Education Week - February 22, 2023 - 10

Schools Are Heading Into a Perfect Financial Storm
By Mark Lieberman
Daryl McLaughlin, superintendent
of the 785-student Perry school district
in rural New York, was bewildered
when he found out how much
money the state plans to provide next
school year.
Even though Gov. Kathy Hochul
has promised a massive increase
in state aid for schools, the Perry
district's two schools will barely
see a bump over the current year.
The state's funding formula, last
updated in 2007, takes the district's
collective household income into account,
and according to the state's
tax office, residents in the Perry
district earned $15 million more in
2020 than in 2019, translating into
less state aid than the district might
otherwise receive.
McLaughlin suspects that figure
may be an error. But he has no way
of proving it. And he has a lot of other
things on his mind. Teachers and
other workers are expecting substantial
wage increases to keep up with
inflation. The district is on the hook
when students can't afford the costs
of meals, now that the federal government
no longer funds universal free
meals nationwide. And expanded
summer programming and mental
health counseling may be on the
chopping block as federal COVID relief
funds expire within the next year
and a half.
" Our schools have become the largest
social services organizations in
our state, " said McLaughlin, who also
leads the Genesee Valley Chief School
Officers Association, which covers 22
neighboring districts. " There needs to
be funding to support those moving
into the future. "
The Perry schools are hardly an outlier.
Across the nation, school district
finances are set to crash into a perfect
storm of fiscal complications in the
coming years.
Federal COVID-19 relief funds
will start to expire this fall, and
the deadline for spending all those
funds will arrive a year later. Inflation
is driving up the costs of
compensating employees, keeping
buildings running, and renovating
facilities. Meanwhile, the specter of
an economic downturn looms large,
particularly for low-wealth districts
on shaky financial ground.
The result: Many teachers and
other school workers could lose
their jobs, academic supplements
like tutoring and summer programs
could be pared back, and funding
for mental health services and other
social-emotional supports will be
harder to come by. This all comes
at a time when student needs aren't
waning: They're still struggling from
learning loss that has been particularly
pronounced among low-income
students and lingering trauma
from the pandemic.
" To assume that after two years
of an atypical school year, that one
typical school year would mitigate
that, would be a false premise, "
said Embekka Roberson, superintendent
of the Birmingham schools
in Michigan.
With federal dollars on their way
out, districts must fill gaps
Three rounds of federal COVID-19
relief aid during the pandemic fueled
massive investments in HVAC system
improvements, expanded tutoring,
extended school days and academic
years, and digital device purchases
to help students learn and do schoolwork
from home.
The funding also helped some
districts stay afloat. Michigan, for
instance, removed dozens of school
districts from its list of financially
struggling school systems after many
plugged budget holes with federal
COVID-19 money.
Many districts prioritized spending
temporary federal funds on one-time
expenses. But some took a gamble
on using the money for recurring expenses,
hoping they'd eventually find
an alternative source.
The Cecil County district in Maryland,
for instance, invested most of its
$40 million allocation on more than
100 new full-time employees.
District leaders did their best to
deepen the district's funding reserves
so that some of those employees can
stay on even when federal dollars fall
off. But some will likely be let go, said
Jeffrey Lawson, the district's superintendent.
" What
we decided was, maybe we
won't be able to do this four or five
years out, but we know we can do it
now, " Lawson said. " If I looked back
and I had to do it all over again, I
would have done the same thing. "
Still, losing people stings, Lawson
said, especially when students have
unmet needs. He continues to worry
about students' reading and math
fundamentals and about the widening
achievement gap between students
from low-income families and their
wealthier peers.
" It starts to look at the local level
like we don't have to do it because
we're getting it from the federal government, "
Lawson said of the federal
funds infusion. " That's going to come
to a screeching halt. "
Some districts are already beginning
to let go of employees they hired
temporarily when the relief money arrived.
Others are reshuffling budgets
to fund those workers' salaries with
different pots of money.
