Accelify Blog

States Squeeze Local Schools (US)

June 15, 2010

State governments generally try to spare schools from budget cuts. But the recession hit tax revenue so hard that K-12 education is seeing sharp cutbacks in state funding.

All major sources of state and local-government revenue—sales taxes, income taxes and prope rty taxes—have fallen. Property taxes are the primary source of school funding, and home values have dropped sharply, particularly on the coasts. More taxpayers are appealing their property assessments to lower their bills.

Stimulus dollars from the federal government have been propping up school budgets, but that aid will expire at the end of the coming school year. U.S. Sen. Tom Harkin, an Iowa Democrat, recently proposed a new $23 billion stimulus package specifically to aid public schools, but its prospects are uncertain.

Schools generally are the largest or second-largest expense in state budgets.

For about 20 years, state governments were shouldering an increasing share of school expenses, for reasons ranging from lowering property taxes to increasing spending equality between districts, says Michael Griffith, a senior policy analyst with the Education Commission of the States, a Denver-based policy-research group.

Before the recession, states paid about half of all K-12 school expenses, with 41% coming from local governments and the remaining 9% from the federal government, Mr. Griffith says.

Federal aid now accounts for 14% to 15% of education spending, partly due to federal stimulus funding, with state and local governments splitting the remainder about equally, he says. As budget shortfalls widen, states have cut back on school aid.

"The wealthy districts tend to make up for losses in state funding by increases in local property taxes," Mr. Griffith says. "It creates a larger gap between the haves and the have-nots."

In the 2010 fiscal year—June 30, 2009, through July 1, 2010, for most states—34 states cut spending on K-12 educat ion, including New York, New Jersey, Illinois and Texas, according to a survey by the National Governors Association and National Association of State Budget Officers. For the coming school year, 31 states expect to cut K-12 spending.

Teacher salaries and benefits account for 65% of education expenses, Mr. Griffith says, so districts have had little choice but to cut jobs.

School districts also are freezing or cutting salaries and benefits, closing schools, reducing transportation and eliminating subjects such as art and music, along with some sports and extracurricular activities.

The American Association of School Administrators has projected that schools could cut 275,000 education jobs for the 2010-11 school year. That figure could rise. State leaders such as Kansas Gov. Mark Parkinson are warning they will be forced to cut education spending further if Congress does not approve additional federal aid for Medicaid, the joint state-federal health-care program.

More than 30 states assumed in their budgets for the coming fiscal year that Congress would come through with a higher level of Medicaid funding. So far, it hasn’t materialized.

Some planned budget cuts are meeting strong resistance from teachers. In Chicago, the teachers union sued the district last week, saying threats to increase class sizes to as many as 35 students would violate city building codes by creating overcrowded classrooms. Chicago public schools must close a $600 million deficit.

The Cleveland teachers union is suing its district, trying to stop a plan that would force hundreds of teachers to reapply for their jobs. The teachers’ contract is set to expire June 30, but discussions have deadlocked over seniority rules and teacher evaluations. The di strict is pushing for salary concessions that administrators say will prevent more than 500 teacher layoffs and 45-student classes.

Some states have rushed to change education laws in the hope of securing a portion of $4 billion in federal Race to the Top funds. In the first round of funding, Delaware and Tennessee received grants totaling $600 million.

More than 30 states have passed laws aimed at improving their chances of securing an award. Colorado’s new law, for example, requires principals to evaluate teachers’ effectiveness every year, with at least half of the rating tied to student achievement. The law withholds tenure for the first three years, and teachers who perform poorly two years in a row can lose tenure and their jobs.