Teaching Profession

Stark Choice for States: Bank Surpluses, or Spend Them on K-12

By Daarel Burnette II — February 12, 2019 7 min read

Public school advocates are scrambling to seize on the windfall of cash that’s landed in state coffers this year, the result of a surging economy and recent federal tax cuts.

More than half of states have budget surpluses this year, according to an Education Week analysis of local news reports and governors’ state of the state speeches.

And district superintendents, teachers, and parent groups have outlined a long wish list of things they say are needed to improve stagnant academic outcomes and school conditions, among them teacher raises, expanded pre-K, more nurses and school psychologists, and replacement of dilapidated school buildings.

Already, in at least 17 states—including in Arkansas and Mississippi, where yearslong budget deficits have caused widespread teacher shortages—governors have indicated that they will use a portion of that money to give teachers a pay raise.

But fiscal conservatives in many states have urged the public to pump the brakes. They instead want to stash even more surplus dollars into state “rainy day” funds in preparation for another recession. The last recession, between 2007 and 2009, state leaders have reminded school officials, devastated school districts, and led to massive layoffs, the effects of which schools are still reeling from today.

Arizona has a $1 billion surplus this year, much of which Gov. Doug Ducey wants to put into savings, a move that’s outraged the state’s public school community. “If ever there were a way to protect public education, to protect the pay raises our teachers have earned and deserve, to prevent budget gimmicks, Band-Aids, and massive cuts down the line, to avoid tax increases and budget standoffs and government shutdowns, it’s through this thoughtful, prudent, and fiscally conservative approach,” Ducey, a Republican said during his State of the State.

The spat over whether to spend or save has been especially animated across the country this year.

Teachers in Denver were set to strike this week over pay-related issues, even as Colorado lawmakers are debating how to handle an expected $600 million surplus over the next two years. Gov. Jared Polis, a Democrat, wants to use much of that money to expand pre-K and full-day kindergarten.

And Los Angeles teachers last month went on a six-day strike over pay, class sizes, and school support staff. District officials have indicated they can’t afford the deal they struck with the teachers and will go to the state to ask for more money this session. California has a $21.4 billion surplus this year, and Gov. Gavin Newsom wants to spend money on, among other things, schools, paying down the state’s pension fund and putting another $1 billion into the state’s rainy day fund.

Even in Oklahoma and West Virginia, where years of budget cuts have resulted in districts instituting four-day school weeks and custodians having to shovel coal into furnaces to keep classrooms heated, politicians are debating what to do with hundreds of millions of surplus dollars.

While most states’ laws require a portion of surplus money to be placed in rainy day funds, it’s typically up to state leaders to decide what to do with the rest of that money.

States’ budgets this year have benefited from a surging economy and low unemployment rate, resulting in income and sales taxes rebounding to record levels, said John Hicks, the executive director of the National Association of State Budget Officers. Some states’ revenues have also benefited indirectly from the federal tax cuts passed by Congress in 2017. States this fiscal year are spending $294.8 billion on schools, according to NASBO, a 4.3 percent increase than they spent in fiscal year 2018.

“On average, school officials are going to see a better year,” he said.

But more than 29 states still don’t provide school districts with the amount of money they provided before the Great Recession in 2008, according to a 2017 report by the Center on Budget and Policy Priorities, an advocacy organization that pushes for more school spending.

The challenge for governors, legislators, and their fiscal advisers as they craft 2020 K-12 fiscal year budgets is determining whether the surplus money is one-time or recurring, said Hicks.

“It’s difficult to do, but it’s an important decision to make so you don’t create a budget that’s unsustainable,” he said.

Governors with volatile budgets, such as in Louisiana and California, who think their surplus money will disappear next year are urging their legislatures to spend money on school construction projects, jump-start academic pilot programs, or pay down pension funds, for example.

Governors who are confident the surplus money will be recurring, such as in Idaho and Texas, are urging their legislatures to boost teacher pay, expand full-day kindergarten, and overhaul school funding formulas.

Risk of Guessing Wrong

State budgets built on faulty predictions in the past have created havoc for school districts.

In 2017, more than half of states overestimated how much tax revenue they’d pull in, forcing school districts to lay off staff in the middle of the school year, and outraging parents.

And while schools on average gobble up more than half of states’ budgets, other starved state departments, such as courts, foster care, and higher education are also demanding this year bigger pieces of the pie.

Some Democratic governors have proposed to splurge on their schools.

New Mexico’s recently elected governor, Michelle Lujan Grisham, a Democrat, has proposed annually increasing school spending by $500 million and providing the state’s teachers with a 6 percent raise this fall. The state is tangled up in a legal battle with its courts over whether its spending amounts are constitutional or not, and it has a $1 billion surplus this year.

“Things can and will be different, and better, starting now,” Lujan Grisham declared last month during her State of the State speech.

Massachusetts’s governor, Charlie Baker, a Republican, wants to increase the state’s public school spending by $1.1 billion over the next five years. That state, after several years of running a deficit, has a $1 billion surplus this year and many in the state think it’s finally time to replace the state’s storied school funding formula.

“We are underfunding education on the backs of our most vulnerable children, betting on which of them will figure out how to survive,” Tanisha M. Sullivan, the president of Boston’s branch of the NAACP said in an interview with the Boston Globe.

Nevada’s governor Steve Sisolak, a Democrat, proposed in his State of the State speech to overhaul its 50-year-old funding formula and provide teachers with a 3 percent pay increase, the first pay bump the state’s teachers have received in more than 12 years.

Kansas Showdown

Nowhere, arguably, has the fight over school spending been more intense or consequential than in Kansas, where the state’s supreme court has threatened to shutter all public schools this April if the state doesn’t provide hundreds of millions more dollars to its school system this year.

The state has more than $900 million in surplus money this year, the result of a resurgent economy, federal tax cuts, and new revenue from a series of taxes Kansas reinstated last year to address a yearslong fiscal crisis.

The state last year promised to provide schools with $548 million more over the next five years. But the state’s supreme court said while that efforts was admirable, it still was not enough. The state needs to provide an estimated more than $360 million over the next five years to address inflation costs, the state’s board of education predicts.

The Republican-dominated legislature and newly elected Democratic Gov. Laura Kelly are at odds over what to do with the surplus dollars. Kelly has proposed increasing school spending by $90 million next year.

But the state Senate last week passed a bill that would provide corporations and property owners with more than $190 million in tax cuts. A separate proposal by the Senate would result in the state using that surplus money to pay down pension funds, a move many legislators believe would free up costs for districts. A large portion of the state’s legislature wants to ignore outright the supreme court’s latest demands.

Mark Tallman, a lobbyist for the Kansas Association of School Boards, said districts have used the infusion of money from last year to provide teachers with a pay raise, reduce class sizes, and to expand professional-development programs.

But knowing how volatile the state’s budget has been and considering how widespread this year’s proposals are over what to do with the surplus dollars, many local superintendents have squirreled away the money in their own districts’ savings accounts, a move that’s upset many teachers across the state.

“The range right now is between having no new money to operate with to having four years of relatively guaranteed increases going forward,” Tallman said in an interview, while driving to the state capitol for what he expected to be another grueling day of politicking.

A version of this article appeared in the February 13, 2019 edition of Education Week as Stark Choice: Save Surplus, or Spend on K-12?

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