Schools brace for budget cuts as the coronavirus wreaks havoc on the economy

The Upper Darby School District was hoping to invest next year in its elementary schools, with a plan to hire more reading specialists and guidance counselors for its youngest students.

That was before the coronavirus. Now the Delaware County district is scaling back those plans while it prepares for a blow to its budget.

"To know all the hard work we’ve done might be wiped away … is difficult,” said Superintendent Dan McGarry.

Districts like Upper Darby have spent years rebuilding from the Great Recession, which hit school budgets a decade ago. To make ends meet in Philadelphia, for instance, administrators slashed programs and laid off thousands of employees, including teachers, school nurses, aides, and every guidance counselor, secretary, and assistant principal in the system. Elsewhere, extracurriculars were cut and programs lost; class sizes swelled and support programs were gutted. Some districts have still not fully recovered.

The coming economic storm could ultimately be worse, experts say.

School systems in the thick of budget season are now scrambling to avoid bleak scenarios as the pandemic pushes the economy south, jeopardizing budgets that must be passed by June 30.

The economy’s rapid slide has created uncertainty for leaders who had prepared initial budgets for next year based on local and state revenues projected pre-coronavirus. Now, with businesses closed and unemployment skyrocketing — imperiling tax collections — no one is sure what to expect.

“We know something’s coming. We just don’t know what,” said Cara Michaels, business manager for the Cheltenham School District, which is projecting a $5 million to $6 million hole in its $122 million plan, up from $2 million before the outbreak.

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Budget forecasters have predicted states could take big hits in revenue as a result of the coronavirus slowdown — possibly upward of 15%, said Mike Griffith, senior school finance researcher and policy analyst at the Learning Policy Institute. Pennsylvania’s Independent Fiscal Office has projected a revenue shortfall of up to $4 billion this year and next due to declines in income and sales taxes; Gov. Tom Wolf’s spending plan for next year is about $36 billion.

Compared with the recession a decade prior, when education spending by states fell by 8%, the projected losses are “massive,” Griffith said. And unlike the last recession — which took years to unfold — ”it’s happening immediately.”

A 15% cut to state education funding next year with no additional federal stimulus beyond the CARES Act could mean the loss of more than 300,000 teaching jobs nationwide, or 8% of teachers, according to an analysis by Griffith. That’s triple the teachers lost in the last recession, he said.

In Pennsylvania, more than 9,000, or 6% of teaching positions could be cut, and more than 10,000, or 7% in New Jersey, Griffith’s analysis shows.

State revenue cuts will most hurt poorer school districts — like Philadelphia — which rely more heavily on that funding. Wealthier districts can raise more money through local property taxes, which tend to be more stable than state sales or income tax collections.

» READ MORE: As coronavirus closes schools, wealthier districts send laptops home with students. What about poorer districts?

But Pennsylvania school officials said they’re worried about local revenue losses. Some districts are anticipating netting less from local earned income and property taxes and real estate transfers.

School districts could lose from $860 million to more than $1 billion in local revenue next year, according to an analysis by the Pennsylvania Association of School Business Officials. That would amount to a 4% to 5% loss in total local revenue — which could be complicated further if lawmakers freeze property taxes.

Districts “are going to be very challenged,” said Hannah Barrick, the association’s assistant executive director. While Pennsylvania will get money from the CARES Act, it’s unclear how the state will use it, and what it means for schools, Barrick said. The federal money isn’t expected to cover district losses.

Aside from the coronavirus, many districts already faced budget pressures. The Pitman School District in Gloucester County, which has seen state aid shrink as New Jersey redistributes funding, has been reconfiguring elementary schools and had planned to outsource cafeteria operations to save money.

“I feel much more in the dark about this year,” said Pitman Superintendent Patrick McAleer. “There’s no template for this.”

Pitman is already losing its high school golf program; now McAleer is worried about freshman sports.

In Pennsylvania, costs for special education services and pension payments have risen faster than state aid in recent years — as have district payments to charter schools. The latter has been a point of contention for district leaders, who have been pressing lawmakers for changes to the funding formula.

» READ MORE: Wolf pushing charter-school bill that would change funding, accountability rules

Under the current formula, if school districts lose money next year, they will still have to pay charters the same rate per student, Barrick said. “They’re not going to be impacted at all,” she said. Charter advocates say funding changes could lead to deep cuts for those students.

School leaders are also pushing for more federal money — and advocating that it not simply replace lost state funding for education, as during the last recession. When that stimulus money ran out, budget holes opened.

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The coronavirus has upended the financial picture in Philadelphia, which prior to the pandemic planned a $3.4 billion 2020-21 budget with a $167 million fund balance.

Now, Pennsylvania’s largest school system is projecting a $38 million budget gap and a $1 billion deficit over five years — and that doesn’t take into account any pay increases for the district’s two largest unions, whose contracts expire this summer.

The pandemic, Superintendent William R. Hite Jr. said, “has the potential to erase all of the progress we have made over the last eight years.”

The district also expects to lose more than $60 million this fiscal year because of losses from the city’s liquor by the drink and use and occupancy taxes and decreased property tax collections.

With school buildings closed, “everybody thinks we’re just saving millions and millions of dollars,” said Michaels, Cheltenham’s business manager. That’s just not true, she said: “Every single one of our employees is still getting paid right now," a state requirement.

Salaries and benefits form the bulk of district budgets. Cheltenham has saved money by not filling vacant positions and is trying to balance its budget without cutting staff, Michaels said.

At the same time, it’s anticipating new costs — like more support for children over the summer following the abrupt shift to remote learning.

Upper Darby has saved on substitute teachers, said McGarry, the superintendent — but the savings will likely be used to offset costs for technology and professional development.

It also has to account for uncertainty next year: While it doesn’t know whether school buildings will reopen, it still has to budget for transportation, for instance. And more students may enroll if private-school families can no longer afford tuition, McGarry said.

The district has reduced its proposed property tax increase, knowing residents are struggling. But it’s facing pressure to cut it further, McGarry said.

"Our game plan is to not repeat history,” McGarry said, recalling the cuts of the last recession. He doesn’t want to create panic. But “we’re aware of the worst-case scenario. We’re preparing.”