To limit the spread of coronavirus, public schools have been closed across North Carolina and the nation. While the closure will protect public health, the economic fallout from the pandemic will be significant and long lasting.
General Assembly Chief Economist Barry Boardman recently predicted state revenue estimates for the budget cycle ending June 2020-21 could plunge $1.5 billion to $2.5 billion below previous forecasts.
A loss of $2 billion in revenue translates to about an 8.3 percent drop in revenue for an approximately $24 billion state budget. Public schools in North Carolina receive about 63 percent of their funds from the state.[i] The $2 billion figure is only an estimate and things may indeed get even worse. But for the sake of discussion, let’s try to make these numbers real.
In 2018-19, North Carolina provided $9.44 billion in General Fund appropriations to public schools in the state.[ii] A budget reduction of 8.3 percent translates to $783.5 million dollars. What kind of impact could that have in school districts? For instance, Forsythe County Schools (FCS), received $335.1 million in state funding for local schools in FY 2018-19. State funding comprises about 64 percent of the funding FCS receives. A reduction of 8.3 percent for FCS equates to a reduction of about $27.8 million dollars. FCS could employ about 370 teachers for that amount. Some tough decisions will need to be made.
The $2.2 trillion dollar CARES Act is the federal response to the shutdown, and includes aid to states to address massive budget problems due to plummeting revenues. Of that amount, $13.2 billion is targeted to stabilize K-12 education in the fifty states. North Carolina is expected to receive about $378.4 million for K-12 education. In addition, the CARES Act also provides the nation’s governors with $3 billion in discretionary emergency relief funds to distribute to K-12 schools and colleges and universities impacted by coronavirus. Governor Roy Cooper’s office is expected to receive approximately $95.6 million in emergency relief funding. All told, North Carolina public schools will receive approximately $378.4 million and an as yet undetermined portion of the $95 million in funds distributed through the Governor’s office. The funding will certainly help but will not fill the budget hole.
The months ahead will be challenging. In addition to their own challenges, the public schools will be competing for scarce dollars with Medicaid, emergency public health, public safety and higher education.
The loss of economic activity will add to the problems. Sales taxes, a source for county revenues for the public schools will also decline. In addition to the revenue decline, schools may also see mild growth in enrollment due to a possible exodus from private schools due to job losses. Job losses may also push more families and students into poverty increasing the demand for more student services ranging from school lunch to counseling to childcare programs. Job losses may help temporarily resolve the teacher retention problem, as a poor job market means fewer teachers will leave teaching to pursue other career avenues, but also create a more experienced and thus more expensive teacher workforce at a time when there is likely to be growing demands for spending and less revenue.
So, what can North Carolina school districts do to help address these concerns? The following steps can help North Carolina school districts weather the challenges of coronavirus.
Encourage Districts to Save. Due to expected declines in revenue, the state should enable local school districts to carry over funding from the previous year. Since schools have been closed since the middle of March, school district budgets should accrue savings in several areas. Implementing a hiring freeze as well as a review of recurring costs can add to savings. Meanwhile transportation, professional development, substitute costs, utilities and afterschool care are other areas where districts should see savings. Lawmakers should incentivize school districts that successfully utilize these funds.
Lift Staffing ratios and delivery requirements. Salary and benefits comprise the largest component of school district budgets.[iv] Wake County Public Schools, the largest school district in North Carolina, spends approximately 82 percent of its operating budget on salaries and benefits. Hence the best way to help control costs is to remove cost drivers such as class size caps and staffing ratios which drive up labor costs. Such regulations are a boon for boosting the numbers of teachers and instructional staff. Is there any reason however, why local districts shouldn’t be trusted to make those decisions for themselves? Can’t a local principal decide if a highly effective math teacher could handle a few more students in her class or if the junior high really needs another media coordinator? Empowering school districts to make decisions on the number of teachers and other instructional personnel can produce savings and provide districts a greater sense of ownership of the services they provide.
Give Districts more authority and flexibility. While school districts are gaining some flexibility to deal with coronavirus outbreak, more is needed. If pay and benefits are the single largest cost drivers, districts should be empowered to try new approaches to teacher pay. Districts should have the authority to create pay schedules that tie pay — not to seniority and credentials — but to productivity and instructional effectiveness. Districts should be able to offer differential pay for hard-to-staff subjects and also offer pay for teachers who mentor other teachers. Moreover, districts need the flexibility to set their own academic calendar and determine their own academic year based on the needs of their students and communities. One way to address some of these needs is through the use of block grants. In addition to providing additional flexibility, doing so would also help to shift real decision-making authority to the local level and to officials who are more knowledgeable and familiar with local problems.
Control the Cost of Benefits. Aside from salary, the second largest cost driver for public schools is the cost of benefits. Last year, North Carolina spent $3.1 billion on employee benefits for public school staff. Ten years ago, that figure was only $2 billion.[v] Escalating costs of healthcare and retirement account for most of the increases. Savings can be achieved in both these areas. Eliminating costly healthcare plans, opting for more cafeteria type plans (which control costs) and asking employees to shoulder a larger percentage of costs are three ways to cut costs. In addition, districts can help curb rising retirement costs by urging changes in state retirement plans to make them more sustainable. One suggestion would be to consider the option of not providing pensions as a future benefit. Instead employees would have the option to choose from an array of benefit options customized to the need, age and family status of the employee. Doing so ensures the benefit plans are more attractive to employees but also allows the state to offer plans that are more financially sustainable.
Encourage Greater Productivity. Technology can greatly aid teaching and learning. Regrettably, the current moment highlights that not all school districts in North Carolina can access the same online resources or use technology effectively. Online learning in rural areas can be a game changer because it expands offerings and significantly bring down the costs of education. Districts need to work with private business and municipalities to ensure rural areas are served by broadband. Districts can advocate for less regulation, subsidies and tax incentives for companies that finish projects on time. Districts should also review local community resources and course offerings to see if a student can/should take classes at a local community college. Doing so can free up important resources and allow schools to invest in quality teachers and offer more customized instruction to students.
Coronavirus has changed the landscape of public education in North Carolina. The crisis and its aftermath create new challenges for our schools but also opportunities to make our districts more nimble, responsive and effective in serving the needs of students, parents and staff. Let’s work to make sure it’s not an opportunity wasted.
[i] Highlights of the North Carolina Public School Budget, February 2019, page 4. Published by the North Carolina Department of Public Instruction. Available online at: https://files.nc.gov/dpi/documents/fbs/resources/data/highlights/2019highlights.pdf
[iii] Calculations assumes average teacher salary of $53,975 and estimated teacher benefits of $21,610 in 2020. For the case of discussion total teacher cost was rounded to $75,000. Thus $6.8 million divided by $75,000 = 90.6 teachers.
[iv] Highlights of North Carolina Public School Budget, February 2019. Published by the North Carolina Department of Public Instruction. Available online at: https://files.nc.gov/dpi/documents/fbs/resources/data/highlights/2019highlights.pdf