What the Recession Really Means for School Districts

Much has been said about dramatic increases in federal funding for public education via the American Recovery and Reinvestment Act (ARRA), which more than doubled the Department of Education’s budget in fiscal year 2009. Similarly, news reports around the country have lamented large cuts to state education budgets with detrimental effects for school districts. But it is just as important to understand what is happening with local education budgets and what fluctuations in each funding source mean for schools.

A recent report by the Government Accountability Office (GAO) reveals that the economic recession and federal attempts to lessen its impact have dealt a mixed hand for school districts across the country. For example, the GAO estimates that 50 percent of school districts will receive a 5 percent boost in federal funding in 2009-10, while only 7 and 9 percent will see a similar boost in state or local funding, respectively. At the same time, 41 percent of school districts will receive a 5 percent or larger decrease in state funding and 17 percent will receive such a decrease in local funds. In short, school districts were nearly as likely to receive cuts to state or local funds as increases in federal funds.

This finding is particularly important because state and local funding make up around 91 or 92 percent of total annual education funding on average. Thus, a decrease in state or local funding will be significantly larger in dollar terms than any increase in federal funding. Overall, however, these gains and losses may be a wash, 17 percent of school districts expect either an overall increase or an overall decrease of 5 percent or more in their total 2009-10 budgets.

Naturally, these findings vary by state. Only a small fraction of school districts in California expect to receive total 2009-10 budget increases of 5 percent or more from the prior year. However, about two thirds of the state’s school districts expect budget cuts of 5 percent or more. The number of districts expecting budget decreases also far outweighs those expecting increases in other states as well – 39 percent of school districts versus 6 percent in Georgia, and 37 percent versus 3 percent in North Carolina.

Some states do have a significant percentage of school districts that expect to receive budget increases of 5 percent or more from prior year funding levels. In Texas, New Jersey, and Mississippi, around 30 percent of districts expect such increases in 2009-10.  In all three states, 9 percent or fewer school districts expect budget decreases.

Unfortunately, the GAO’s analysis does not take into account the number of students attending each district expecting either a budget increase or decrease. As a result, we cannot assess the student-level impact of this variation. Regardless, it’s safe to say that for a sizeable number of school districts across the country, federal funding via the ARRA and state and local efforts to maintain funding levels have not been sufficient to even maintain prior year budget levels. For these districts, 2009-10 is destined to be a rough year.