Coronavirus Resources for Schools

Financial Recovery Research Brief Hanover Research

Contains resources from school districts and public health agencies.

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© 2019 Hanover Research 2 Overview of Financial Challenges Although most districts are not likely to see significant financial challenges during the 2019-2020 school year, several factors will impact district finances during the 2020- 2021 school year. Figure 1 shows potential financial challenges identified by the Edunomics Lab at Georgetown University. In addition to funding reductions, these challenges include several factors that may increase district costs, such as increased student needs and increases in student enrollment. Districts may also face increased costs for teacher salaries. Research suggests that teacher turnover tends to decline during periods of high unemployment. Because teacher salaries in most districts increase with length of service, declining turnover rates will result in increased salary expenditures even as the total number of teachers remains stable. 3 Figure 1: Potential Financial Challenges for School Districts Source: Edunomics Lab at Georgetown University 4 Identifying Cost Savings Districts should begin identifying potential cost savings immediately to prepare for anticipated financial challenges associated with the Covid-19 pandemic. A 2020 presentation by the Edunomics Lab at Georgetown University recommends the short-term and long-term strategies shown in Figure to mitigate the impact of funding reductions on district finances. In the short term, the Edunomics Lab recommends that districts immediately freeze hiring and promotions to avoid incurring additional personnel costs in the following school year. 5 Figure 2: Recommendations for Mitigating Funding Reductions Source: Edunomics Lab at Georgetown University 6 Districts should also take immediate steps to protect financial reserves that can be carried forward into future fiscal years. A survey of district superintendents in Texas examining the impact of 2011 state budget cuts finds that superintendents who were able to carry forward funding from previous years reported that this funding was protected and reduced the impacts of state cuts on their budgets. 7 Operational Cost Savings Districts can reduce recurring costs by increasing efficiency in energy usage and transportation. For example, Huntington Beach Consolidated School District in California launched an energy efficiency initiative in response to the 2007-2009 recession. This initiative included an awareness campaign to encourage staff members to turn off lights and other electrical equipment when not in use, upgrades to air conditioning systems, and the installation of solar panels at school sites. 8 Likewise, Carroll County Public Schools in Maryland realized annual cost savings of $1.4 million by adjusting school start times to reduce the number of daily bus runs from three to two. 9 Some districts have realized operational cost savings related directly to Covid-19 school closures. For example, Montgomery County Public Schools in Virginia has reduced spending in areas such as maintenance and utilities due to school closure. The district plans to use these savings to provide each classroom teacher with 15 hours of professional development focused on teaching in a virtual environment and carry some savings forward into the 2020- 2021 school year. 10 In some cases, smaller school districts have pursued mergers in response to severe budget challenges. For example, Ilion Central School District and Mohawk Central School District in New York merged in 2013. Cost savings realized by the merger and a state financial incentive for district mergers enabled the combined Central Valley School District to avoid a 20 percent reduction and staff and replace programs that had been cut due to previous budget reductions. 11 However, district mergers are often controversial, and in some states Loss of State Funding •Overall state revenues will decline due to reduced sales tax revenue while facing pressure to increase spending on other areas such as public health and Medicaid, resulting in a decrease in state funding for school districts Reduced Teacher Turnover •Voluntary teacher turnover drops during periods of high unemployment, increasing salary expenditures as teachers accrue pay raises for additional experience Increased Student Needs •Student support needs will increase due to parental unemployment Pension Challenges •Negative pension returns may necessitate increased contributions to pension funds Increased Enrollment •Students formerly atttending private schools may enroll in public schools Short-Term •Protect reserves •Freeze hiring •Refrain from making promotions •Reduce any recurring costs •Communicate Long-Term •Examine benefits •Seek per pupil cost reductions to every central department •Shift budgeting choices to schools •Leverage attrition

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