Lower Fuel Prices Could Mean K-12 Tech Windfall

• By Dian Schaffhauser
• 01/07/15

One investment firm estimates that schools will experience a $2 billion savings in lower fuel prices for the current fiscal year and could likely spend this "found money" on technology and consumables such as digital content. However, what could turn out to be a boon for some states could have detrimental effects on other states.

Trace Urdan, managing director and senior analyst for Wells Fargo Securities, issued a note to his clients in which he predicted that lower gas costs for school transportation could contribute as much as $2.03 billion this fiscal year and $2.71 billion next year to district budgets. He cited data from two counties, Fairfax, VA and Montgomery, MD, reporting that school buses use an average of 37 gallons per student per school year. Tallying that across 49.8 million public school students equates to a total usage of 1.84 million gallons of gas. Budgets that were fixed in July 2014 based on an average U.S. gas price of $3.65 per gallon will now reap the difference for a price that currently averages $2.18 per gallon.

A similar bonanza will hit heating fuel budgets, which could result in a $1.65 billion windfall, the report said. Urdan examined data from the United States Environmental Protection Agency indicating that U.S. schools use about 31.6 gallons of heating oil per student per school year. Heating oil sold for $4.12 per gallon on average when budgets were set in July. They've since fallen to about $3.08 per gallon. A similar amount would represent savings for the fiscal year 2016 budget as well, the analyst noted.

Where will these extra dollars be spent? Probably not on capital projects or staff expansion, Urdan wrote. More likely the money will go to multiple projects, including "consumables and technology." For example, he said, digital content providers could see "increased sales" of supplemental digital content, materials and services into K-12.

Conversely, as oil prices drop, states dependent on production of crude oil could see their education budgets take a turn for the worse. Two of the top producers — Texas and California — have diversified economies, which better insulate them from the vagaries of gas pump prices; but other states — Alaska, North Dakota, Oklahoma, New Mexico and Louisiana — may grapple with major cuts. Alaska, which gets nine-tenths of its state budget from oil revenue, is "facing a $7 billion budget gap over two years because state tax revenues have tanked with oil prices," reported the Alaska Dispatch News. Louisiana is looking at a $1.4 billion budget shortfall for the coming fiscal year and expects to make midyear changes to spending, according to the Times-Picayune. New Mexico, reported the Albuquerque Journal, anticipates budget cuts but expects to spend new revenues on education initiatives, one of the governor's "top priorities."

Urdan can be contacted directly for a copy of his report at [email protected].