McConnell and Pelosi are back on speaking terms discussing the stimulus package, and many are hoping they reach a deal before the looming December 11 deadline to avoid a government shutdown. Bipartisan support is growing for a compromise $908 billion aid bill that is big, sweeping, what some describe as comprehensive. Congressional Democratic leaders have backed away from the $2.2 trillion HEROES Act relief package passed by the House in October. McConnell is pushing for a smaller $500 billion relief package that would include aid for education but not for state and local governments. While McConnell prefers a smaller, targeted relief package, he has left the door open to the compromise bill, which includes $82 billion for education and $160 billion for state and local governments. For the nation’s schools, federal education aid without aid for state and local governments would be ineffective.

School funding in the United States for public preK-12, totaling nearly $760 billion in 2019, comes from three levels of government -- roughly 8% federal and 45-47% from each state and local. Local funding from property tax is stable given that property tax rolls tend to lag changes in home values by two to three years. Federal funding over the last several decades has been relatively steady in the 8 to 10% range, with the exception of 2009 when the federal government contributed $100 billion in education aid following the Great Recession -- six times more than the $16.5 billion to date in CARES Act funding for education. In the 2009 stimulus package, the federal government also provided $145 billion to states to fill their budget gaps, along with additional funding for infrastructure and other programs.

State funding, of the three sources of education funding, is the most susceptible to macro-economic swings. State revenues depend on personal and corporate income tax and sales tax -- all of which are negatively impacted by the spring shutdown of the economy and the continuing effects of the pandemic. Most states experienced a decline in revenues for fiscal year 2020 for the first time since the Great Recession and 2021 state revenues are expected to decline even further. As COVID-19 surges across the country, rolling business restrictions will continue to impact state revenues. The National Association of State Budget Officers reports that governors across the country are directing state agencies to plan for budget cuts of as much as 15% for 2021 and 2022.

State education budgets had barely recovered from the Great Recession when the COVID-19 pandemic hit in the spring, forcing districts to close schools, pivot to remote and hybrid learning models, try to connect with children who lacked digital access, and feed children in districts serving vulnerable populations. In the fall, schools across the country began to operate under in-person, remote and hybrid models, with state-level guidance often dictated by partisan politics, rather than public health metrics. While the message from the Trump administration was “open the schools -- full speed ahead”, many districts that had reopened their schools for in-person instruction are closing them again. As with business restrictions, we are certain to see rolling school closures for the rest of the current academic year.

School districts, public universities and community colleges need PPE and public health supports to operate in person, devices and broadband access to operate remotely, and all that and more, including additional teachers, to operate in a hybrid model. Adapting curriculum to new platforms and professional development for teachers who must deliver that curriculum is costly. Buildings still need to be maintained, whether or not they are occupied. Operating our nation’s schools through the pandemic simply costs more money. Because school funding is tied to enrollment, enrollment declines will lead to funding declines, further straining already strained education budgets. Homeschooling is expected to jump from 3-4% of the total K-12 population in the 2019-20 school year to the mid-teens in the 2020-21 school year. The Center for American Progress reports that, “various education advocacy groups have put forward estimates -- ranging from more than $100 billion to about $250 billion -- regarding how much money is needed to stabilize state and local K-12 budgets; close gaps in remote learning; provide students with mental, physical, and academic supports; and provide a safe school environment for educators and students should schools reopen.”

School funding in Texas since the Great Recession provides a cautionary tale. In the Great Recession, Texas used federal aid to stave off cuts in education funding only to cut the state education budget by $5.4 billion in 2011, or approximately 6% of the education budget, harming low-income and special needs students the most. The 2011 state budget cut to education led to years of school finance litigation, the settlement of which included an increase in state funding for education in the 2019-21 biennium budget of $11.6 billion to $65.7 billion. Texas state taxes were also cut in 2019 on the assumption of continued economic growth. In response to the pandemic and a 9.5% decline in state revenues, Governor Abbott ordered 5% budget cuts across the board in 2020 but exempted the state education budget. However, the state used its $1.2 billion in CARES Act education relief to fill a portion of the state education budget shortfall. So, while the Texas Education Authority claimed it was fully funding the state schools, public education advocates claimed that Texas schools did not get their anticipated additional pandemic relief funds. Texas educators have reason for concern -- by 2016, inflation-adjusted average per pupil spending in Texas was still below 2008 levels, and Texas still spends less per pupil than the national average, ranking 36thamong the states, and spending less than other states in the south. On the 2019 NAEP, Texas ranked 46th in eighth grade reading and 32nd in eighth grade math.

While Majority Leader McConnell, in an August Senate speech, referred to aid to states as a “slush fund”, only the federal government can provide state and local governments the aid they need to satisfy the demand for public goods and services during this time of crisis. States are prohibited by law from deficit spending -- they operate under balanced budget requirements. The offset of federal aid against state budget cuts is happening across the country. Federal aid for education is essential, but insufficient without aid to the states and localities upon which they depend for the lion’s share of their funding. State budgets need to cover not only increased education costs, but also increased Medicaid, public assistance, infrastructure and other costs. As a nation, if we fail to invest in our children, we will pay the price for years to come in reduced academic achievement, which, in turn, will reduce national income and wealth and increase income and wealth inequality. The Brookings Institute and the World Bank predict that the U.S. loss in future earnings from the spring COVID-19 learning loss alone will be in the trillions. We need to fully fund our nation’s education system, not give with one hand while taking away with the other.

About the Author:

Julie Allen is a 2020-21 Harvard Advanced Leadership Initiative Senior Fellow. Ms. Allen had a distinguished career in corporate law, focusing on capital markets, and public company M&A transactions and boardroom governance and counsel. Most recently, she was a senior partner at Proskauer Rose. She currently serves as Chair of the Board of Directors of Read Ahead, a reading-based mentoring organization serving NYC public school children, and a member of the Advisory Board of the Harvard Kennedy School Carr Center for Human Rights Policy.