School districts struggle to draft budgets as coronavirus upends education, plunders state coffers

Wisconsin school districts are bracing for one of the toughest budget seasons in memory as the ongoing coronavirus pandemic threatens to reshape how they educate children and plunders the state coffers that fund that work.

Wednesday's announcement that state tax revenues fell about $870 million in April alone reinforced districts' fears that public schools could face a major cut in state funding for the 2020-21 school year.

At the same time, administrators are drafting spending plans with no clear understanding of when they might reopen their buildings, what potentially costly changes might be needed to keep students and staff safe, and how far federal stimulus dollars could go in offsetting their losses.

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"We're really very nervous right now. There are so many unknowns," said Deb Kerr, superintendent of the Brown Deer School District and president of the American Association of School Administrators. "Most business managers are planning for multiple scenarios."

As the 2019-20 school year winds down, districts are still determining the impact of the statewide shutdown, which forced schools to pivot to online learning, reconfigure and ramp up meal programs, print tens of thousands of paper workbooks, idle buses and in some places add or furlough workers. Although 2020-21 budgets won't be finalized until the fall when enrollment numbers come in, districts must build and roll out their preliminary plans in the midst of great uncertainties.

The challenges around those uncertainties are laid out in a new report by the Wisconsin Policy Forum, which says cuts in state aid could force school districts to slash programming or, depending on how cuts are structured, turn to their local taxpayers for more money.

Hardest hit, it said, would be districts with lower property values — large urban districts like Milwaukee and Janesville, but also many rural schools — that tend to serve higher numbers of students in poverty, students of color and students with disabilities.

"Right now, we're waiting to see what happens and looking at what we'll need to do to cover the gap in funding," said Keith Posley, superintendent of Milwaukee Public Schools, whose $1.28 billion preliminary budget was unveiled at a board committee meeting Thursday.

"But this is going to be on the backs of children. And our children need every resource they can receive," he said.

Schools in Wisconsin are funded by a combination of local, state and federal dollars. But districts are limited in how much they can raise from local taxpayers and the state's general fund by revenue caps put in place in the early 1990s after years of local property tax increases.

Before the coronavirus erupted, districts were banking on a $179 per-pupil increase in their revenue limit authority next year, under the state's 2019-21 biennial budget passed in July. But state tax revenues have fallen more than $1 billion since then, leading many to believe that a budget repair bill or other legislation aimed at cutting state funding next year is inevitable.

Menomonee Falls, which has about 4,000 students and a $40 million annual budget, has already approved its staffing plan for next year. And the deadline for layoffs and nonrenewals of contracts has already passed, said Superintendent Corey Golla. But budget cuts would likely mean no new hires and no cost-of-living raises, which have been around 2% annually in recent years.

"Our biggest fear would be our staffing," Golla said, whose business manager has been mapping out various funding scenarios. "If we got to the point where we couldn't hire people, we'd be forcing class sizes higher. You don't want to do that ever, but especially not in these conditions." 

Quantifying the unknowns

Districts also are struggling to quantify what it might cost if they have to dramatically restructure their buildings and systems to limit spreading the virus. 

What happens, for example, if there can be no more than 10 people in a room or 30 on a school bus? How do you manage lunchtime and classroom changes? Some schools are contemplating staggering school days to bring in fewer students at a time, which will affect transportation expenses; and so-called blended models that pair in-person and online instruction, which could boost technology costs. And there will likely be added costs for cleaning, supplies and efforts to monitor health conditions.

"Schools are not turnkey operations. We don't just flip the light on and walk in the door," said Kerr of Brown Deer. "We have to make sure we have PPE for all staff coming into buildings. We're looking at hand-washing stations and quarantine rooms ... the deep-cleaning of our schools and the rearrangement of classrooms. And then you have to rethink the processes for letting people — parents and others — in the building."

There are potential sources of funding that would cushion the fall for school districts. But Jason Stein, research director for the Wisconsin Policy Forum, stressed that the impacts of those are limited. 

Most districts are banking on getting at least some funding from the federal Coronavirus Aid, Relief, and Economic Security Act. Wisconsin is slated to get at least $2 billion. But states have been told they may not use those funds to fill budget shortfalls. And, there's been no indication when schools might see that money or how it would be distributed.

"They're still trying to figure out how much will be going to each district and what the conditions will be on using it," Stein said.

In addition, many districts are sitting on more cash and other assets in their reserve funds than they have in several years. According to the Wisconsin Policy Forum, districts have about $1.78 billion in unrestricted reserves, or about 17% of spending, compared with $1.38 billion, or 14.4%, in June 2012. If you add restricted reserves, they have almost $2.5 billion, or 23%.

Stein said there are legitimate reasons for maintaining healthy reserves, including limiting the need for short-term borrowing. Tapping the reserves, the Forum report said, would amount to a one-time fix and would cover only about nine weeks of spending on average.

Finally, districts that have gone to referendums for additional operating funds could tap those, though they may run afoul of taxpayers if they use funds for line items not spelled out in their ballot measures. At MPS, which will see a $57 million boost next year as a result of the April 7 election, Posley said the new funds would be used only as spelled out in the referendum.

Whether districts will be able to turn to local taxpayers to backfill their budgets will depend on how the state structures any cuts. If lawmakers slash general aid but leave revenue limits intact, districts could increase their local levies to make up those losses. But if the state cuts general aid while also lowering the revenue limits, they have no recourse. In addition, if they slash per-pupil categorical aids, money for specific uses such as transportation or special education, that funding cannot be made up by increasing local levies.

Even if they can, district officials say they are not relishing the prospect of asking local taxpayers for more money at a time when many are unemployed — or recovering from lost work — because of the economic downturn caused by the coronavirus.

"None of us would want to go down that road," said Golla, of Menomonee Falls, "knowing what our local economies look like."

Contact Annysa Johnson at anjohnson@jrn.com or 414-224-2061. Follow her on Twitter at @JSEdbeat. And join the Journal Sentinel conversation about education issues at www.facebook.com/groups/WisconsinEducation.