Education Week - March 31, 2021 - 10

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Why did some states lose
less money than some
analysts projected last
spring and summer?

School Budgets:
Why They're Not
As Bad As Predicted
By Mark Lieberman
Projections from economists last spring painted
a grim picture of what the recession caused by the
COVID-19 pandemic might look like, with schools
facing cuts even more devastating than those that followed the 2008 economic downturn. Teacher layoffs,
delays to much-needed construction projects, and
cancellations of programs that provide extra support to
students were all on the table.
Fast-forward to nearly a year later, and the outlook in
many places is markedly improved.
Some state revenues have stabilized or even slightly
grown year over year, thanks to an influx of federal relief
funds and a smaller-than-expected drop in sales tax collection.
Not all states have weathered the pandemic unscathed, though. States that rely heavily on tourism,
like Hawaii and Nevada, or revenue from the oil and
gas industries, like North Dakota and Texas, are facing
substantial losses and pondering significant cuts. That
could prove particularly troubling for districts in those
states that are located in low-income areas and rely
heavily on state funds. State-level debates over school
budget cuts are raging in New Jersey and Wyoming.
Even school districts in financially healthy states can
hardly breathe a sigh of relief just yet.
Extended school building shutdowns and remote
learning technology challenges have compounded inequities in access to high-quality learning and set back
many students' academic achievement by at least
several months. Far more public school students than
usual nationwide have dropped off their home district's
radar, either switching to private or charter options or
disappearing from view altogether. Even as COVID19 vaccines roll out, the still-rising death toll and more
contagious virus variants stand in the way of a return to
normal in-person interactions.
For districts with a high volume of federal Title I funding, the three sets of federal stimulus funds over the last

year could go a long way toward addressing some of
those concerns. But some school funding experts regard
Title I as an imperfect and outdated system for dispensing aid to the students and schools that need it the most.
The uneven distribution of financial harm from the
pandemic is a familiar story for the nation's public education system, which is rife with systemic inequities. The
federal government supplies less than 10 percent of K-12
school districts' budgets; the rest comes from a blend
of state and local funds that differs greatly from place
to place. Districts with low property values tend to rely
more heavily on state funds, which means they depend
on the whims of the economy to drive spending.
" You might hear something like, 'It's only a 5 percent cut to education.' But that 5 percent is much
more meaningful to a district that can't tap local resources, " said Michael Griffith, a senior school finance
researcher and policy analyst for the Learning Policy
Institute. " It's the kids that need help the most that
tend to get hurt the worst. "
School finance is notoriously tricky to parse in the best
of times. During a pandemic that has brought no shortage of strife and uncertainty, understanding how schools
are doing and where their greatest needs lie is an even
more pressing challenge.
Here's a look at some of the crucial facts to know about
where schools stand financially as the current school
year wraps up.
Most states' current revenue stacks up to less than
what they were expecting before the pandemic. For
some states-Ohio, Vermont, and Kansas among them-
the current revenue is only a hair lower than expected.
In other states, though, pre-pandemic predictions far
outpaced reality. New York, Alaska, Nevada, and Texas
each came in more than 10 percent below expectations.
Even so, many economists in the early days of COVID19 expected these numbers to look far worse for states.
Federal funds directed to state and local governments to
fill those gaps partially account for that positive outcome,
but they don't tell the whole story.

10 | EDUCATION WEEK | March 31, 2021 | www.edweek.org

A conveniently timed 2018 Supreme
Court decision deserves some credit.
In South Dakota v. Wayfair, judges
ruled 5-4 that states can collect sales
taxes on online purchases, even if the
online vendor doesn't have a physical
location in the state where the items
were purchased. During COVID-19,
with much of the country homebound
and many brick-and-mortar stores
closed, online purchasing soared, and
states reaped the benefits.
Many states have also been spending cautiously and making more liberal use of rainy-day funds in the aftermath of the Great Recession. That
meant they were better positioned
for an emergency on the scale of the
pandemic than they might have been
otherwise.
Finally, economists have pointed
out the unusual nature of the current
recession, which has confounded expectations for the typical trajectory of
an economic downturn. Some have
called the economic recovery " Kshaped " with high-income people
getting back to normal more quickly
while low-income people suffer disproportionately.
Low-wage jobs that require working in public have been the hardest hit
by the pandemic, while higher-wage
workers have more easily transitioned
to remote work. People with high incomes naturally contribute more tax
revenue to the states, which means
school budgets haven't lost as much of
their state backing as they might have.

Why did some states lose
so much more than others?
CDC guidelines have urged Americans against unnecessary travel
since last year. States like Hawaii,
Florida, and Nevada that center
their economy on tourism revenue
have naturally taken a big hit. Hawaii, for instance, saw a 17 percent
drop in year-over-year revenue during the period between April and
December, according to UrbanBrookings Tax Policy Center data.
States like California, which rely
heavily on capital gains revenue,
have been buoyed by the relatively
resilient stock market of the last 12
months. California's April-December revenue during 2020 was 1.2
percent higher than during the comparable period in 2019, according to
the Urban-Brookings data.
States with economies centered
around natural resources, like Wyoming, North Dakota, and Alaska,
have suffered significant financial
losses. But there too, prospects are
mixed and subject to change: Revenue forecasts in North Dakota
and Alaska have recently improved
thanks to rising oil prices.

How badly did schools
need relief from the federal
government?
In a recent survey by the Association of School Business Officials
International, a membership organi-

zation for K-12 finance decisionmakers, 55 percent of respondents said
the two federal stimulus packages in
2020 were not enough to meet their
unprecedented financial needs during the pandemic.
An analysis of school district budgets from Georgetown University's
Edunomics Lab shows evidence
that schools with a high percentage of students learning in-person
are spending far more overall than
schools that have stuck with fulltime remote learning for most students. The Biden administration is
urging the safe reopening of most
school districts as quickly as possible, which means even the districts
that have managed to save money
working remotely may need to shell
out more before long.
Atypical pandemic-era expenses
for in-person schooling include
more substitute teachers to make up
for teacher absences due to illness
or quarantine, more nurses to assist
with COVID-19 screening efforts,
and personal protective equipment
like masks and hand sanitizers to
prevent the spread of the virus.
Some critics of the latest federal
relief package have pointed to statistics noting that many districts
haven't spent significant portions
of the federal money they received
last year. Those numbers may be
deceiving, though. If a district is
using some of those funds to keep
staff on the payroll for the rest of the
year, the full scope of that investment wouldn't show up on a report
on how much money has been spent
so far.
" If you're living paycheck to paycheck, you're not going to spend
every cent of your paycheck on the
day you receive it, " said Elleka Yost,
the director of advocacy for ASBO.

How will the American
Rescue Plan differ from last
year's stimulus funds?
It might be too early to tell exactly how the latest federal relief,
passed by Congress and signed by
President Joe Biden this month,
will play out. The funds from the
previous relief package are still
trickling out, even as many schools
continue to grapple with the shortterm calculus for reopening buildings.
Districts spent much of the early
federal relief money on short-term
COVID-19 mitigation measures
like masks and cleaning supplies, as
well as digital devices and hotspots
to improve the quality of remote
learning experiences for students,
according to the ASBO survey.
Now that some of those immediate concerns are out of the
way, district leaders will turn to
longer-term considerations: How
far behind have students fallen?
What's the best way to get them
up to speed? Which essential but
previously underfunded initiatives
are worth the investment now, and
which ones can wait?
Spending the federal money will
require some ambitious thinking,
given the lack of precedent for the
present conditions. But it will also

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Education Week - March 31, 2021

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