How Prepared Is Your School District for the Coming Fiscal Cliff?

Education experts discuss severe school budget cuts coming in 2024 and how districts can prepare now.

In Polco’s recent webinar, leaders from all areas of K-12 education weigh-in on what the upcoming budget shortfall looks like from their unique perspectives.

“We have a fiscal cliff coming. We've been able to see it for a while,” said Marguerite Roza, Research Professor and Director of the Edunomics Lab.

For the past few years, schools have had extra funding from federal grants. However, during the 2024/2025 school year, school districts will face the biggest financial hit in recent history. 

Elementary and Secondary School Emergency Relief (ESSER) funds that have buoyed education budgets for the past few years will end abruptly. Roza says they are most worried about districts that used ESSER funds for recurring financial commitments. Additionally, there are dipping enrollment numbers due to declining birth rates. Urban districts are particularly at risk. Moreover, high inflation and a slowing economy mean less funding for schools.

Roza says when schools don’t prepare, they make rushed cuts, like postponing maintenance. This escalates to postponed raises, changes in benefits, and furloughs. Finally, they have to make larger staff layoffs, including laying off core teachers.

“That's what it looks like when it's hurried. But this time we actually have some time because we could see this coming,” she says.

When the finance team presents next year's budget to the school board, they will have to start negotiating difficult trade-offs. Will this mean leaner dental and vision plans, a reduction in force, ending the school year early, or other potential cuts?

Starting the conversation early, with resident input, can help align stakeholders on the most important priorities. So when cuts happen, there is more collaboration and support.

Smarter School Spending Framework Best Practices

To help address the looming budget issue, Carol MacLeod, a senior project manager for the Government Finance Officers Association (GFOA), lays out some of the most important steps in the Smarter School Spending Framework. The Smarter School Spending Framework is a GFOA initiative that develops strategies to align resources with student goals. She says that keeping student success as the most important priority will help districts align their goals.

Key Steps in the Smarter School Spending Project Initiative

• Establish a partnership between finance and instructional leaders. Eliminate silos between departments. 
• Develop policies and principles that guide the budget process.
• Analyze your current levels of student learning. If you don't know where your students currently are, how do you determine where they need to be?
• Develop a communication strategy. Clarify your message, define your audience, identify your messengers, tell your story, or someone else will.

“Also vital to your district is to know your own data. Most districts believe that their budget is aligned with the goals and objectives outlined in their strategic plan. There's a very good chance this is an incorrect statement,” MacLeod says. “An honest and thorough evaluation of where funds are currently being spent is essential to determining what changes you may want to make.”

What Budget Cuts Look Like at the Classroom Level

It’s easy to discuss budget cuts without understanding how they truly impact the classroom. That's why Mark Sass, a former teacher of 26 years who is now the Executive Director of Teach Plus Colorado, says it’s important to get teachers involved in these conversations. It’s also essential that teachers share this information with parents so they understand the reasons behind their decisions.

In his last year of teaching US history, his classroom was made up of 34 students with a variety of needs. Gifted and talented students required a different curriculum than their peers. Some students had hearing impairments, while others needed extra attention. One student was an immigrant who didn’t speak English and had a 3rd-grade writing level. Another student was from Thailand and spoke international sign language. The only interpreter available to the school spoke American sign.

“I'm hoping you understand how it is when we start to make decisions about fewer case managers, fewer deans, how that impacts the teacher in the classroom,” Sass says. “It's important for these stories to get out to the public to understand why these situations and these conversations that we're having are so difficult.”

Sass also notes that typical school district policies are “last in, first out,” meaning the most recent hires are the first to get laid off. He says many of these new teachers are a result of the equity and diversity push in schools in recent years. So laying off the “last in” will undo some of that work.

He stresses that, for these reasons, teachers need to be involved in the conversation with these decisions. And why teachers should be talking to parents, not administrators.

“When you put teachers in front of parents, you start to build trust,” he says. “We need more than ever to really focus on the trust between the practitioners and the institutions so that they trust that we're making the right decisions.”

Left: Cherry Creek School District presents budget prioritization results to the community. Right: Cherry Creek parents use Balancing Act's Budget simulation tool to prioritize school funding priorities.

How to Get Residents Involved in Prioritizing Budget Cuts

With all these challenges, one may wonder how to get parents and stakeholders involved in prioritization and decision-making. There are new tools that simplify the budgeting process and show your community what options are available.

For example, the Cherry Creek School District, a district in the suburb of Denver known for its excellence, had a $50 million structural deficit. David Hart, former Cherry Creek School District CFO and current  Los Angeles Unified School District CFO, and 70 other district leaders met to discuss their potential options. They used Balancing Act’s Budget Simulation software to show district leaders the potential impact of various decisions.

The simulation allows participants to add or reduce costs in certain areas based on the school's income and revenue. They could decrease the staffing ratio, mental health resources, salary and benefit increases to eventually break even. They could also see how they can increase their revenue. For instance, a $60 per year mill levy per $400,000 home in Cherry Creek would give the school an extra $2 million.

“It's giving people who are not professional budgeters, who are not professional administrators, a vantage point into what's at stake and letting them see what the costs associated are with each of these options and letting them help make those trade-offs,” said Chris Adams, Balancing Act from Polco’s founder and CEO.

Cherry Creek School District ended up passing that mill levy to keep the services they value. The school district also presented their decision to 700 community members in an auditorium to get approval from the public. The district also had parents go through the same exercise.

Hart notes: “It’s very difficult to revenue your way out of a problem in certain communities. Cherry Creek is one where passing an election is thought to be probable… That is not uniformly the case. I would suggest most districts have trouble. And so part of that is how do you do more with less–a common phrase, but difficult to achieve.”

Budget Solutions for Your School District

Make the most of limited funds and maintain high-quality education and services in the face of budget cuts. Polco's K-12 Fiscal Cliff Package, including the Balancing Act by Polco Budget Simulation, can help.

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