By: Sujith Cherukumilli (@sujith_cher)
May 28, 2020
With the shockwaves of shuttered businesses and closed schools continuing to be felt across American society, states have been tasked with making difficult budgetary decisions to deal with the fiscal fallout of the COVID-19 crisis. State legislatures throughout the South are now in the process of recalibrating their respective budgets for Fiscal Year (FY) 2021 and slashing previously-appropriated funds. As one of the most sizable line items in any state’s budget, public elementary and secondary (K-12) education is slated to experience blisteringly deep cuts, the likes of which the southern region and the nation as a whole have not seen since the financial crisis over a decade ago.
SEF’s analysis of projected cuts shows that no southern state will be immune from sharp declines in tax revenue and steep cuts to education budgets. Estimates from the Learning Policy Institute reveal a bleak future for public schools throughout the South; states can expect anywhere between a 10 to 25 percent shortfall in state revenues between FY2020 and FY2021, in addition to increased costs from the implementation of distance learning, expansion of school nutrition programs, and extension of learning time. Among all 17 southern states, the total educational costs associated with COVID-19 could be as high as $14.3 billion, with the average state’s response costing over $840 million. The impact on state revenues in the South will be much more severe, with southern states collectively poised to lose nearly $89 billion in revenue if state education budgets are cut by five percent this year and 20 percent next year. A southern state will, on average, experience a combined $6 billion in revenue losses and costs over the next year, with educational costs and decreased revenues in the South totaling over $103 billion. This amount represents 45 percent of the total nationwide fiscal impact for a region that educates 39 percent of the nation’s public school students.
On average, southern states spent 19 percent of their total state budget on public K-12 education in FY2019. According to the National Association of State Budget Officers (NASBO), FY2020 marked the tenth straight year of states increasing their revenues and expanding their budgets, but states also took measures to prepare for an economic slowdown by building up their rainy day funds and limiting spending increases. A deeper look at each southern state’s proposed FY2021 budget for elementary and secondary schools shows that K-12 education is one of, if not the, most substantial line items in a state’s budget.
Nearly every pre-COVID-19 budget proposal for FY2021 included increases for K-12 education in some form: formula adjustments, teacher pay raises, infrastructure improvement allocations, or a combination of the above. For example, Georgia allocated 39 percent of its 2021 budget toward the Quality Basic Education (QBE) formula for public schools. Prior to the COVID-19 pandemic, Governor Brian Kemp (R-GA) planned to increase state funding for public elementary and secondary education by over $100 million. Similarly, Governor Roy Cooper (D-NC) proposed a FY2021 budget that would invest $369 million to raise teachers’ salaries, amounting to a 4.5 percent increase. North Carolina’s proposed FY2021 budget of nearly $10.5 billion for the North Carolina Department of Public Instruction (NCDPI) would have been a $350 million increase from FY2020. A handful of other states, including Oklahoma, South Carolina, and Tennessee planned for teacher pay raises and an overall increase to their education funding formula. However, the pandemic will likely render many of those increases unfeasible and put state budgets in a fiscal hole that will take years to recover from.
Overall, SEF’s analysis of proposed budgets and estimated revenue losses and educational costs in all 17 southern states for 2021 shows that a significant portion of each state’s budget will be impacted by incurred costs and lost revenue. Arkansas, likely the most heavily-impacted state from this standpoint, will experience revenue losses and educational costs associated with COVID-19 that will equal around 79 percent of the state’s total 2021 K-12 budget. In Florida and Missouri, increased costs and revenue losses will account for 72 and 68 percent of their respective budgets. On average, increased educational costs and decreases in revenue account for over 58 percent of proposed 2021 K-12 budgets in the southern region. These jarring figures reveal both the magnitude of this crisis, as well as the urgency with which it must be addressed in order to protect public education.
In the wake of the 2008 financial crisis, the federal government’s American Recovery and Reinvestment Act (ARRA) provided states with nearly $100 billion in education relief funding. While states experienced comparable but less severe fiscal crises during that downturn, Governors and state education agencies received considerably more to bolster their budgets and support the retention of hundreds of thousands of teachers. In comparison, the paltry $31 billion in federal relief funds through the Coronavirus Aid, Relief, and Economic Security (CARES) Act has largely failed to address the immediate fiscal needs of states throughout this crisis. Funds appropriated through the Governor’s Emergency Education Relief (GEER) Fund and the K-12 Stabilization Fund pale in comparison to the projected costs and lost revenues for states. The total amount appropriated to southern states in the GEER and K-12 stabilization relief funds is $6.5 billion – only about 6 percent of the projected fiscal impact in the region.
