Officials at Moody's, the financial services company, have predicted the next recession could hit the U.S. as soon as 2020. Marguerite Roza, a finance professor at Georgetown University, feels this recession could have an even greater impact on school districts, because many state funding models disproportionately depend on income tax and state sales tax in low-income areas – funding streams among the first impacted in a recession, Education Week reports.
Roza offers fiscally cautious advice to school districts: First, be realistic and transparent about the current state of finances because, if districts constantly complain about lack of funds, people don’t grasp the scope of the problem when the situation is actually dire; and second, hire sparingly, because it's easier to cut contracts with outside vendors than it is to fire your own people.
- Roza also recommends that districts find alternatives to teacher raises – because they also affect benefits and pension funding – and to think in the long term and build up rainy day funds to sustain themselves during cutbacks. They should also be transparent with stakeholders about where funding comes from and why it makes its budgeting decisions, Education Week notes.
Recessions tend to be cyclical in the American economy, and experts point out that the current economic expansion is already the second-longest on record. But economists are predicting a recession as early as 2020, and school districts need to consider this possibility as they budget for the coming fiscal year.
Recovering from a recession is a slow process. In 2015, 29 states were still funding schools at per-student levels lower than in 2008. Since then, many states have worked to gradually increase school funding. In fiscal year 2018, K-12 school expenditures nationwide rose 4.6% from the previous year, remaining the largest area of state general fund spending. And in 2019, states raised that spending again. A majority of states have had the best year since 2015 and are celebrating budget surpluses, but in turn, are faced with tough choices about whether to save money — or another probable recession— or spend it on restoring funding levels for a multitude of agencies that suffered cuts in the past.
As states consider what to do, school districts now face the same dilemma. As teachers strike in many areas, clamoring for a larger piece of the fiscal pie, district leaders must weigh competing priorities and determine how money needs to be best spent in the service of students. At the same time, they also need to consider how much to save. The answers are never easy and will almost never receive 100% support – no matter what school boards or superintendents decide, they will likely face opposition from those who feel they are losing out.
Now is not a time for administrators to panic, but it is a time to consider the future as district leaders craft new budgets today. In turn, it could also be a good time to educate teachers, staff members and community stakeholders about the challenges that both states and districts face when planning budgets in an uncertain economy.