Study: Schools face post-stimulus shortfalls

A stimulus funding cliff is approaching in education.
A stimulus funding cliff is approaching in education.

Using federal stimulus money to avoid layoffs at schools is going to create a shortfall even more difficult for states and schools to contend with when that money runs out, according to a government study.

New York alone will see a $2 billion shortfall after stimulus money ends in 2011-12, and that could drive up some of the nation’s highest local property taxes another 8 percent, according to the analysis by state Comptroller Thomas DiNapoli.

“This isn’t just a New York problem,” DiNapoli said in an early and detailed analysis of school aid after federal stimulus funds run out in 2011-12. “Other states across the country will face a similar dilemma if they used stimulus money to plug budget holes instead of paying for one-time expenses.

“Stimulus funding is not a recurring revenue; it shouldn’t be used for recurring expenses.”
A Government Accountability Office report released a week ago found 63 percent of states in a representative sample planned to use 50 percent of their school stimulus money to retain jobs. Other uses were nonrecurring items including equipment.

In July, the GAO cautioned that many states facing deep deficits were using stimulus dollars to fill budget holes and avoid layoffs, rather than reforms that could mean longer-term savings or programs such as building new schools.

The U.S. Education Department (ED) encouraged schools to diversify the use of stimulus money to ward off huge budget gaps when it runs out, said spokeswoman Sandra Abrevaya.

“When one saves a job, it doesn’t mean one saves it indefinitely,” she said.

In California, the stimulus was credited with saving or creating 62,000 jobs in public schools and state universities. Utah reported saving about 2,600 teaching jobs. In both states, education jobs represented about two-thirds of the total number of jobs said to be created or saved by the stimulus. Missouri reported more than 8,500 school jobs, Minnesota more than 5,900. In Michigan, where officials said 19,500 jobs have been saved or created, three out of four were in education.

The Congressional Budget Office has noted the difficulty of measuring the number of jobs saved by the stimulus. “It is impossible to determine how many of the reported jobs would have existed in the absence of the stimulus package,” a CBO report said last month.

The early public warning mirrors internal worries among state budget officers nationwide.

“They have to manage through the decline and end of the Recovery Act funds, but they know it’s unlikely that improved revenues–if they improve–can cover the recovery fund amounts,” said Scott Pattison, executive director of the National Association of Business Officers.

The post-stimulus era is often called “the cliff.”

In Pennsylvania, ED spokesman Michael Race says the cliff was considered in budget negotiations as a consequence of using the federal money. He says it’s difficult right now to give a specific answer about a funding drop-off since many variables have yet to play out, such as how much the governor will propose to increase school funding, and whether state revenues recover.

Though Washington is talking about another federal stimulus package, states and schools aren’t expected to get another infusion of cash. But school advocates in New York have already starting to prepare a case that schools will need more federal money.

School districts faced with raising taxes to make up for stimulus money “are going to have to put together some contingency plans,” said B. Jason Brooks, director of research and communications for the Foundation for Education Reform & Accountability, a think tank.

“There may be massive teacher layoffs,” he added.

And the future may be even darker. Depressed housing values–which lag about three years behind a recession–will hurt the ability of schools and local governments to raise tax revenue, said Michael Petrilli of the Thomas B. Fordham Institute, an education think tank in Washington.

“The question is, is this the new normal?” he asked. “Schools need to get used to the idea that lean times are here and they are here to stay.”

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