Special Report

Local Educators Prepare to Use One-Time Funds

By David J. Hoff — February 20, 2009 7 min read
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The Los Angeles Unified School District stands to receive an estimated $566 million in extra Title I and special education money—plus an undetermined amount of state stabilization money—from the federal stimulus package.

Those estimates, by the U.S. House Education and Labor Committee, would just about fill the gap Superintendent Ramon C. Cortines faces in the 2009-10 school year budget for the 694,000-student district. But that’s only if things don’t get worse.

Though he’d like to avoid all teacher layoffs, that’s not feasible—nor is it necessarily desirable, Mr. Cortines said last week.

“I don’t think we should be building budgets on air,” he said, echoing the concerns of other school leaders that the economic-stimulus aid is one-time money. He’d rather use the money over the next two years to offer early-retirement incentives to older, more expensive teachers, thereby saving the jobs of teachers in their first three years of service.

To be sure, officials in hard-hit states like California are breathing a little easier now that they can use some of the more than $100 billion in emergency federal education support to plug holes in budgets for the current school year. But they still don’t know how they will allocate money for the 2009-10 school year, and whether the federal stimulus funds will be enough to prevent teacher layoffs, increased class sizes, and reductions in other services.

“It’s no longer: ‘How can we shut down [programs]?’ ” said Richard M. Long, the executive director of the National Association of State Title I Directors. “Now it’s: ‘OK, how do we do this right?’ ”

In New York City last week, Mayor Michael R. Bloomberg circulated a memo saying the stimulus package would provide enough money to avoid significant layoffs in the city’s school system. The city expects to receive $1.1 billion of the stabilization money over the next two years for schools.

Before enactment of the federal legislation, the city’s department of education was expecting to make $300 million in cuts from its $17.6 billion operating budget for the current school year.

Awaiting Guidance

State leaders and budget officials around the country will be able to address next year’s budgets once they receive further guidance from federal authorities on how they will be allowed to spend the money and see the budget forecasts for their own revenues. Until then, local school leaders can’t do any significant planning about how they will spend their portions of the extra aid, much of which will be channeled through existing federal funding formulas.

“The problem right now is there are more questions than answers” about how schools will be allowed to allocate the grant money, said John D. Musso, the executive director of the Association of School Business Officers International, based in Reston, Va.

Even if schools leaders don’t know how they will spend the money, which is part of a massive federal effort to combat a deepening recession, the stimulus law is likely to ease budget planning in what has been one of the most difficult years for public budgets since the Great Depression.

In the $787 billion American Recovery and Reinvestment Act, which President Barack Obama signed into law on Feb. 17, Congress provided a patchwork of K-12 funding, creating temporary federal programs and financing existing ones, including $12.4 billion for special education and $13 billion for the Title I program for disadvantaged students over two fiscal years.

Overall, the law will provide $80 billion for K-12 schools, to be allocated by the U.S. Department of Education between now and Sept. 30, 2010. Another $20 billion will go for student financial aid and other higher education support. The law also includes $15 billion in tax credits for college tuition.

In pushing for the measure, President Obama and U.S. Secretary of Education Arne Duncan said the education money was necessary to prevent the layoffs of several hundred thousand teachers.

An independent analysis estimated that districts would be forced to lay off up to 325,000 employees—half of them teachers—without emergency aid. With the enactment of the stimulus law, districts could “avert the bulk of that 325,000 layoff figure,” said Marguerite Roza, a research associate professor of education at the University of Washington, in Seattle, who conducted the research.

The largest portion of education money in the stimulus measure is the $53.6 billion state fiscal-stabilization fund. Of that amount, $39.5 billion is reserved for preschool through college.

All states will receive portions of that money, and their grants will be determined by each state’s population. Within states, the money will be distributed according to state funding formulas.

In most states, governors will use the stabilization money to undo budget cuts previously made in the 2008-09 school year, said Michael P. Griffith, a school finance expert for the Education Commission of the States, a Denver-based group for state officials who oversee education.

Last week, in fact, the governors of Maine, Maryland, and Virginia announced they would use the federal money to restore education cuts already made for the current school year.

Virginia Gov. Tim Kaine, who is also the chairman of the Democratic National Committee, said his state would receive enough money under the federal measure to cover a $700 million shortfall in its current two-year budget and have an extra $200 million left over.

Although Gov. Kaine and his staff hadn’t calculated how much local districts could expect to receive under the stimulus law, he said the money would lessen the budget pressures on superintendents and school boards.

“We have to figure out a little of the details,” he said at a Feb. 16 press conference. “But basically, this is going to lift some of the weight off local governments’ shoulders.”

Gaps Remain

But not all states will have enough federal money to prevent or restore cuts from the current school year.

In Oregon, state legislative leaders have proposed a plan that would immediately spend $115 million from the stabilization fund on education for the 2008-09 school year. The state’s schools still would have to cut their expenses by $167 million, about 3 percent of state aid in the current school year.

With less than four months left in the school year, making such cuts would be difficult for districts, said Susan C. MacGlashan, the Oregon education department’s assistant superintendent for finance and administration. Districts are discussing teacher furloughs and other steps to close the gap, she said.

For the 2009-10 school year, most states will have enough stabilization money to protect schools from cuts, according to Mr. Griffith of the ECS.

“They will get themselves to where next year is essentially a flat year, or one with a slight inflationary increase,” he said.

But some states are facing such large budget gaps that the emergency federal funds won’t solve their districts’ problems, Mr. Griffith said. In California, for example, lawmakers on Jan. 19 closed a $42 billion gap in a $119 billion budget for fiscal 2009.

“They are in really tough straits,” Mr. Griffith said. “The [stabilization] money won’t get them to break even.”

Arizona, Florida, and New Jersey may be in similar positions, he added.

While the stabilization-fund money will have an immediate impact on overall school budgets, the stimulus law also includes $13 billion for the Title I program and $12.6 billion in special education money in fiscal 2009 and fiscal 2010. That aid must be spent on the specific needs of children the federal programs are intended to serve.

The special education money will help schools pay the costs of implementing students’ individualized education programs under the Individuals with Disabilities Education Act.

But Title I directors must figure out how to spend the stimulus money over the next two years without making long-term commitments. Title I currently receives $14.8 billion a year.

Program directors are reluctant to hire new teachers, said Mr. Long of the state Title I directors’ group, because two years from now, Title I might not have enough money to support an expanded workforce.

Title I officials are discussing ideas to spend the stimulus money, such as extending the school day, offering summer school, and providing professional development for teachers, Mr. Long said.

“People are shifting to think, ‘What can we do right now that will make a difference in kids’ lives and be an economic stimulus?’ ” Mr. Long said.

Assistant Editor Michele McNeil contributed to this story, which also was supplemented with reporting by the Associated Press.
A version of this article appeared in the February 25, 2009 edition of Education Week as Local Educators Prepare to Use One-Time Funds


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