draconian spending cuts because of the its heavy dependence on sources of state funding.

Before the coronavirus’ freeze on the economy, Rochester’s schools were reeling from chronic underfunding and gross fiscal mismanagement that were forcing leaders there to make deep cuts. The virus brought even more devastation as lawmakers in New York voted not to increase state aid to districts.

On May 7, the Rochester school board permanently closed five schools, shuttered its program for teenage mothers, and another for Puerto Rican students who fled from Hurricane Maria. Since late last year, more than 300 teachers—one-tenth of its teaching force—have been laid off.

And Rochester must brace for more pain. State lawmakers will likely reconvene soon to make another round of cuts to fill an estimated $8 billion budget deficit.

“I have never seen the world as upside down as it is now,” said Adam Urbanski, the longtime president of the Rochester teachers’ union.

A Historical Shortfall

Fiscal analysts are forecasting that the recession associated with the coronavirus pandemic will be deeper and longer-lasting than the last, with severe implications for America’s public schools.

The $13.5 billion that Congress last month provided to school districts will not be able to make up for the anticipated losses.

Without another federal bailout, several states will have to cut anywhere from 5 to 20 percent from their budgets when they reconvene this month and next, according to fiscal analysts.

Cuts will fall on most school districts to some degree, but those whose budgets are built largely on property tax revenues will suffer less.

Education Week analyzed 2016 school spending data, the latest available, to identify which districts will be most at risk of harm because of their heavy dependence on state aid.

Education Week’s analysis shows more than 600 districts get more than 75 percent of their aid from their states, putting them at great risk for deep cuts.

Hawaii is a single, statewide district, and schools are funded without a penny from property tax revenues. Sales and income taxes generated by Hawaii’s tourism pays for schools—an industry that has ground to a halt. The state’s school system is predicting a $1.5 billion shortfall next year and the governor has proposed pay cuts for teachers as high as 30 percent as one remedy for filling the gap. Cutting salaries could hurt teacher recruitment and retention at a time when the state already struggles to hire enough teachers.

The demographics of districts dependent on state aid vary by state and depend on how well states target their aid to students with the most needs. Nearly every district in Vermont—there are more than 200 of them—is almost entirely reliant on state aid.

In Georgia, which plans to cut $1.6 billion from its K-12 budget this year, more than two-thirds of students in districts that receive the majority of their funding from state aid are poor. That’s compared to 58 percent of students in districts that are less than 50 percent reliant on state aid.

In addition, Education Week identified more than 465 school districts that have instituted sales taxes of their own. Philadelphia, for example, generated $381 million from local taxes on parking meters, hotel occupancy, and lottery ticket sales in 2016. Much of that money is likely now gone, according to school officials.

In New York state—the epicenter of the coronavirus outbreak—an analysis done by the Education Law Center shows that an across-the-board percentage cut to K-12 spending, which is how legislatures have historically made budget cuts, will be devastating to a district like Rochester but will have little impact on the public schools in Pittsford, N.Y., a suburb which sits just southeast of the city.

Pittsford, where the median household income is more than $116,000, is majority white. U.S. News & World Report this year ranked its two high schools among the nation’s top one percent.

The 5,000-student district, whose leafy cul-de-sacs are lined with large homes, gets more than 76 percent of its money from property tax revenue and only 23 percent from the state.

The district is keeping a close eye on what state lawmakers do to address budget cuts, but has so far made no plans to lay off staff this year, a spokeswoman said.

Boom and Bust

Economists have long warned that, because students academically thrive in stable learning environments, school districts should avoid building budgets on revenue sources such as sales and income tax, which swing wildly depending on unemployment rates, the stock market, and even the weather.

But using state sales and income tax revenue for schools was a politically palatable answer to courts that began to demand in the 1970s that states even out K-12 spending disparities between wealthy and poor school districts.

The risks of that remedy played out starkly during the Great Recession between 2007 and 2009 when sales and income tax revenues went into a tailspin, accelerating a divide between wealthy and poor school districts.

By 2010, more than 300,000 public school librarians, counselors, office secretaries, and teachers had lost their jobs—layoffs that fell disproportionately on low-income urban and rural districts. A study released last year showed that districts that cut the deepest in the Great Recession showed the least progress in students’ academic performance, as measured by standardized test scores.

The job losses and spending cuts would have been far worse without a $100 billion bailout for schools under the 2009 American Recovery and Reinvestment Act.

