Fresh Perspectives on Funding…A Look Inside State and Federal Funds in 2012 and Beyond
— Friday, February 24, 2012In a recent MDR Webinar, Fresh Perspectives on Funding…A Look Inside State and Federal Funds in 2012 and Beyond, Anne Wujcik, MDR’s Senior Education Research Analyst, and Michael Griffith, a state funding expert with the Education Commission of the States (ECS), provided an update of the 2012 federal budget and the changes in store for 2013 as well as an overview of the state funding situation. Read on for highlights from the webinar and for tips on how to focus on areas that are your best opportunities.
Opportunities in the New Normal
While the economy is showing signs of recovery, we are still in the early days with a long road ahead. The fact is: federal education funding has been flat for the past five years and is likely to continue at near current levels for the foreseeable future, though the possibility of really significant cuts continues to loom.
If you have figured out how to keep going and find opportunities in what is likely the new normal, you are well positioned for the coming years. You are already doing more with less, while schools are still struggling with the realization that what they have now may be what they have, period!
Despite all the sound and fury getting there, the 2012 budget we are currently working under included only a small cut in education spending and some programs actually saw small increases. The Administration’s 2013 budget request for the Department of Education was up $1.7 million (2.5%). This was something of a surprise and an indication of the importance of this issue to the President in a year when there is strong pressure for no spending increases.
ESEA Reauthorization and What to Watch
With large gaps still existing between the House, Senate, and White House versions of the ESEA bill, we are unlikely to see reauthorization this year; the most likely outcome is reauthorization after mid-2013 once the election results have settled. In the meantime, interest in waivers remains strong. Eleven states applied for waivers during the first round, and all were granted, with the next round of waiver submissions due by February 28.
In regard to ESEA and the federal budget, we recommend keeping these issues on your radar screen but to not let them become a distraction.
Tip: Focus on the states that are recovering, the programs that are funded, and the rules as they are currently written.
Race to the Top Keeps Racing
One of the areas that saw increases in the 2013 budget request was Race to the Top, which in 2013 will include districts in addition to states. Areas of increased funding in the President’s budget request are:
- $850 million for Race to the Top
- $100 million for Promise Neighborhoods
- $100 million to be restored to the Teacher Incentive Fund
- Increased funding for statewide longitudinal data systems, which has been a successful program
What may seem to be large increases for certain programs, such as Safe and Drug-Free Schools, are actually the result of a rolling up of smaller, targeted programs into larger umbrella programs with more flexible funding streams, giving schools the freedom to use the money for any goal as long as it falls within the goal of the larger program.
Note that the Administration is renaming programs to align with the ESEA reauthorization blueprint, but Congress is continuing to appropriate funds using the old names.
Tip: If you rely on any of the smaller programs that have been targeted for consolidation or renamed in this way, you need to pay attention to where these programs now reside as the budget process moves forward.
Striving Reader Grants
Striving Reader Grants fund comprehensive programs that advance literacy skills. With $180 million in funds leftover from FY2010, the Department made six Striving Reader Grants to state agencies in Georgia, Louisiana, Montana, Texas, Nevada, and Pennsylvania. If you have literacy programs, especially for older students, this is an opportunity to pursue. You can expect to see another round of grants probably before the end of 2012.
Early Learning Challenge Grants
Nine states won a share of the $500 million Early Learning Challenge Grants, which are part of Race to the Top funding. These grants were intended to develop state capacity in creating statewide systems of Early Childhood Learning, so they tend to focus on infrastructure and systemic issues. But states will still have a need for services and programs that help them meet specific program goals:
- Defining high-quality, accountable programs
- Promoting early learning and development
- Supporting a great Early Childhood Learning workforce, i.e., professional development for people working in early childhood centers
- Measuring outcomes and progress
Most of the attention early on will be on defining the metrics of what a high-quality Early Childhood Learning program looks like.
