By Nora Gordon, Susanna Loeb, Marguerite Roza & Eric Taylor
In the wake of the COVID-19 pandemic, the outlook for school district budgets is bleak. Many states have announced shortfalls for the fiscal year that is just ending in most places and for the new fiscal year as well. The Center on Budget and Policy Priorities projects that states will have $615 billion less over the three fiscal years starting with 2020 than budgeted for in better times.
Unlike the federal government, almost all states have laws that require them to balance their budgets, virtually guaranteeing that governors and state lawmakers will make cuts this fiscal year or the subsequent one in 2021-2022. Policymakers will not be able to spread the economic shock over longer periods of time.
Schools that are heavily dependent on state funds are likely to be particularly vulnerable to budget shortfalls, as they were during the Great Recession. Federal aid is offsetting some losses but so far not a lot, and we don’t yet know what future aid will look like. As of today, federal aid directed to schools for the COVID-19 crisis has been only a small fraction of the aid provided in the 2007-2009 recession.
Simultaneously, schools and districts are facing increased needs. As they ramped up virtual learning, technology costs increased, including those for internet access, laptops, software licenses, and professional development to upgrade teachers’ technology skills. As we look ahead to when school buildings are again in use, health monitoring and social distancing could dramatically affect operations and costs. Then there is attending to learning loss caused by pandemic disruptions. Adding 20 days to the school year (roughly 10 percent more time) in response could cost approximately $36 billion, according to the Learning Policy Institute’s estimate.
Although many states have not set the guidance that districts and schools could use to plan for the coming year, research provides some insights into useful next steps.
First, immediate action can save resources. For example, delaying pay raises or furloughing nonworking staff now can reduce future layoffs. Reduction-in-force notices have negative effects beyond actual layoffs by creating stress for teachers and leading them to leave voluntarily. Even before districts have a sense of the magnitude of the reductions needed, they can draft budgets and better understand the implications for students of possible trade-offs.
Second, the new context means the traditional priorities—particularly the typical mixes of services and spending outside of classrooms—may not be what is best now for students. Before the pandemic, for example, technology and student supports may have seemed like appealing places to cut because they often operate independently of the core functions of schools. However, technology has clearly been critical for schools during school-building closures, and the need to balance in-person and online instruction is likely to last into the new school year, especially if the virus spikes again this coming winter. Mental- and physical-health supports may also be even more important than they have been in the past. Many students will return to school having experienced trauma related to either direct or indirect effects of the pandemic or the killings of Black men and women at the hands of police.
Third, because salaries and benefits typically account for more than 80 percent of district expenditures, the need for substantial cuts means reducing labor costs. But that does not necessarily dictate substantial layoffs. Salary freezes and reductions, furloughs (fewer hours or days), and benefit cuts are alternative ways to save. Reductions in salaries for teachers can make it more difficult to compete for employees with other sectors, true, but in some districts, salary cuts may still be preferable to layoffs. Layoffs can ultimately force losses to instructional time or larger class sizes, which may be greater evils, for instance, than lesser pay increases.
If layoffs are necessary, last-in, first-out (LIFO) approaches to choosing which teachers will be let go do not minimize the negative effects for students. LIFO leads to losing effective teachers while less-effective teachers remain because experience explains only a little of the difference in effectiveness. Research provides some evidence that legislation limiting use of LIFO improved graduation rates.
State laws and collective bargaining agreements do place restrictions on the layoff process, but many states have flexibility, and within that, many collective bargaining agreements have some leeway as well. For example, the Spokane, Wash., school district was able last month to announce a possible change in staff workloads related to budget woes. Moreover, contracts need not be set in stone. Given the way the pandemic and its consequences have shifted priorities, it may be worth revisiting bargained contracts.
Fourth, without a focus on equity, inequality will increase. School resources are particularly important for students with the greatest needs. Heavy job losses linked to the pandemic, for instance, can hurt students’ mental health and academic performance. Students in a hard-hit district or area will require more support not to fall (or fall further) behind their peers in other communities.
For students to have equal chances to learn, districts need to know how budget cuts will affect individual schools and work to reduce the impact on the schools with the most children in need. Cutting support services, leaving certain positions unfilled, or creating other positions may affect some schools’ spending more than others.
Equally important to take into account, LIFO approaches to layoffs tend to remove more teachers in the most difficult-to-staff schools because the teachers there are often less experienced. While districts can move more-experienced staff members in, the churn of teachers creates disruptions that hurt student learning. LIFO will also likely result in the loss of teachers of color since many teachers of color were recently recruited into the field. These teachers are particularly beneficial for students of color, and districts can protect them and their students.
Research shows that during the Great Recession, revenue cuts negatively affected students, especially ones in poor neighborhoods. The impact of cuts at a time of increased costs for schools and greater stress on families will likely be worse. A substantial influx of federal funds for schools is the best bet to fill in budgets but is not anticipated anytime soon.
Meanwhile, education leaders have important choices to make in reducing spending. Taking action immediately, carefully considering trade-offs, and focusing on equity will help leaders minimize the worst effects of the revenue losses that are so unfortunately coming their way.
Nora Gordon is an economist and an associate professor at the Georgetown University McCourt School of Public Policy. She is a research associate of the National Bureau of Economic Research, a nonresident fellow of the Urban Institute, and a member of the FutureEd Advisory Board. Susanna Loeb is a professor of education and of public affairs at Brown University and the director of the university's Annenberg Institute for School Reform. She studies education policy, and her interests include social inequality. Marguerite Roza is a research professor and the director of the Edunomics Lab, a research center focused on exploring and modeling education finance policy and practice, at Georgetown University. She leads the McCourt School of Public Policy's Certificate in Education Finance program. Eric Taylor is an associate professor of education at the Harvard Graduate School of Education and studies the economics of education, with an interest in employer-employee interactions between schools and teachers.