Now that schools are a few months into the academic year, many school districts are starting to plan for next year’s budget. You may be thinking, this school year has just begun! Why are we already planning for the next one?
School districts spend nearly the entire year creating the next year’s budget, from projecting how much money they’ll have to spend in the fall to voting on it in the spring. There is a lot of planning that goes into the creation of the budget and though few understand what the process looks like, there are important differences this year that will impact a lot of students. Let’s dig into it.
How are schools funded?
School districts receive the bulk of their funding — approximately 90% — from state and local sources such as state budget allocations and local property taxes. The state and local shares of the overall pot vary by state, and part of the state’s role is to estimate each district’s ability to contribute monetarily and develop a funding formula that ensures that districts and students have equitable access to resources throughout the state.
The remaining 10% of a district’s budget comes from federal sources through different title programs. You may have heard of Title I, which provides funds for schools serving economically disadvantaged students.
What does funding look like for the next school year?
Nationwide, many districts will need to make difficult decisions about budget cuts for the 2025-26 school year. This is because the education system is facing fiscal cliffs from all sides after a few years of budget increases.
During the pandemic, federal funding for education rose significantly through Congress’ approval of nearly $200 billion in pandemic recovery aid (ESSER funds). This was the largest one-time federal investment in K-12 schools in the history of the United States, representing 13.7% of all funding that K-12 schools received in the 2021-22 school year compared to the usual 10%. Districts had broad discretion in how they spent these dollars, and those funds officially expired in September. And while districts grapple with the loss of this federal funding, they also must deal with the fact that state and local funding for K-12 education decreased during the pandemic by an average of 2.3%.
What’s the issue?
These funding changes make for a perfect storm in the education world. For many districts, adjusting to a budget decrease isn’t as simple as cutting a little-used extracurricular program. District budgets are difficult to adapt to dramatic fluctuations in the budget because the majority pays for recurring costs. About 80% of a district’s budgetgoes to staff salaries and benefits. In some cases, this even includes pensions for retirees of the district.
Research shows that since the 2016-17 school year, districts nationwide have seen a 4.7% increase in staffing, including adding 159,000 employees in 2022-23. Nearly 50% of ESSER funds went to labor costs such as hiring new teachers and salary increases. In contrast, schools have seen a 2.1% decrease in student enrollment during that time.
What can we do?
Our "Looking Back to Look Forward" report from last year highlighted research connecting spending to positive student outcomes, particularly when spent wisely on high-impact interventions that yield big returns on student outcomes. As taxpayers in the education system and the employers of its graduates, businesses have a vested interest in ensuring that school districts preserve these elements of their system. Business leaders should engage the community in helping them understand the scope of the fiscal cliff in their communities and advocate for the programs that are best for students, while cutting costs on things that don’t yield better results. This could include calling for more research on how specific interventions have or have not made an impact on student achievement.
Businesses should also consider donating to K-12 education as part of their corporate giving strategies. The U.S. Chamber of Commerce Foundation recently hosted our annual Business Solves conference exploring how business leaders can work to support a more sustainable and resilient future. During the keynote session, Dr. Tom Kane, faculty director of the Center for Education Policy Research at Harvard University, and Andy Rotherham, Virginia State Board of Education member and co-founder of Bellwether Education Partners, urged the audience to do just that. Currently, corporate giving in K-12 education totals approximately $4.4 billion, and businesses should consider strategic investments in interventions that move the needle on student achievement.
Take Creature Comforts Brewing Co., winner of the 2024 Citizens Award for Best Community Improvement Program for their Get Comfortable program. This community giving program partners local businesses, leaders, schools and community organizations to improve early literacy and proficiency in Athens, Georgia. Through these collaborative partnerships, we can create powerful solutions for education's funding challenges. Together, we can ensure our students have the resources they need to succeed.
About the authors
Kyle Butler
Kyle Butler is senior manager of K-12 education programs at the U.S. Chamber of Commerce Foundation.