Most states do not have a good roadmap for defining these metrics yet and may be looking for help.
Promise Neighborhoods are programs that establish wraparound services, like health, social services, community improvement, and parenting skills, which serve the wider community within which the schools are attempting to achieve performance improvements for students. The prototype for this program is the Harlem Children’s Zone.
Thirty million dollars was awarded in 2011 with another $60 million in 2012, so this is a rapidly growing program.
Tip: If you have a presence in one of the five implementation communities— Buffalo (NY), Minneapolis (MN), San Antonio (TX), Hayward (CA), and Berea (KY)—look at these applications for opportunities to partner in community activities.
Overall State Outlook Improving
The good news is that we are coming out of the worst economic downturn since the Great Depression. State budgets were hit harder in this period than at any time in the past 60 years, and states experienced an unprecedented 2 years in a row of declining tax revenue. Now we are seeing seven to eight quarters in a row of improved tax revenue. While a handful of states are not yet seeing that recovery in tax revenue—notably California—there are signs of a stronger economic recovery than anticipated.
States Playing Catch Up in Near Term
As states recover, here are some realities of the new normal at the state level:
- Local property tax revenues are in decline due to drops in property values, and these taxes make up a big portion of the revenues municipalities use to fund their school systems.
- While state budgets for FY2012 improved 2.9%, they are still $20 billion short of 2008 spending levels. Twenty-nine states have not yet returned to 2008 spending levels.
- Education spending prior to the economic downturn was the highest single budget item in most states. Now Medicaid is the leading expenditure item in every state.
- Other budget areas that were cut first and hardest during the downturn (HHS, Corrections, and Transportation) are being prioritized as general funds become available. Even as state budgets improve, there is not the extra money for education we would have anticipated.
- Education dollars, when available, are being targeted to increasing healthcare and retirement costs; filling holes in teacher pay; and addressing teacher pay freezes, layoffs, or furloughs. It is not clear how long it will take for these areas to be made whole and funding to flow again for items such as textbooks, technology, and equipment.
Specific States to Watch
California – Hit hardest by the downturn, California tax revenues have not returned, and the state has not hit bottom yet. California will continue to have financial problems even after the other 49 states have recovered.
Florida – Housing prices fell apart due to overbuilding, the state passed a property tax cut at an inopportune time, and there have been deep cuts for the past two years. The Governor has committed to an additional billion dollars for education over the next year, but if this comes to pass, remains to be seen.
Texas – Texas has the means available in its “Rainy Day Fund” to return schools to 2008-level funding. At this time, the state has continued to make cuts in education and has not accessed the fund.
Open issues that will impact states in the years to come:
- Will education funding return to pre-downturn levels?
- How reliant are states on continued levels of federal funding? Not all school districts or states are the same. States like New Mexico or West Virginia count on 15% to 20% of education funding to come from the federal government. New England states (like Connecticut, which only relies on the government for 3%) will not be impacted as badly.
- Forty-six states have committed to the Common Core Curriculum, but how many will follow-through? States like Colorado and Kentucky, who are going full-bore on Common Core, may have to start purchasing curriculum-ready textbooks now.
- Recent announcements from Apple on e-textbook authoring software and the Gates Foundation’s involvement in developing an e-textbook platform raise the question of how quickly e-textbook adoption will happen. But we expect this to be an issue of when, not if.
Bottom Line: Leveraging Your Strengths
How do you thrive in the new normal? Leverage your strengths.
Align your key products to these federal and state initiatives—or others in states where your sales reps or schools are telling you there is an initiative they are excited about. Stay close and responsive to your existing customers and also pick some new targets:
- Programs targeted to K-3 could work in preschool, a very hot prospect area.
- Explore project-based learning. Think cross-discipline and take advantage of technology to update or refresh your products.
- Support older students in the transition to higher education or the workplace. This will be another hot area.
This is not an easy world! But you have already learned to work in it, and there are opportunities to pursue.
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