• Bell Wilkins

COVID-19 and K12 Finance: What You Need To Know

With over 125,000 lives and 20 million livelihoods lost, the COVID-19 pandemic represents arguably the worst national disaster that any living American has endured. Education hasn’t escaped the unprecedented disruption due to the virus, and the full impact on the sector-- including the impact on K12 finance-- remains to be seen. In this post, we’ve distilled the five main things you need to know about the current state of school finance, as well as how the pandemic may continue to affect it for the foreseeable future.

1. Declining state revenues will heavily impact K12 schools…


As we discussed in a previous post, about 47% of public K12 funding comes from state sources. States collect revenues mainly from sales and income taxes—both of which evaporated when millions of Americans lost their jobs or shuttered their businesses. (States also collect money from property taxes, but these revenues are expected to be relatively stable). As shelter-in-place orders swept the nation in mid-March, states began diverting funds to ensure they could effectively "flatten the curve" and continue providing essential services, including K12 education. For many states, this primarily meant investing heavily in internet and computer devices to ensure students could participate in remote learning on short notice. Unlike the federal government, states are not allowed to run budget deficits: they must have a balanced budget, which means that future public services will be cut as a result of declining revenues. It’s up to each state to decide which ones, and by how much. The federal government also began to address state needs through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which passed on March 27, 2020.


2. …which brings us to the CARES Act


The Education Stabilization fund within the CARES Act contains $30.8B meant to bring fiscal relief to education institutions across the nation. Of that money, $13.2B was earmarked for K12 schools (allocated to districts proportionate to their Title I funding) and $3B for state governors to allocate to districts through grants and special programs. (The rest of the money went to higher education institutions.) While $16 billion may sound like a lot, it translates to roughly $300/student, or just over a 2% bump to total K12 funding. CARES Act funds were not only meant to support students through technology purchases and continued food distribution, but also to ensure local education agencies could continue to pay service providers throughout COVID-19 related closures. By contrast, the federal government bailout for education institutions in the wake of the 2009 Great Recession was roughly $100 billion (with most of this going to K12), and state governors are calling on the federal government to step up in a similar way for this crisis.


3. There's still a good deal states don't know about their revenues


Due to coronavirus, tax filing deadlines in many states moved from the usual date of April 15 to July 15. This means states won't know their actual tax revenue until mid-July (or, more realistically, days or weeks later after governments tabulate the returns). With the end of the 2020 fiscal year* fast approaching, some states have scheduled special sessions in the summer to revise their budgets. Other states chose to finalize their budgets by dipping into their existing reserves, using federal relief funds, or making use of payment deferrals to push certain expenses into future fiscal years. No matter a state's actions, however, it is impossible for them to see the full financial impact of COVID-19 at the time of this post's publication.


4. Schools serving low-income Black and brown children will likely bear the brunt of funding shortages


Due to centuries of state-sanctioned discriminatory policies, poverty and race are closely intertwined in the United States. Healthcare data already show that Black and brown Americans are disproportionately contracting COVID-19, and employment data shows they are also disproportionately losing their jobs. It is almost certain that similarly negative impacts will carry over to funding for schools serving these very populations. The simplified explanation: given their lower property tax base, schools in high-poverty areas often rely more on state resources than do wealthy districts. With that state money evaporating (see bullet #1), these communities will lose more than affluent areas that have the local property tax streams to keep their schools well-funded. The disruption doesn’t stop at the district level, however. In many districts, new teachers with minimal experience are concentrated in schools that serve a higher percentage of poor, minority students. If districts are forced to lay off teachers, they are often contractually obligated to cut these newest teachers first, disrupting the staff continuity at those high-poverty schools in most need of stability. Given that teacher retention is an indicator of student outcomes this will present yet another obstacle in a student’s K12 career.


5. Even without a clear picture of next year, it is more important than ever for school leaders to allocate resources equitably


The fiscal impacts of COVID-19 on school district budgets are still as uncertain as the academic and socio-emotional effects of the pandemic on students. For most states, (46 to be precise) this new fiscal year begins on July 1, and the vast majority of schools and districts won’t know exactly what instruction will look like by then. Will students and teachers be back in-person? Totally remote? A mix of both? Each choice will present its own logistical and financial challenges—whether that means investing in daily classroom disinfection or more remote-learning devices. Moreover, a second wave of the pandemic could lead to another mass school closure, forcing districts to again evaluate the best ways to manage their funds. School and district leaders must develop flexible, equitable, and efficient strategies for finances if they hope to support their staff and students through the challenges of pandemic learning.

One thing is clear: the 2020-2021 school year will be unlike any other in the history of US public education. With our flagship school budgeting platform, Edstruments streamlines finance management, giving school leaders more time to focus on student affairs and instruction rather than cumbersome, complex, and outdated spreadsheets. Make sure to subscribe and follow us to stay up-to-date on the latest school funding updates, and don't hesitate to request a demo if you're interested in how Edstruments can provide a school finance solution to meet your unique needs.


(*For those unfamiliar with fiscal years, it’s a way for states to see their revenue picture more precisely given seasonal differences in economic activities. For instance, if a state has a large spike in sales tax in December, when people are shopping for holidays, it would be hard to reflect that in reports aligned to a calendar year.)

Edstruments exists to equip education leaders with the knowledge and tools to most effectively and equitably serve their students. To learn more about how we can help your school administrators make better financial decisions, email us at hello@edstruments.com or fill out the contact form on our main website.

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