Education Funding

Report: COVID-19's Impact on School Funding

• By Dian Schaffhauser
• 05/19/20

While it's much too soon to understand what impact COVID-19 will have on K–12 education, two researchers have looked at the potential outcomes based on the impact made by the Great Recession of 2008. According to "The Coronavirus Pandemic and K–12 Education Funding," published by the Albert Shanker Institute, while some states had recovered from precipitous drops in state and local K–12 funding by 2017, "most had not." The greatest impacts were felt in higher-poverty districts.

The report took into account four funding trends that had an impact on K–12 budgets during the last recession and are still resonating today for schools:

• The drop between 2009 and 2012 in the share of state economies dedicated to K–12 education;

• The continual decline in state and local revenue as a percentage of personal income;

• The increased reliance on local property tax to shore up cuts in other revenue sources, which took a major hit in the housing market crash of the Great Recession; and

• The practice of giving both high- and low-poverty districts "roughly the same funding," leaving the latter "more vulnerable."

The federal government responded to the Great Recession by putting together a two-year "State Fiscal Stabilization Fund," as part of the American Recovery and Reinvestment Act. According to the authors, while those stimulus funds "gave states' economies more time to recover," the short duration of the funding gave states too little time to recover, setting them up to fall off a "fiscal 'cliff,'" and forcing them to make "drastic cuts" immediately; and many states chose to reduce state revenue to all districts proportionately, creating a bigger gap for higher-poverty districts, which tend to rely more heavily on state revenue.

As the report explained, when the Great Recession struck, state and local K–12 education funding for school districts, adjusted for local labor costs, declined about $500 per pupil by 2011. Between 2011 and 2017, funding increased, but only by $250 per pupil, leaving the average district worse off than it was before the recession.

"The revenue and spending declines had real effects in schools, including a drop in teacher staffing ratios," wrote Bruce Baker, a professor in the Graduate School of Education at Rutgers University, and co-author Matthew Di Carlo, a senior fellow at the Albert Shanker Institute.

Drawing on lessons learned from the Great Recession, Baker and Di Carlo offered recommendations for addressing "the health of public education" through the economic turmoil of the coronavirus.

On the federal side:

• The K–12 system needs "substantial" funding above the $13 billion provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was approved in March;

• To avoid the cliff drop-off, that funding should be distributed in phases — a "substantial allocation" in the first two years, followed by a second set of allocations for a three- to five-year "phase down effort";

• Federal funding should be distributed in a way that's "equalized" for local capacity and student needs; and

• Funding mandates need to ensure that states can't turn around and reduce the funding they give to higher-poverty districts out of state coffers.

On the state front:

• States need to increase taxes to make up for the permanent losses that schools experienced after the Great Recession;

• They also need to build up their budget reserves through tax increases and make sure they have flexibility in how to spend those funds when needed, such as to avoid school layoffs or program cuts;

• Funding formulas followed by states should be altered to be "progressive" — with higher-poverty districts receiving more funding than lower-poverty districts; and

• State education funding shouldn't rely too heavily on one single source of revenue. Rather, to hedge risks, it should be balanced, drawing from sales, income and property taxes.

"The severity of the current crisis should, as in the human immune system, act as a wake-up call to strengthen public school finance not only so as to recover, but also to make us strong enough to withstand future crises," Baker and Di Carlo concluded.

The report is openly available on the Albert Shanker website.