Why this matters
An almost certain consequence of austerity cuts in education budgets will be the thinning of teacher workforces throughout the South. A 20 percent cut to K-12 education budgets could, on average, result in nearly nine percent of the South’s teacher workforce being cut. In some cases, states with a smaller teacher workforce will experience a bigger shock, with COVID-19 education budget cuts decimating their teacher workforce by as much as 18 percent. With research indicating that smaller class sizes are conducive to improved student achievement, the decrease in available teachers and subsequent increase in class sizes has the potential to negatively impact student achievement, particularly for students with special needs and English Learners, who require additional academic support to thrive.
Additionally, history has shown us that sharp and sudden declines in education spending significantly hamper districts’ ability to carry out essential services and expand learning opportunities for students. Lower teacher salaries directly affect the capacity of a district to place a qualified teacher in each classroom, and data on shortages and teacher preparation show that students of color, students with disabilities, students from low-income families, and English Learners are more likely to be in a classroom with an unqualified teacher. These inequities in students’ ability to access high-quality teachers have strong implications for student achievement, as improved academic outcomes are correlated with the preparation and qualifications of a teacher. Districts will also likely face challenges with finding financial resources to expand learning time, which will be a necessity to help students make up for months of depleted instructional time. A recent study shows the potential for millions of students – particularly those with limited to no access to the Internet or digital learning devices – to fall behind in Reading and Mathematics, potentially erasing an entire year’s worth of academic gains and setting a whole generation of students back.
The proliferation of school privatization programs throughout the South also considerably depletes the ability of states to fully fund public education, and will likely have a more pronounced impact as states enter this tumultuous period. Currently, southern states collectively dole out $1.6 billion in state funds or tax benefits to privatization programs. While this amount represents a small fraction of the total fiscal impact of the COVID-19 crisis, states must allocate every possible dollar they can toward supporting and funding public education. States continuing to fund privatization programs as their school districts struggle to provide students and families with basic necessities and distance learning opportunities would amount to a failure of states’ constitutional obligation to unconditionally maintain a free and accessible public education system for all students.
Recommendations and next steps
While a state’s education funding formula varies based on a number of political and economic factors, each state’s education funding formula is reliant on funding from local, state, and federal sources. Among the 17 southern states, the average share of the education budget fulfilled by state funds is 47.5 percent. Delaware contributes the largest share, with 60 percent of its education formula funded through state revenues, while Missouri, contributing 34 percent, relies the most on local and federal monies to fund education. In times of fiscal uncertainty, low-wealth school districts that rely more heavily on state funds are hit particularly hard. States that contribute a disproportionate share to their respective funding formulas, as well as states that have an abundance of low-wealth school districts, will experience an especially pronounced impact on teacher recruitment and professional development efforts, distance learning implementation, the maintenance of critical services for students, and the expansion of learning time.
It is evident that states will require substantial assistance to recover from the deleterious effects of the COVID-19 crisis. The relative flexibility afforded to Governors to spend their respective share of federal relief funds presents opportunities for lessening the blow of COVID-19-related cuts. To mitigate the impacts of the COVID-19 budget crisis, Governors, state lawmakers, and local officials should:
– Consider additional sources of revenue to offset decreased state income and sales tax revenues – Leaders in many southern states have established relatively tax-friendly policies that make their states attractive locations for businesses and families. With state and local tax revenues on the verge of cratering, however, leaders must devise creative ways to raise additional revenue for public education. A potential solution lies in raising the tax on tobacco and cigarettes. Four of the five states with the lowest tobacco tax rate – Missouri, Virginia, Georgia and North Carolina – are located in the South. In Georgia, raising the tobacco tax to the national average can provide the state with an additional $600 million in revenue. Other states can expect similar benefits and a subsequent jolt to their faltering economies if they demonstrate the willingness to broaden their revenue sources.
– Direct federal relief funds toward the most immediate needs associated with the COVID-19 pandemic – Distance learning, including expanding access to devices and broadband, has become the chief concern for policymakers at all levels as they work to equitably address the educational ramifications of COVID-19. Although CARES Act funds will be insufficient to address all, or even most, of each state’s needs, states must smartly and efficiently allocate funds toward the following priorities: distance learning and digital equity, maintenance of critical services including nutrition and wraparound services, professional development for parents and teachers to continuously support students, and expanded learning time.
– Engage parents, families, and external stakeholders in the process of implementing distance learning plans – With financially-strapped school districts looking to impose hiring freezes and cut teachers and support staff members, fewer education professionals will be available to provide students with the resources and attention needed to succeed academically. By equipping parents, families, and external partners with the tools and knowledge to support students outside school, districts can utilize a shared responsibility model that could offset the negative impacts of reduced access to human capital.
The draconian cuts to K-12 education looming over the horizon are frightening and wrought with unfamiliar challenges. Through prioritization, creativity, and resilience, though, states will be able to endure the worst of the crisis, support their students, and emerge better prepared to deliver a world-class education to each and every student.
Sujith Cherukumilli is SEF’s Legislative and Research Analyst.