The NCSL Blog

12

By Elizabeth Romanov

Declines in state revenue, coupled with the rising costs of responding to the COVID-19 pandemic, have forced legislators to make difficult decisions about how to allocate state education dollars. While several states continue to revise their fiscal year 2021 budgets to reflect adjusted revenue projects, most have enacted new budgets.

$100 blll Ben Franklin wearing a maskNCSL has been tracking state budget enactments and revision and their impact on state education funding. As states have addressed budget shortfalls over the spring and summer of 2020, their budget revisions reflect three emerging trends in K-12 education funding.

Categorical Programs, Rather Than Base Per-Student Funding, Are Most At-Risk

Generally, states are not reducing their base per-pupil funding but instead are focusing on cutting categorical funding. Lawmakers in Nevada, for example, plan to decrease K-12 funding by $156 million, $70 million of which will be taken from supplemental funds allocated to selected student populations in addition to the base amount. Among the programs that are facing reduced budgets are the Read by Grade 3 program and anti-bullying and school safety initiatives. The base amount, however, stays the same at $6,288 per pupil.

Opening the Financial Toolkit

One promising aspect regarding state budgets is the amount of surplus revenue states have set aside in budget stabilization funds since the Great Recession. In fact, states ended FY 2019 with a collective $74.9 billion in their rainy day funds—a record high. Now many states are planning on using these funds to mitigate COVID-19-induced budget shortfalls.

Ohio Governor Mike DeWine (R) recently announced that state officials plan to use a significant portion of the state’s $2.7 billion budget stabilization fund, although it is unknown how much of it will be allocated towards K-12 funding. Drawing on reserve funds, Oklahoma was able to keep reductions to education at 2.5% while other state agencies received a 4% or less reduction.

Other financial strategies under consideration by states will require voter approval. The California Schools and Local Communities Funding Act, which is eligible to appear on the statewide ballot in November, seeks to modify how commercial and industrial properties are assessed and taxed. If passed, it would raise up to $12 billion in revenue to be spent on schools and local governments.

Ballot measures aimed at providing additional funding for schools are being considered in Arizona, Colorado and North Carolina as well. Another strategy is to redirect tax revenues from program-specific funds into general funds or into education funds to shore up losses.

Teacher Salary Increases Threatened

As salaries and employee benefits make up around 80% of total elementary and secondary education expenditures, it comes as no surprise that many states are looking toward teacher pay decreases as a means of reducing costs. One prominent researcher suggests any budget cuts to education greater than 2% to 3% will require reductions to the education workforce.

It is too soon to assess the impact of budget reductions on the education workforce. Some states are either reducing teachers’ salaries, freezing pay raises, and/or implementing mandatory furloughs.

Teachers from South Carolina and Idaho, for example, are being asked to forego promised raises this year, whereas those in Oregon and North Carolina were spared from any salary decreases. Whether or not a significant number of teachers will be permanently laid off remains to be seen, but thus far most full-time educators are preparing to start teaching in a few weeks.

NCSL is tracking education budget actions very closely and has a comprehensive webpage with resources about Education Finance in the Time of COVID-19. Legislators and legislative staff can think of NCSL as their go-to resource for the latest information on this topic.

Elizabeth Romanov is an intern in NCSL’s Education Program.

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Posted in: Education, COVID-19
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About the NCSL Blog

This blog offers updates on the National Conference of State Legislatures' research and training, the latest on federalism and the state legislative institution, and posts about state legislators and legislative staff. The blog is edited by NCSL staff and written primarily by NCSL's experts on public policy and the state legislative institution.