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Cutting to the bone: At a glance

A quick look at a painful subject

Although the recession technically ended in 2009, district budgets are not expected to regain their pre-recession (2008) funding levels until late in the decade, for a number of reasons:

  • Reduced local revenues from real estate taxes. Home prices are unlikely to get back to their 2006 highs for several years.
  • Lagging state budgets. State revenues might recover to pre-recession levels by 2014, taking inflation into account, but the cost of providing the same services will have risen at a significantly higher rate, due to increased demand for Medicaid and other state programs with high cost increases. Most states will also have to increase their contributions to state employees’ retirement funds, which are substantially underfunded.
  • Reduced funding from federal stimulus programs. State Fiscal Stabilization Funds (SFSF) from the American Reinvestment and Recovery Act (ARRA) have helped districts limit their budget cuts, but those funds are expected to run out by 2011. The new Education Jobs Fund could mitigate part of the blow in 2011 and 2012.

Just how bad is it?

Since the average school district receives about half (47 percent) of its funding from state coffers—ranging from 31 percent in Illinois to 86 percent in Vermont—districts are directly impacted by the health of state budgets (FEBP 2010).  And “states are facing a protracted budget crisis like none seen in the last 30 years and perhaps not since the Great Depression” (Thomasian 2010).

In 2010, every state except Montana and North Dakota faced budget shortfalls totaling $200 billion, or about 30 percent of state budgeted general expenditures—the largest gap on record (McNichol and Johnson 2010). Such a large drop in revenues called for dramatic spending cuts. States spent nearly $75 billion less in 2010 than in 2008—an almost 11 percent decrease.

When such drastic cuts are made, no area goes unscathed, including education. In fiscal year 2011, 33 states and the District of Columbia cut their K-12 funding (Johnson, Oliff and Williams 2010) to help balance their budgets. The cuts were broad and deep, affecting even the most essential budget areas (Oliff and Johnson 2010, Thomasian 2010):

  • General funds to districts
  • Funding for books and classroom supplies
  • Programs for gifted and talented
  • Pre-K and after-school programs
  • Funds for teacher preparation and training
  • Aid for school construction
  • Allocations for administration staff
  • Aid targeted to charter schools

These painful cuts undermine reform initiatives many states are undertaking with encouragement from the federal government (Roza and Frank 2010). Worse, many states have slashed the rest of their budgets to the bone and exhausted their reserve funds, which means there’ll be nothing left to shield schools the next time states wield the budget cleaver.

A triple whammy

Meanwhile, the unprecedented drop in housing values means that property tax revenues, which make up most local school funding, are down sharply and will stay down, since most experts don’t see a rebound in the housing market until 2013. And federal stimulus funds, while helpful, are short-term and have made up for the loss in district and state revenues.

Taken together, these trends constitute a triple whammy. And districts are reeling from the effects. In 2009 and 2010, many school districts were able to cut their expenditures with minimal impact on students by adjusting thermostats, deferring maintenance and construction projects, laying off central office administrative staff, and eliminating nonessential travel. But for the current school year (2010-11), most districts have had to make cuts that affect students more directly. These cuts included:

  • Laying off teachers, which in turn increases class size
  • Cutting extracurricular activities
  • Cutting courses not required for graduation
  • Eliminating summer school
  • Adopting a four-day school week
  • Eliminating field trips
  • Cutting instructional programs
  • Cutting professional development for teachers and staff.

According to a study by the American Association of School Administrators (AASA), budget cuts are noticeably more significant this school year than they were in either 2008-09 or 2009-10. AASA’s April 2010 survey found that 78 percent of districts cut budgets in 2010-11, up from 64 percent the previous year. Not only were more districts cutting, but they were making more dramatic cuts. For the current school year, 30 percent of districts slashed their budgets between 11 and 25 percent, up from 21 percent of districts in 2009-10 (Ellerson 2010).

With 60 to 80 percent of school funds dedicated to personnel (Roza 2007), budget cuts mean it’s inevitable that jobs will be lost. Nearly all districts (90 percent) said they expected to cut positions this school year, an increase from 68 percent a year earlier (Ellerson 2010). Some of these personnel cuts will come through attrition, but 60 percent of districts are expected to lay off staff this year, up from 33 percent in 2009-10 and 12 percent in 2008-09 (Ellerson 2010).

What’s more, in the effort to balance budgets, many districts are considering and making cuts they never have before. They’re closing schools, reducing health care benefits, cutting back on pensions, and freezing salaries.

Although the recession technically ended in late 2009, states are not likely to see any budgetary relief until 2013 or 2014. And the sluggish housing market is not projected to recover until then as well. In fact, some experts think it will take until the end of the decade for states to recover to pre-recession levels.

Cut now, pay later

Nothing makes cutting budgets easy, especially when there’s little left to cut. As school boards monitor this year’s budget and plan for next year’s, research can point the way toward which cuts will have the least negative impact. For instance, research shows where smaller class sizes are most effective. Before making decisions that may increase class sizes, districts should examine their student demographic and achievement data to pinpoint which classes need to remain small and which may be able to absorb more students without undermining achievement.

But what will be the long-term impact of this unprecedented budget crunch? Just think: Today’s primary school children may graduate from high school before their districts can afford to reinvest in quality teachers, small classes, and proven educational programs.

It’s a case of cut now, pay later. Cuts to health care and pension benefits will make it difficult to attract and retain good teachers. Layoffs will lead to larger classes. Cuts in early education programs will mean fewer students enter school ready to learn. And the list goes on.

Clearly, the current system of school funding isn’t working. For schools to succeed in the long run, school boards, policymakers, and the public need to reexamine how public education is funded at the local, state, and federal levels. Federal ARRA and Education Jobs funds are simply tourniquets for hemorrhaging local and state education budgets. We need a new system that will stop the bleeding permanently by providing reliable and sustainable funding for public education. What that new system looks like should be the subject of a serious national conversation that leads to a real solution.

Districts need to communicate how severe the long-term outlook is and work to ensure that students who are just starting school now will be able to compete with their international peers when they graduate from high school. Asking schools to do more with less does not make sense. How much less can schools have before they are unable to do more? How much erosion in the quality of public education can the nation sustain?


Published October 2010.  © 2010 Center for Public Education.

This study was written and researched by Jim Hull, Center for Public Education's Senior Policy Analyst.