Analysis: Pandemic-Fueled Financial Turbulence Is Hitting School Districts Across the Country. Here’s What to Watch for

(Edunomics Lab)

It’s tough to overstate just how much the pandemic is asking of school districts and their financial leaders.

They’re being asked to budget in the face of whiplash-inducing on-again, off-again reopening scenarios — all set against a backdrop of collapsing state revenues for K-12 education. At Edunomics Lab, we’ve been tracking districts’ budget decisions in the wake of the pandemic-triggered financial upheaval, based on news reports and, where feasible, budget and school board documents. Although our effort doesn’t provide an exhaustive national picture, it does offer a hit-or-miss, selective snapshot of a fast-moving situation. And what we’re seeing are some short-term district actions that could have significant — and, in some cases, troubling — long-term ramifications.

Local school boards are granting superintendents emergency financial powers

Undoubtedly, such moves stem from good intentions, to ensure that districts can respond to the needs of the moment without delay. Sidestepping board approvals can be helpful when a district has to act quickly, say, to buy digital devices if schools must shift to remote learning. But the flip side is that the normal safeguards around spending public education dollars — school board oversight and approval, and the public process that goes with it — are now lowered. One caution for superintendents is that those seemingly onerous and time-consuming approval processes may actually insulate them from job-ending accusations of misuse of funds.

For communities, emergency provisions can short-circuit public engagement at a time when we arguably need more creative thinking, not less, on how best to leverage limited dollars to support learning for students. In fact, without board approval of budget amendments, spending decisions may go many months before ever being made public — part of why it has been so difficult to track spending cuts and investments since the onset of the pandemic. Another risk is that leaders may lock in commitments that well exceed the expiration date of their emergency spending authority.

Districts are tapping their reserves

At first blush, this makes sense, because we’re in a bona fide emergency, and reserves are a “break glass in case of emergency” resource. But reserves are a quick fix for short-term problems, like repairing a building after a flood. What districts are facing now will be a longer-term issue that’s expected to outlive the pandemic itself — namely, the coronavirus-triggered recession. District revenues will be severely constrained, not just for the 2020-21 school year but for several years to come. When districts deplete their reserves today in order to avoid making cuts, they’re maintaining cost structures they can no longer afford, rather than grappling with and possibly restructuring costs now. Tapping reserves, for instance, while awarding pay raises means districts will face a more expensive workforce next year. In other words, they may be kicking the fiscal can down the road and boosting the odds of deeper and more disruptive school cuts for 2021-22 and beyond.

There is no set playbook for this moment: District spending decisions are all over the map

Many districts did start by making minor budgetary trims, such as ending some contracts or reducing central office staff. But after that first round of cost-cutting, district decisions have ranged from pay freezes to layoffs to furloughs. Some are even raising salaries. A few districts have let principals decide what to cut and what to protect. Some are moving forward with proposed levies, while others have postponed them for now. Unclear state messages and uncertainty about federal aid may be playing a role. Financial conditions do vary by state, and some within-state patterns are emerging, such as layoffs in many California districts, furloughs in many Colorado and Oregon districts, and salary raises in Florida and Texas districts. But in other states, there is little alignment from one district to the next.

Yet many districts continue to lock in spending for a schooling model that students can’t access during a protracted public health crisis

 Districts are budgeting for the full complement of in-person services delivered in “normal” times, though “normal” is drifting further into the future. Many large districts are starting the fall fully remote while continuing to fund transportation systems, custodial services and substitute teacher pools that aren’t being utilized. Think rosters of crossing guards, phys ed teachers, classroom aides, choir directors and athletic coaches, and buildings empty of students. Many districts have added investments in digital learning but thus far have not redirected funding for the many services not being provided to students in the current moment. Part of the rationale is to keep the system intact (and on hold) for the time when leaders flip the switch to reopen schools. But as each month goes by with students in virtual mode, doing so increasingly means tying up this year’s dollars in ways that aren’t benefiting this year’s students.

Perhaps it’s time to start unlocking that money to offer (different) services that students can use now

Districts are between a rock and a hard place. Imagine the armchair quarterbacks second-guessing a district that restructures its budget if the school doors open Oct. 1 — and there are no buses. Dismantling parts of our current model by, say, laying off the entire transportation team could force further delays when it’s deemed safe to reopen.

But what happens if the pandemic school closures drag on? It seems less and less appropriate to park resources in a system that’s effectively on hold, when the alternative is to creatively use those resources to get students what they need today.

A few districts have started this kind of creative rethinking of their services at a time when larger classes won’t work. Using current staff (like phys ed teachers, aides and librarians) to offer tutoring or small in-person learning groups could be a way to both keep educators on the district rolls and meet student needs. These types of options require flexibility and cooperation, especially of those who will be expected to work differently going forward. Who better than our schools to take on the challenge of developing smaller, more supportive learning experiences for students — especially those who need it most?

While none of us wished for this wildly uncertain future, here we are. The essential job description for district financial leaders continues to be one of leveraging limited resources to maximize student learning. But doing that job is now immensely more complicated than at any time in recent history.

Marguerite Roza, Ph.D., is director of the Edunomics Lab and a research associate professor at Georgetown University. Katie Silberstein is a research fellow at Edunomics Lab at Georgetown University and a former elementary school teacher.

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