With the economy in free fall due to the coronavirus pandemic, schools across the nation are very likely to face significant fiscal challenges. While a sharp v-shaped recovery is possible (here’s hoping) and Congress may pump out additional stimulus cash (more probable), state and local leaders still need to prepare for the economic headwinds.
In a recent webinar, school finance expert Marguerite Roza of Edunomics Lab discusses the potential impacts on schools. They are likely to suffer revenue declines, while also facing pressures that make it hard to contain costs during a recession (e.g., more low-income students and less attrition of veteran teachers). To help prepare for the budget crunch, Roza offers some concrete suggestions such as immediate hiring freezes and reopening employee contracts. Those are an excellent start, especially if you’re a local superintendent. Yet in the coming months, Ohio policymakers will need to rethink, and possibly rework, a number of state funding policies in light of new fiscal realities. Where to begin? This piece offers four basic ideas.
First, set realistic expectations for school funding.
To his credit, Governor DeWine has been very open and frank with Ohioans about the public-health crisis and his rationale for taking action to mitigate it. Likewise, state leaders will need to strike a similar tone when discussing the budget challenges that lie ahead and their effects on school funding. In the short term, the federal stimulus and Ohio’s rainy day fund should help the state absorb the impacts this year and possibly next (FYs 2020 and 2021). But state policymakers will also need to start planning for the next biennial budget, which will be debated in spring 2021. If the economy continues its free-fall, the state will be hard-pressed to maintain current school funding levels, much less pay for the large, across-the-board funding increases proposed in the Cupp-Patterson plan, or find the extra dollars that can support other well-intended reforms such as eliminating funding caps. Instead, policymakers will need to ensure that the public and school leaders have realistic expectations about what the state can afford.
Second, emphasize the state’s special responsibility to support less advantaged students.
The pandemic-induced school closings are sure to hurt disadvantaged students the most. There’s already media accounts suggesting that low-income students are struggling to keep up in remote learning environments. Similar concerns about special-education students have also surfaced. While the state already provides more aid to high-poverty districts, it should strive for even more effective targeting of funds to help prevent disadvantaged students from falling hopelessly behind. In the next biennial budget, this could mean driving more state funding through “categorical” grants that deliver aid based directly on economically-disadvantaged, special-education, and English-language-learner enrollments. As discussed elsewhere in this piece, it might also entail an additional funding stream based on students identified as poor via direct-certification methods.
Third, concentrate on restarting the school funding formula.
For FYs 2020 and 2021, legislators suspended the funding formula, the mechanism that usually allocates state funds to school districts. Instead, districts’ current state aid is generally equal to the amount received in FY 2019 (calculated via formula based on their enrollments and state share indexes for that year). Depending on whom you ask, this freeze was either enacted to buy the legislature time to continue exploring alternative funding models (like the Cupp-Patterson plan) or to give the then newly elected DeWine administration time to craft a thoughtful school funding plan. The problem, however, with keeping the formula frozen in time is that districts aren’t funded based on the students currently enrolled in their schools. For instance, a district educating twenty-five more special education pupils in FY 2022 (relative to FY 2019) won’t receive the extra dollars to support the needs of those additional students. (Conversely, this also “overfunds” a district that has fewer special education students.) At a more general level, the freeze shortchanges districts with increasing enrollments overall and/or those that are becoming relatively poorer and need more state help. In sum, getting Ohio back to a formula-based system will be critical to delivering limited resources to where they’re most needed.
Fourth, provide flexibility around how schools may spend funds.
Ohio districts and charters already have flexibility in determining how most state dollars are spent. However, the state does limit how they spend two sizeable pots of money: economically disadvantaged and student wellness funds, which together constitute about $750 million in state outlays in FY 2020. Economically disadvantaged funding must be spent on things like extended school days, community learning centers, professional development, or academic interventions. Similarly, schools must spend wellness dollars on initiatives such as mental health services, mentoring, or family engagement. Of course, these are well-meaning and potentially high-impact activities. Yet they also limit options, especially problematic if districts need to address budget shortfalls. A district, for example, might prefer to spend $200,000 in economically-disadvantaged or student-wellness funds to avoid teacher layoffs instead of supporting an afterschool program. Because those dollars are restricted, however, it would end up spending funds on a lesser priority. To give school leaders more flexibility, lawmakers could simply add provisions permitting the use of these funds for staff retention and compensation initiatives.
The past month has been heart-wrenching, and these trying times are likely to persist as the economy tries to regain its footing. For state and district leaders, this will mean tough budget decisions ahead. But if policymakers can maintain a focus on leveraging existing dollars to meet the needs of students, we may look back on this time as Ohio’s finest hour.
 The freeze doesn’t apply to charters whose FY 2020 funding is based on FY 2020 enrollments.