An end to federal Covid relief funds, declining enrollment, staff raises, hiring increases, and stagnant state funding are expected to lead to significant budget shortfalls in California schools, particularly affecting low-income districts.

The impact of these budget shortfalls will vary, with districts that received the most Covid relief dollars and those with the highest number of low-income students facing the biggest challenges, according to Marguerite Roza, director of the Edunomics Lab at Georgetown University.

Governor Gavin Newsom’s budget proposal in January aimed to protect schools from major cuts, maintaining popular initiatives like transitional kindergarten, universal school meals, community schools, and after-school programs. To address a projected multi-billion-dollar shortfall, Newsom proposed using reserves and delaying some expenses.

However, the Legislative Analyst’s Office has suggested that the shortfall may be larger than estimated, and cuts may be inevitable. Newsom is set to release a revised budget in May, with the Legislature having until June 15 to pass a final budget.

Meanwhile, federal Covid relief funding for schools is set to end in September. California schools received $23.4 billion through grants known as Elementary and Secondary School Emergency Relief, which funded various expenses such as air purifiers and after-school tutoring. This funding was distributed based on the number of low-income students in each district, meaning districts with higher numbers of low-income students will be most affected by its end.

Initially, schools used the funds for one-time expenses like tablets and Wi-Fi hotspots for remote learning. However, as schools reopened, the focus shifted to ongoing programs to help students catch up academically and address mental health challenges. These programs include tutors, longer school days, and summer and after-school programs. For example, San Bernardino City Unified used $8 million of its $230 million in Covid relief funds to enhance its after-school program, offering free activities, tutoring, transportation, and mental health support at every school. Mia Cooper, a parent with three children in the district, praised the after-school program for its positive impact on her children’s academic and personal development, emphasizing the importance of maintaining such programs despite budget challenges.

But some districts’ use of Covid relief funds could worsen their budget prospects, Roza said. Districts that used one-time funds for ongoing expenses, such as new staff, raises, and bonuses, might face difficulties. Nationwide, school staff increased by 2% since the pandemic, while enrollment decreased by 2%, according to Georgetown’s Edunomics Lab.

Salaries for existing teachers have also risen. Districts in San Francisco, Oakland, San Diego, and Los Angeles, all experiencing declining enrollment, agreed to substantial teacher raises and bonuses in the past year.

However, the fiscal outlook is not as dire as during the 2008 recession, said Julien Lafortune, a research fellow at the Public Policy Institute of California. School funding in California has increased significantly since then, lifting the state from the bottom half of states in school funding to above the national average. Additionally, the state’s shift to the Local Control Funding Formula a decade ago has provided more funding for students with higher needs, although inequities persist.

But these cuts will still have an impact, especially on students most affected by the pandemic, such as low-income, Black, and Latino students. These groups were disproportionately affected by school closures, lacking adequate technology at home and parental support for distance learning.

Roza is concerned that debates over potential cuts will overshadow concerns about learning loss. While school closures and teacher layoffs may provoke strong protests, school boards should prioritize services that directly benefit students, such as math tutoring and literacy programs.

“Some districts will focus on staff retention instead of children’s needs,” Roza said.

These decisions could be so divisive that Roza predicts a high turnover rate among school administrators and board members unwilling to make unpopular decisions. Some districts may also refuse to make sufficient cuts, risking insolvency or state takeover.

Planning pays off in Fresno

Fresno Unified, facing declining enrollment and a large loss of relief funds, received over $787 million in state and federal relief money, one of the largest allotments in California.

The district, however, was cautious, building reserves, relying on state grants when possible, and not overly investing in ongoing staff salaries. Instead, it used most of its funds to train teachers in math and literacy, extend the school day, and provide a high-quality summer program. It also hired social workers, restorative justice counselors, attendance specialists, and other staff to improve students’ mental health.

These investments seem to have paid off. The number of students meeting California’s math benchmark increased by almost 3 percentage points last year, while chronic absenteeism fell significantly, from 51% in 2022 to 35% last year. Nonetheless, the district expects to make some cuts, likely affecting the district office but not schools directly – at least initially, according to Patrick Jensen, the district’s chief financial officer.

“It’s like we’re in a boat and can see a storm coming,” Jensen said. “We’re not going to be dashed against the rocks, but we still need to find a safe harbor.”

San Bernardino City Unified, one of California’s lowest-income districts, also received a significant relief funding payout: $230 million for 46,000 students. However, the district does not anticipate a financial disaster once the funding expires. It plans to shift some of its state block grant money to fund programs currently supported by relief funds and has been conservative in its planning. The district is also closely monitoring the state budget and economic outlook, said Associate Superintendent Terry Comnick.

Nonetheless, some cuts are likely, and the district will need to evaluate the effectiveness of its programs. In addition to the successful after-school program, a “resident guest teacher” program had positive results. The district hired substitute teachers to work one-on-one or in small groups with students who were falling behind. This $4.5 million program, implemented in every school, resulted in higher test scores among the neediest students.

So far, it appears that the district will be able to maintain both programs for the next few years, according to Comnick.

“People call it an ‘Elementary and Secondary School Emergency Relief’ cliff because the money just ends,” Comnick said. “But for us, it will hopefully be a gentle slope.”