School enrollment decline threatens lasting funding damage for districts

Dive Brief:

Low enrollment numbers could be permanent in some areas where students are moving beyond school district borders, cornering districts into difficult decisions, said education finance expert Marguerite Roza in a Tuesday webinar hosted by the Edunomics Lab at Georgetown University.
Even though states are putting in place policies to buffer the impact, shrinking enrollment could result in a significant decline in funding districts receive from their state, forcing them to think about whether they need to "downsize their operations,” Roza said.
In the past, districts reacted to enrollment-related funding losses by delaying budget cuts, which depletes reserves and causes more financial strain later, Roza said. Most also resisted closing schools even when declines persisted, and many will likely delay similar decisions this time around.

Dive Insight:

As many state legislative sessions get underway this month, Michael Leachman, vice president for state fiscal policy at the Center on Budget and Policy Priorities, warned states could sharply cut funding. According to a report released in December by the National Association of State Budget Officers, K-12 saw the largest decrease in state funding for fiscal year 2021 when compared to other state programs.

"Even in a situation where you get across-the-board cuts, the impact and the pain from those cuts are felt most deeply by the schools and kids who need the help the most," Leachman said during a Jan. 14 webinar, adding that how cuts are imposed can also impact their outcome.

Historically, even a 1% enrollment loss is "financially destabilizing for districts," Roza said. For example, Mesa Public Schools in Arizona is facing a loss of $23 million after a 6% decline in enrollment.

At the same time, some districts are making enrollment and funding gains, Roza said, adding however that it is often charter and private schools seeing increases in these areas.

To stave off funding destabilization, some states have developed or are considering alternative enrollment options. Kansas, for example, is allowing districts to choose between reporting this year's or 2020's enrollment. Colorado is allowing districts to calculate enrollment based on a multi-year average.

"States can do the right thing still," Leachman said, who urged states to make policy decisions focused on funding districts equitably and addressing learning losses.

While districts are making budget decisions based on lower enrollment numbers and funding cuts, they also are being tasked with addressing learning loss. Federal aid for learning loss provides approximately $1,100 per pupil, which Roza said could be used in various ways. For example:

Pay for four months of COVID-19 testing for all students and staff twice a week to reopen school. While this may help schools reopen, it won't address learning loss.
Reduce class size by two for all students for two years. Leaders will have to consider what happens when funds for this run out.
Add a month of school for all students. Leaders will have to consider whether all students need the same kind and duration of support.
Fund two years of tutoring for half of the students. While this is a more customizable option to meet students where they are, tutoring can oftentimes be stigmatizing and raises the question of whether students will participate.
Give schools money per pupil to spend as they see fit. While this permits schools to innovate, not all districts are comfortable with a hands-off approach and that could lead to varying results.

While districts tinker with these options, many are calling on the federal government to provide funding in the next COVID-19 relief package to help stabilize state and local budgets. President-elect Joe Biden's proposed $1.9 trillion American Rescue Plan includes $350 billion in aid for that purpose, but some question the package's viability in Congress.