Since the pandemic shut down businesses and schools across the country, schools have faced mounting financial uncertainty. With costs estimated at billions of dollars, pitted against declining and uncertain revenue streams, school leaders will be faced with difficult financial decisions and the likely need for significant cuts. Recent research suggests that the consequences of financial uncertainty — including increased teacher turnover — could affect student achievement. (And teacher turnover could also have a negative impact on economies that are already struggling.)
With an economic stimulus package that could address some of these concerns in limbo, Usable Knowledge sat down with the executive director of the Center for Education Policy Research at Harvard University, Jon Fullerton, to better understand the link between school finances and the economic conditions caused by the pandemic.
How have schools’ revenue streams and costs been affected by COVID?
States depend on sales tax and income tax for most of their revenues — both those streams have been hit dramatically by COVID. While it varies by state, education accounts for the largest single chunk of state general fund spending. On the whole, state aid is about 47% of the revenue districts get. So, if you combine shrinking state revenues with the fact that education budgets are the biggest chunk of what states spend money on — some of this financial pain is going to have to flow down to school districts. Of course, state revenues have taken different levels of hits so there is some variability. But unless there’s substantial additional federal funding, there will be major implications [for education] over time.
Along with this collapse in state revenues, costs are increasing for three reasons. One is direct COVID response issues — we’re buying laptops, implementing social distancing and safety measures, and these things just drive up costs. A second area is baseline costs going up. These are going up due to “normal” inflationary pressures (including planned pay increases), but also may go up even further because you don’t have the normal amount of turnover. In recessions, people tend to stay longer on the job, and [in education] the longer you’re on the job, the more you get paid. And the third big cost is going to be trying to catch kids up from missing a quarter to a third of last year, plus additional losses from this year. So overall, districts are experiencing both decreased revenues and increased cost pressure.
Finally, uncertainty itself can drive costs. Los Angeles, for instance, experienced over a 10% drop in kindergarten enrollment this year. Are those students just gone, or will they show up when schools open for in person instruction? How do you staff when enrollments are this uncertain?