School district budgets catch long COVID

A very painful fiscal cliff is coming for America’s schools. The crisis is the unintended — but in retrospect predictable — result of the federal government’s attempt to protect school budgets during the pandemic. So much for good intentions.

When temporary pandemic aid expires later this year, school districts across the country will be hit with a triple whammy — the bill for existing staff positions that were temporarily funded by the stimulus; the new hiring enabled by those same dollars; and the inflated, unsustainable salaries fueled by the teacher hiring boom.

Each of these issues would, on its own, require cuts that harm student learning in an ordinary budget cycle. But their collective impact on the solvency of the nation’s schools will pose one of the greatest fiscal crises in recent memory.

We’ll get to the problem and the path forward, but first some background: The Elementary and Secondary School Emergency Relief Fund sent nearly $200 billion to school districts during the pandemic, the largest infusion of federal education aid in history. The first two rounds of funding were approved in 2020, during the Trump presidency, but the largest share was distributed under the American Rescue Plan shortly after President Biden took office.

The federal aid was initially meant to shield school districts from revenue losses during the pandemic recession. (The recession happened, but these losses were smaller than anticipated.) Later on, however, the Biden administration claimed that even more money was needed to fund ventilation and facilities upgrades to reopen schools. But this was fallacious, because most private (and many public) schools had already reopened, and the money wouldn’t arrive until after the remaining schools did too. So the rationale changed once more — officials claimed the money was for students’ academic recovery. Yet federal lawmakers required schools to spend just 20 cents of every dollar on learning loss.

While many organizations tried to track how schools spent their windfall, doing so proved practically impossible because money is interchangeable. For example, while many districts reported using their aid to pay for summer school, there was no way to tell if such programming was new or an accounting gimmick — with districts simply charging the cost of existing staff and services to the new revenue stream to free up other money in the process.

But now, thanks to a clever new study from Washington state that examined the actual job openings that schools advertised rather than the spending plans they publicized, we finally know where the money went.

First, a significant chunk went to pay the salaries of existing employees — backfilling budget deficits in the wake of enrollment declines. This means that when that aid runs dry this summer, districts will face substantial shortfalls, forcing school leaders to decide how (and whether) to continue paying their employees.

Second, districts in Washington state used federal money to hire new employees — more than 12,000 of them, including more than 5,000 teachers. To put these figures into perspective, 5,000 newly hired teachers is about 10 percent of the Evergreen State’s entire educator workforce. These are positions that would not have existed without the influx of federal cash, and which school districts will not be able to afford after that aid ends.

But the total impact on district finances is even larger. Because teaching is a highly regulated profession with significant barriers to entry, the hiring binge that federal aid set in motion put districts in direct competition with one another for teachers. Amid high inflation, this created pressure to increase salaries — both to recruit new educators and keep current ones from being lured away. This hiring frenzy helped “lock in” contractual pay increases for years to come.

The path forward won’t be easy, but honesty and a student-first approach is the way to start.

First, school leaders must negotiate labor agreements that are more sustainable and right-size district operations. For example, policymakers need to find the political will to close under-enrolled schools that aren’t serving kids well. California is a textbook case of what not to do. Recently, a state board there ruled in favor of Oakland’s teachers union, arguing the district had a legal obligation to bargain over closures — a novel finding that, if applied broadly, will make long overdue right-sizing efforts impossible to achieve.

Second, the public must be educated about the nature of the crisis. Because fewer than one-third of Americans know that the feds handed out large sums of money to their schools, unions can use this ignorance to their advantage to blame underfunding and resist needed cutbacks.

Recently, teacher unions in big cities have used strike campaigns to push districts to the brink of insolvency. As The Oregonian reported, Portland officials now say they will need to trim $30 million from next year’s budget as a result of a three-week teacher strike in November that ended with a 14.4 percent salary increase over three years.

Finally, leaders must come clean to parents and the public — both about the financial challenges their districts now face and about having squandered federal aid to backfill deficits and put off painful decisions.

Cleveland schools CEO Warren Morgan offers a promising profile in political courage. In announcing budget cuts, he acknowledged the uncomfortable truth that, “Some of the financial challenges the district would have seen a lot sooner if the COVID-19 relief dollars didn’t come … It allowed us to fill gaps and maintain our funding, maintain our programming, provide incentives in a way that may have given us a sense of ‘oh we’re ok.’”

The bottom line: No one is coming to rescue America’s schools from the unintended consequences of the American Rescue Plan.

Michael Hartney is a fellow at Stanford University’s Hoover Institution and an associate professor of political science at Boston College. Vladimir Kogan is a professor of political science at the Ohio State University.