Policy Analysis | March 2011

School Budgets Feeling the Pinch

Jonathan Watts Hull

It should not be a surprise that education budgets are feeling the pinch this year. As the economy continues its slow climb out of the Great Recession, state budgets are showing incremental signs of recovery. But for education, states are facing the end of federal stimulus money that pumped about $100 million into schools, mostly to avert teacher layoffs. While the federal government asked states to spend the recovery money in ways that did not create a gaping hole when the funds ran out (states are required to commit all recovery funds by the end of fiscal 2011), a 2010 study from Teachers College of Columbia University noted that most states spent 70 percent of their fiscal stimulus funds in fiscal 2010. As state and local revenues for education continue to lag, a number of states are facing a precipitous funding "cliff." State legislatures in general work very hard to avoid cutting K-12 education funds, but as the recession has dragged on and reserves begin to be depleted, education budgets are feeling the pinch.

In Alabama, where education is funded through a separate account generated largely through sales tax, the governor announced proration for school funding in the current fiscal year to cover a $165 million projected shortfall in collections. The action reduces funding to schools from the state, and sets up a budget debate in the Legislature over school funds for the coming fiscal year that will reflect diminished funds. The Senate Finance and Taxation-Education Committee this week approved a House bill to limit the growth of spending from the Education Trust Fund, putting surpluses into a reserve account that would then be available when the Fund is unable to meet required outlays, diminishing the potential for future prorations.

Texas, which is facing a budget deficit of upwards of $27 billion, has budgeted $9.8 billion in cuts to public education. The state has yet to detail plans for how these cuts would be directed, but the 23 percent reduction in direct aid for public education will likely lead to layoffs (as many as 100,000 according to the school finance consulting firm Moak, Casey & Associates).

The Florida Legislature, which is working on teacher tenure and pay reform as well, is trying to close a $3.7 billion budget shortfall, and address a projected property tax collections deficit of more than $200 million for next year. The governor has proposed a 10 percent cut to state aid to public education, a figure that legislative leadership has indicated may need to be altered considerably.

While education funding is being reduced in many states, it is noteworthy that not every state is reducing outlays in this area. Virginia, which concluded its annual legislative session in February, was able to increase funds for K-12 education by $75 million. In Georgia, the state has largely held the line on the budget for education, although both of the flagship programs funded by the state lottery will see reductions. Changes to the HOPE scholarship were detailed last week, and will likely be signed by Governor Nathan Deal this coming week; changes to the state's universal Pre-K program include a 20-day reduction in the number of days the program will operate and an increase in the number of pupils per class.