The Alachua County schools in Florida
hired instructional aides and health
care workers with COVID-19 relief
funds. Some have left, and their positions
won't be filled. But others may
have to be let go, unless the district can
come up with alternative funding.
Tina Certain, an Alachua school
board member, fears that districts
like hers will be punished for failing
to implement transformative change
during the window to use relief funds,
even though they were working within
time and logistical constraints beyond
their control.
10 | EDUCATION WEEK | February 22, 2023 | www.edweek.org
"
It starts to look at
the local level like
we don't have to
do it because we're
getting it from the
federal government.
That's going
to come to a
screeching halt.
JEFFREY LAWSON
Superintendent
Cecil County, Md., public schools
Some proposals, like extending the
school year, fell through during collective
bargaining negotiations. The
district had to compete with the 66
others in Florida for the same contractors
to repair HVAC systems. And
three years is a short time to reinvent
decades-old instructional approaches.
" Those that are attacking public
education will say, 'We gave them a
boatload of money and the results still
haven't improved any, so they can't
say it's the money,' " Certain said. " But
in order to get outcomes, you have to
change systems, the way we do things. "
Fixed costs strain districts'
capacity to innovate
There's only so much districts can
do to change systems when fixed costs
are rising so quickly.
Districts' pension liabilities have
grown more quickly than the revenue
to cover the increases. And multiple
district leaders told Education Week
the cost of providing health insurance
to employees has never risen more
quickly than in the last couple of years.
The Sag Harbor district on Long
Island in New York saw double-digit
percentage increases in health insurance
premiums last year and this year,
said Jennifer Buscemi, the district's
business administrator. It's the first
time she can remember such steep
increases in two consecutive years.
Benefits aren't the only cost that
schools have little room to finagle.
Prices for construction materials
and labor have skyrocketed, forcing
some districts to put construction
plans on hold.
The Kearney school district in Missouri
has long planned to add a fifth
elementary school to ease overcrowding.
Initial estimates this year for the
project came in $8 million over budget.
Even with trimming and tightening,
the district only managed to reduce the
cost to $2 million over budget.
Opening a new building also brings
new costs: adding staff, keeping the
lights on and the water running. Forging
ahead with an ambitious project
at a time of uncertainty felt risky to
district leaders, so they paused the
project for now, said Emily Miller, superintendent
of the Kearney district.
Instead, two of the four elementary
schools that are currently over capacity
may get renovations and additions. The
district is also working with demographers
to refine enrollment projections
for the next decade, so administrators
can know with more certainty whether
they can get by without a new school.
" People have been appreciative of
our fiscal responsibility to slow down
and make sure that we're measuring
twice and cutting once, " Miller said.
" We want to make sure that this is the
right fit for Kearney. "
High-poverty districts fight
unpredictable funding
In some districts, the headaches
that come with a volatile economy are
a reminder of a more existential frustration:
legacy funding systems that
put them at a disadvantage.
Advocates in Indiana are pushing to
reverse a recent trend of declining aid
for high-poverty districts. Lawsuits
are underway in states like Pennsylvania
and Wyoming to challenge state
funding systems that districts and advocates
say are inadequate. States like
Georgia haven't updated their funding
formulas in decades.
Every two years in Alaska, districts
beg lawmakers to increase funding.
Those calls have largely gone unanswered,
with only a $250 per-student
increase in base aid in the last decade,
said Lon Garrison, executive
director of the Association of Alaska
School Boards.
He believes the state should create
an education-centric version of its permanent
fund, which provides Alaska
residents with an annual share of investment
earnings from mineral royalties.
That way, districts could rely on a
predictable revenue stream and focus
on supplementing it at the local level.
" Even before the pandemic, we
were having problems with the socialemotional
needs of students, student
mental health, trying to make sure parents
are connected with their schools, "
Garrison said. " Now we're trying to
play catch-up. "
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Education Week - February 22, 2023

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