Counterintuitively, even though the recession was sparked by the collapse of the housing market, property tax revenues rose. That’s because states allowed school districts to adjust their property tax rates to offset dipping home values. Wealthy school districts escaped unscathed.

“All of states’ efforts to equalize spending was undone in the last decade,” said William Evans, an economist at Notre Dame University who studied the effect that the last recession had on America’s public schools. “State funding for education is a way to equalize spending across districts, but the problem is that when there are these global economic shocks, states’ budgets are going to get crushed.”

Rochester in Bad Shape

Rochester has for decades had a fraught relationship with New York’s state legislature over school spending. The district spends around $12,500 per student, roughly $1,000 less than the state average. Its per-pupil spending on students who require special education is about $29,000, which is $3,000 less than the state average. Twenty-two percent of Rochester’s enrollment are students with disabilities.

In 2007, New York agreed to ramp up its K-12 spending after losing a years-long court battle over its funding formula. But the state, which was slammed during the last recession, has failed to live up to that promise. Today, the state is more than $4 billion below its funding obligations to districts. For Rochester, the state has fallen more than $86 million behind in its funding obligations.

David Sciarra, executive director of the Newark-based Education Law Center, an advocacy group for children in low-income cities, argues during a hearing in a school funding case before the New Jersey Supreme Court in Trenton, Wednesday, April 20, 2011. Thousands of struggling students in New Jersey are being deprived of an adequate education because of state aid cuts initiated by Gov. Chris Christie and approved by the Legislature, Sciarra told the state Supreme Court.

“The state for years has been reneging on its constitutional obligation to equitably fund schools,” said Jasmine Gripper, the executive director of the Alliance for Quality Education, a K-12 funding advocacy organization that’s filed a lawsuit against the state. “It’s systemic racism. Large populations of black, brown and immigrant students are not a top priority for this state.”

The district’s problems were compounded when, after the last recession, thousands of students left the district for local charter schools.

Rochester’s ongoing fiscal crisis reached a head earlier this school year when an auditor discovered that the district’s administration spent $45 million more than it collected last school year.

Despite student walkouts, teacher protests, and tearful school board meetings, the district in December, laid off 109 teachers. The layoffs would have been even worse without a last-minute, $35 million, 30-year loan from the state.

After the December layoffs, administrators and school board members assumed the state would increase the amount of state aid Rochester would receive. Then the pandemic hit.

Along with worrying if they’ll have a job next month, Rochester’s teachers have been attempting to roll out distance learning plans and checking on the well-being of their students.

Rochester’s union has posted on its website open teaching jobs across the state and teachers have encouraged each other to keep handy documents proving the day and time they signed their contracts since the layoffs are last in, first out.

Terry Dade

Board members, who meet bi-weekly via Zoom, have been at odds with the district’s administration over which programs to cut and which schools to close. Because so much revenue comes from outside the district, administrators have little flexibility on how to spend its money.

And on April 23, Superintendent Terry Dade quit. He had barely been on the job for a full year.

“It’s been brutal,” said Abby Bardanis, a bilingual special education teacher who works with refugee students and worries about being laid off. “We’ve been defeated by the system.”

What’s the Outlook?

If the past is a guide to how state lawmakers will plug the giant hole that the coronavirus has blown in their budgets, the most vulnerable school districts have a lot to worry about.

Historically, there’s been little political will in statehouses to address inadequate and inequitable school spending patterns.

“You want to use a scalpel instead of a sledgehammer,” said Aaron Garth Smith, the director of education reform for the Reason Foundation, a libertarian think tank. “Legislatures should siphon off scarce resources from districts that need them least.”

If a huge, new bailout package doesn’t arrive from the federal government, K-12 funding advocates are pushing for states to use alternative budget-cutting strategies such as making bigger cuts from wealthier districts, temporarily capping property tax revenue or overhauling funding formulas. Such attempts typically face fierce backlash from suburban parents and their political representatives.

“Equity has always been a challenge for this country,” said Van Henri White, the president of Rochester’s school board, which has had to make budget cuts every year for the last 12 years straight.

“The responsibility of our government is to make sure that there’s equitable funding for schools that are behind the eight ball. Otherwise, why collect taxes? … We have to be crystal clear about the consequences of these draconian cuts: it won’t hurt school boards or administrators. It’s going to hurt America’s most vulnerable children.”

A version of this article appeared in the May 13, 2020 edition of Education Week as School Districts Are on the Brink


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