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State Fiscal Woes Start to Put Squeeze on K-12 Budgets

By Michele McNeil — May 05, 2008 4 min read

Except for such energy-rich states as Alaska, Wyoming, and North Dakota, states across the country are confronting deteriorating budget conditions that have tied the hands of legislators and governors hoping to spare K-12 education.

Enduring the worst of the financial woes are Alabama, Arizona, California, Florida, and Nevada, which face shortfalls greater than 10 percent of their budgets for fiscal 2009, according to the latest survey of state fiscal officers by the Denver-based National Conference of State Legislatures, released last month.

Altogether, the 2009 budget gaps—the difference between what states are expected to collect in revenue and what they’re expected to spend on services—will exceed $26 billion, the NCSL says.

In Florida, the gap translates to about $330 million sliced from the operating budgets of its schools, under a budget the legislature agreed to last week. School officials there say the financial picture is the gloomiest it’s been in their memories.

“Individual districts now are deciding how to deal with this,” said Mark Pudlow, a spokesman for the Florida Education Association, an affiliate of both the National Education Association and the American Federation of Teachers. “We’re hearing everything, from some schools will have to lay off teachers to some districts may have to close schools.” He’s also heard talk of districts’ cutting back on crossing guards.

The reason for the budget problems in Florida and elsewhere is relatively simple: Tax collections across the board are sluggish because of slumping local economies, which dovetail with the national economy. Twelve states aren’t collecting as much from personal-income taxes as they thought they would; sales-tax receipts are below target in 16 states; and corporate-income-tax revenue also is below expectations in 16 states.

“Whether or not the national economy is in recession is almost beside the point for some states,” William T. Pound, the NCSL’s executive director, said in a statement that accompanied the April 25 release of the fiscal survey. “The fiscal situations have declined so much in some states that they appear to be in a recession.”

Things will likely only get worse, especially if the national economy continues to stumble, oil prices continue to soar, and the housing market doesn’t start to pick up, said Corina Eckl, the fiscal-program director for the NCSL. She spoke during a session of the organization’s spring forum in Washington, at which the survey results were released.

Many states say they have enough in their reserves to balance their budgets without making drastic cuts for next year, but fiscal 2010 could bring real trouble, Ms. Eckl said. Just how much trouble, she said, will “depend on the severity of the downturn and the duration.”

Budget problems are already hitting schools, and not just in Florida.

Delaware lawmakers are planning to cut $30 million from K-12 education, or a little less than 3 percent, next budget year as the state deals with a projected gap of $201 million, or 6 percent of its overall budget. In a telling summary of the state’s fiscal situation, included in the NCSL survey, Delaware officials said: “The outlook is grim and rectifying it will require unpopular measures.” They did not specify what those would be.

In Tennessee, Gov. Phil Bredesen, a Democrat, has said he will back away from plans to provide an additional $25 million to expand prekindergarten as part of a plan to cut $400 million from the $28 billion fiscal 2009 budget.

Rougher Seas Ahead?

In Arizona, which is facing a $1.9 billion deficit, or 18 percent of its budget, the legislature hasn’t outlined how it plans to balance the books. But hundreds of students and teachers rallied last week at the state Capitol to urge lawmakers to spare public school funding.

Growing Financial Gaps

For the 2009 fiscal year, 23 states are expecting budget gaps, with the cumulative shortfall expected to top $26 billion. States’ shortfalls are shown as a percentage of their general fund budgets.

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Source: National Conference of State Legislatures

Tom Horne, Arizona’s state schools chief, sent an April 23 memo warning school officials that “there will be no way to avoid some impact on schools” because of the state’s financial straits.

According to the NCSL, most states will resort to spending cuts—and not tax increases—to solve their budget problems.

At least 16 states plan to trim or eliminate programs, including education programs in some cases. Wisconsin, for example, is considering delaying aid payments to schools, a commonly used accounting move by states that can present a cash-flow problem for schools even if it doesn’t result in a loss of actual funding.

Eight states, though, are considering tax or fee increases, including Massachusetts, which is contemplating raising cigarette taxes.

While high energy and food prices are helping drag down the economy in most places, states that produce oil, coal, and any other products related to energy—including corn and soybeans, used to make biofuels—appear to be thriving, NCSL officials note. The coal- and natural-gas-producing state of Wyoming, for example, is beating its revenue estimates by 5 percent. In North Dakota, also an oil producer, all tax categories are running ahead of projections.

The biggest winner of them all is oil-rich Alaska, which is using $100 million of its proceeds to pay for an average $100-per-pupil increase in school funding for next year. (“Alaska Legislators Overhaul Funding,” April 30, 2008.)

And Alaska will still be able to leave much of its $8 billion surplus intact. That money alone would underwrite the entire state budget for two years.

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