Financial Uncertainty Looms As Wisconsin School Districts Plan Budgets

May 6, 2020

The COVID-19 crisis could significantly deplete state resources in Wisconsin. Gov. Tony Evers says the state could lose more than $2 billion over the next year because tax collections are expected to drop and demand for state services like Medicaid is expected to increase.

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This is bad news for school districts, which are heavily reliant on state funding. In fact, K-12 schools are the largest expense in the state budget each year.

The Wisconsin Policy Forum released a report Wednesday about how school district finances could be impacted by the pandemic.

“We don’t know how badly state government has been affected by the COVID-19 pandemic, but we know the impact has been very swift and severe,” Policy Forum Research Director Jason Stein said. “So that’s raising a question about whether the state might need to freeze or cut school aids to try to manage its own budget problems.”

Some districts are more dependent on state funding than others. The state equalization aid formula provides more support for districts with lower property wealth. That means those districts, which include many urban and rural areas, could be more vulnerable to a change in state revenue.

Districts also vary in the amount of savings they have available for emergencies. Stein says on average, school districts have built up their fund balances to about 24% of their total budgets. But there are outliers. Most notably Milwaukee Public Schools, where the fund balance is only about 3% of overall costs.

“[MPS’s] fund balance is among the smallest in the state and the smallest among large districts,” Stein said. “So that’s a point of concern as we look at this crisis and we see all the financial shocks … that might intensify over the next year.”

Voters recently approved an $87 million operating referendum for MPS, which could help protect the district from funding shortfalls. MPS has its first budget hearing Thursday night, where the school board will discuss a proposed spending plan from Superintendent Keith Posley.

When the upcoming school year starts, students may need more academic and emotional support due to the pandemic and prolonged school closures. But Stein says state and local funding shortfalls could make it difficult for districts to even maintain the status quo.

“That is one of the ironies here,” Stein said. “As districts have had classroom teaching affected and shifted to virtual instruction, there’s some impacts to student outcomes. There might be a lot of things districts would like to do to address those impacts … but it may be difficult to sustain current operations, let alone take on new responsibilities.”

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