Schools face cliff as education money dries up

[April 06, 2011]  NEW YORK (AP) -- As lawmakers around the country debate their states' budgets, they're staring over the edge of a massive fiscal cliff -- the point where about $100 billion in federal stimulus money for education will run out.

The end of that money will compound states' severe budget woes and likely lead to thousands of layoffs and the elimination of popular school programs around the country.

The bulk of the money, part of $814 billion provided under the American Recovery and Reinvestment Act passed in 2009, went to save the jobs of teachers and other school employees, as state and local revenue dried up during the prolonged economic downturn. Lawmakers in many states drew criticism for making deep cuts in state education spending and replacing the money with stimulus dollars, thus avoiding cuts elsewhere in their budgets.

States are required to have spent most of their education stimulus money by September, and most will burn through it by the end of the current academic year, budget officials say.

And while state economies are showing signs of life, tax revenue is not increasing fast enough to make up the loss.

"It's not like that money was the icing on the cake," said Michael Griffith, a senior policy analyst at the Education Commission of the States, in Denver. "It was the cake."

Officials in some states saw the cliff coming from the start and encouraged districts to use stimulus money in ways that would not produce ongoing costs they could not cover when the emergency aid ran out, such as temporary tutors or improvements to buildings to make them more accessible for students with disabilities.

"There was a lot of caution about people employing folks, because when that money is gone, it's gone," said Ray Lankford, Missouri's Deputy Commissioner of Education. "A lot of them did program improvements and short-term employment to address specific issues."

While Congress tried to cushion the blow for states through its approval last year of a $10 billion Education Jobs Fund, state officials say that money is not enough to replace the lost stimulus dollars.

The situation is compounded by a reluctance to raise taxes in many states.

In Florida, freshman Republican Gov. Rick Scott's budget for fiscal 2011-12 would cut state K-12 spending from $17.3 billion to $16.5 billion, a decrease of about 5 percent. The end of $872 million in stimulus money would boost that cut to roughly 10 percent compared with the current year.

The combined weight of those state and federal cuts would force Florida's Volusia County school district to cut an estimated 900 employees, said Margaret A. Smith, the system's superintendent. The 62,000-student district has cut 1,500 positions and $75 million from its budget in the past two years.

Further cuts will hit programs in art, music, and physical education, as well as extracurricular and sports programs, she said.

In Ohio, Gov. John Kasich has proposed increasing state aid for schools by 1 percent to 2 percent for each of the next two years. The evaporation of federal stimulus money will mean a net decrease of 5 percent to 6 percent below current levels, said David Varda, the executive director of the Ohio Association of School Business Officials.

Of about $100 billion in total education-focused stimulus aid, about $79 billion was devoted to K-12 programs. The biggest chunk went to help states restore school programs cut because of the recession. Smaller portions went to special education programs and federal Title I programs for poor children.

The stimulus money also paid for competitive programs aimed at fueling innovative reforms, most notably the $4.35 billion Race to the Top program.

But the vast majority of the money was designed to save jobs. The U.S. Department of Education has estimated that the stimulus funds saved some 368,000 school-related jobs during the 2009-10 school year.

Education is "a worker-intensive business," Griffith said. "If you're cutting positions, you're cutting programs."

In Tennessee, districts used the federal money in part to add employees, particularly instructional and curricular coaches, said Amanda Anderson, a spokeswoman for the state Department of Education.

Massachusetts strongly encouraged districts to use at least 50 percent of their Title I money on "strategic investments" that would leave long-term benefits for students, said J.C. Considine, a spokesman for the state Department of Elementary and Secondary Education.

Wyoming, a state insulated from much of the recent economic pain by its strong energy industry, is actually planning to return $10 million of the $82 million in stabilization money, said Jeanne Norman of the state's Office of State Lands and Investments.

A few Wyoming districts have used stimulus money to pay for teaching jobs, but more of them have spent it on computer software, student programs, and building maintenance.

Idaho's stimulus funding saved jobs and restored work days that school employees were going to take off through furloughs, said Melissa McGrath, a spokeswoman for the state Education Department. But districts also bought classroom materials, computer software and remediation services for students, which will help in the post-stimulus era, she said.

Nearly every state will use the $10 billion Education Jobs Fund approved last year to make up for the loss of stimulus money. One exception is South Carolina, which did not receive its $140 million share because of large cuts the state made to higher education, which violated the law's requirement to maintain spending in that area.

Texas has seen a much larger chunk of jobs aid, $830 million, blocked because state officials have not been able to promise they would meet congressional rules for maintaining future K-12 spending. The 2010 stimulus requires assurances that the state won't cut its own education spending in response to the federal money, and Texas has taken that requirement to federal court.

The state faces an estimated $27 billion, two-year budget shortfall that could cost as many as 65,000 school employees their jobs, the Texas Association of School Administrators estimates.

States that have received education jobs money appear to be on very different schedules for spending it -- which by law they can do this academic year or next.

Missouri has not yet spent any of its $190 million share but is counting on it to make up for shrunken state revenues and the stimulus gap, as is New Jersey, which saved its share to cover the coming academic year.

In Idaho, 50 of the 115 school districts have drawn down a combined $5 million of the state's $51.6 million allotment. State officials have proposed K-12 budget cuts for next year, so the remaining money is expected to help make up some of the loss. Massachusetts' school districts so far have spent about half the state's $204 million jobs money.

Iowa will receive $97 million through the federal Education Jobs Fund. But that's small compared with the stimulus money that saved an estimated 3,500 jobs, said Jeff Berger, the chief financial officer and government-relations coordinator for the state Education Department.

[Associated Press; By SEAN CAVANAGH and HEATHER HOLLINGSWORTH]

Cavanagh reported from Washington, and Hollingsworth reported from Kansas City, Mo. Also contributing to this report were Associated Press writers Geoff Mulvihill in Trenton, N.J.; Jessie L. Bonner in Boise, Idaho; Bob Moen in Cheyenne, Wyo.; Steve LeBlanc in Boston; and Seanna Adcox in Columbia, S.C.; and Education Week Assistant Editor Michele McNeil.

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