The Growing Financial Crisis

The financial fallout from COVID-19 is staggering. In the past 6 weeks, since shelter-in-place orders were mandated across the country, economic activity has been grinding to a halt, as nearly 30 million Americans have applied for unemployment insurance.


The IMF (International Monetary Fund) has predicted that this will very likely be the most significant economic downturn since the Great Depression. State and Local tax revenues will take a massive hit, which will result in reduced spending on K-12 education.

The urgent questions we must confront are: how badly will our schools be affected, and what can we do to mitigate the problems?


COVID-19 Impact on K-12 Revenue

School districts across the country should prepare themselves for a precipitous drop in revenue earmarked for K-12 schools in the next year, as a result of the widespread shuttering of the economy. Businesses shuttering in conjunction with skyrocketing unemployment rates will crash states’ sales and income tax revenue, which are the bread and butter of the funding upon which districts rely upon heavily.


While nothing is yet certain, budget and revenue experts everywhere are estimating that the revenue decrease for most states will be between 10% and 20% in 2020. And the pain will be even worse in 2021–22 when the lost income tax revenues are felt even more.


Furthermore, the extraordinary new costs to states from health care and social services for those who need more assistance, become homeless, or are unemployed will take a deeper bite into the shrinking state revenues, leaving even less for the needs of education.


A quick calculation yields a startling statistic. A 20% reduction in state education budgets would mean funding decreases of $57 billion for America’s public schools. Put into human terms, this is the equivalent of approximately 750,000 teaching jobs. Although the numbers will vary from state to state, no state will be spared.


Take New York, for example. As is well known, at the moment, New York has suffered most severely from the coronavirus. Current estimates put the loss to education at somewhere between $9 and $15 billion, or 9 to 17 percent of the budget.


When asked recently how school districts should prepare for next year’s budget without knowing whether or not state funding would be reduced even further, Gov. Andrew Cuomo said, “Call Washington.” He urged New Yorkers to press federal lawmakers to craft another stimulus package that will increase funding declining state budgets.


Many educators across New York have called Washington recently, registering their fears that without more significant federal assistance their schools will face devastating budget cuts next year, which will result in the loss of tens of thousands of jobs. But thus far, the leaders in Washington have resisted their calls for help.


The Federal Stimulus Package to the Rescue?


And you wonder why Congress should appropriate more money to the schools? What about the $13.5 billion for K-12 schools included in the federal stimulus package last month?

According to Michael Griffith, a veteran school finance analyst, every state would be forced to make cuts if the revenue loss exceeds 8 percent. So whereas the stimulus is undoubtedly helpful, cuts are still inevitable.


Moments Like This Require Bold Leadership

When the economy tanked, back in 2008, states across the country were confronted with massive budget shortfalls. In response, government institutions and programs cut funding and jobs. And education was no exception. But in Michigan, Governor Jennifer Granholm saw it quite differently and pushed for more education funding.


Her calculus, while visionary and courageous, was quite simple. She refrained from cutting the public education budget because she understood that an educated workforce is foundational to creating a healthy economy.


“It is an economic imperative,” said Granholm during her weekly radio address on October 24, 2008. “We can’t have a strong, diverse, thriving economy without a well-educated and trained workforce.”


Even as the state suffered a $240 million state deficit for the 2009 fiscal year, in addition to an economic emergency that threatened Michigan’s automobile industry, public schools were immune to a round of $150 million budget cuts (Heinlein & Hornbeck, 2008).


Granholm fought to fund those programs that she knew were imperative to educating youth in her state. Her priorities were bolstering early childhood education, improved and more demanding curriculum, and dropout prevention.


What Can We Do to Save our Schools?


Realizing the current plan to fund education will be insufficient, what can state and local leaders do to help?


First of all, they must assure that those with disabilities and those from low-income families don’t feel the brunt of education cuts. State and district leaders should ensure that any cuts made to education do not fall disproportionately on these high-need student groups. Aside from sensitivity and compassion, federal law requires that schools need to provide services to those requiring special ed to keep in compliance.


Second, if states need to cut education funding, they should provide districts with greater flexibility in how they spend their dollars. States may want to take this opportunity to create more flexible, equitable, and responsive funding systems.


But at the end of the day, it is going to boil down to herculean efforts to push for increased Federal Assistance: a 30% reduction in state education funding over each of the next two years could result in cuts to public K-12 systems of almost $200 billion.


Robust federal funding is needed by the schools to ensure our children’s education, and our continued prosperity in the years and decades to come. And it is needed now!


Help Your Students Cope with the Crisis

The response to the COVID-19 Pandemic is unprecedented. Because of our unique role in children’s K-12 education, we feel a responsibility to do what we can to assist schools, therapists, and students with this transition to online learning and seclusion. To ensure that our students remain engaged and supported, our therapists are providing complimentary “Support Sessions” to the country’s youth. We are also assisting schools by training their therapists for remote therapy. Click here to learn more.