Enrollment in public schools nationwide has drastically declined since the onset of the COVID-19 pandemic in 2020, dropping by more than 1.2 million students between the 2019-20 school year and the 2022-23 school year. For many school districts, student enrollment projections remain uncertain as families have become more comfortable shopping for other school options like virtual private schools or homeschooling co-ops. This continued decline in public school enrollment, which is more pronounced in urban school districts, will have serious impacts on school district finances.
As American Enterprise Institute’s Nat Malkus and doctoral student Cody Christensen pointed out in Education Next, “If enrollment remains lower in the future, smaller districts could lose hundreds of thousands of dollars annually, and larger districts could lose millions, compared to pre-pandemic revenues.”
Declining U.S. Birthrate Likely to Impact Student Enrollment
Public school enrollment declined by 3% or more in 19 states between 2020 and 2022, according to the American Enterprise Institute’s “Return to Learn Tracker,” which has recorded K-12 enrollment trends since 2020.
But many states were experiencing enrollment declines well before the pandemic and March 2020. In fact, K-12 student enrollment dropped in 22 states between 2002 and 2020. While school districts in some regions might regain some of these students in future years, other factors, including low birth rates, will likely contribute to lower student counts going forward.
Between the 2010 and 2020 censuses, the country’s under-18 population decreased by 1%, from 74.2 million to 73.1 million, USA Facts reported in 2021. The smaller child population is in part due to the long-declining U.S. birth rate, which has been below replacement since 1971 and experienced a notable decline after 2007.
In fact, the U.S. population under the age of 18 dropped in 27 states between 2010 and 2020. “When birthrates decline, we see a drop in kindergarten enrollment five years later that tracks from one school grade to the next,” Tulane University Professor Douglas N. Harris and Valentina Martinez-Pabon, postdoctoral associate at Yale University, pointed out in Education Week.
Although the United States has long bolstered its low birth rate with immigrant populations, net immigration fell by about 75% between 2016 and 2020. Moreover, immigrant fertility rates declined by 158,000 births between 2008 and 2019, even though the number of female immigrants who were of childbearing age increased by 9%. In 2019, “for what is almost certainly the first time in American history, the immigrant fertility rate was below replacement level,” wrote Steven A. Camarota, director of research at the Center for Immigration Studies, in National Affairs.
Declining U.S. and immigrant birth rates are bad news for many school districts’ budgets because states use student enrollment figures to allocate education funds. Thus, school districts with declining enrollments will likely face financial repercussions.
However, not all school districts will feel the effects of lower student counts immediately. More than half of states have hold harmless provisions, which let school districts use previous years’ attendance records to calculate state funding. This practice allows schools to receive funding for students who are no longer enrolled. For example, Pennsylvania is one state that employs a generous hold harmless provision. According to the non-profit Children First, “The [Pennsylvania school] districts have lost a total of 167,000 students since 1991-92 — a fifth of their student body — but they haven’t lost any money, instead of receiving increased funding each year. They now have $590 million tied to students they no longer educate.”
During the COVID-19 pandemic, 22 states adopted temporary hold harmless provisions, which let school districts continue to receive funding based on student counts from before 2020. Most of these temporary hold harmless provisions were set to expire after the 2021-22 school year, but at least four states extended their pandemic hold harmless provisions through the 2023-24 school year.
Once these temporary provisions expire, however, some school districts will likely experience significant financial blows as their student counts reflect the pandemic-era exodus from public education. “Even a 1% loss of enrollment tends to be financially destabilizing for districts,” Hannah Jarmolowski and Marguerite Roza of the Edunomics Lab at Georgetown University wrote in a 2021 report.
Urban School Districts’ Enrollment Challenges
Minneapolis Public Schools is one district that has found itself in financial straits due to its student population changes. The Minneapolis Public Schools (MPS) Finance Committee announced in November 2022 that the school district “is approaching an impending fiscal crisis” due to declining enrollment.
Projections indicate that MPS enrollment will only be 23,000 students in 2028, 12,000 fewer students than in 2018. However, the pandemic merely exacerbated an existing enrollment exodus as the district’s enrollment had steadily declined since the 2002-03 school year when the district served more than 46,000 students. Moreover, the recent MPS report showed that “the number of children ages 5 and under living in the city fell 17% between 2020 and 2021,” indicating that the district’s enrollment challenges will only get worse.
Minneapolis is not the only urban school district facing difficult financial decisions. Earlier this year in California, Oakland Unified School District’s Board of Education voted to close seven schools over the next two years. Time Magazine reported that, as of February, the school district’s enrollment had declined by more than 4,000 students during the past five years.
Similarly, Boston Public Schools’ (BPS) enrollment dropped for the eighth year in a row, and the district has hemorrhaged more than 8,000 students over the last decade. The Boston Globe reported that “96 out of the district’s 120 schools were underenrolled” last year. In addition to the Boston School Committee voting to permanently close three middle schools in 2021 in response to low student counts, Boston Mayor Michelle Wu also proposed renovating or consolidating 15 schools by the 2025-26 fiscal year.
These examples are snapshots of the enrollment challenges that some school districts, especially urban ones, now face. Research has shown that urban school districts that relied on remote learning the longest has more enrollment loss. AEI reported that the school districts that stayed remote the longest lost 1.2% more students in the 2021-22 school year than in the previous year. On the other hand, school districts that returned to in-person learning sooner, oftentimes those located in suburban or rural areas, mostly experienced enrollment rebounds.
Thankfully school districts can weather much of the potential financial storm by adapting to new enrollment figures. The University of Miami’s Bruce Baker showed that school districts across the nation rightsized after student counts dropped when many students opted for charter schools during the early 2000s. School districts like Newark City Schools in New Jersey and Kansas City Public Schools in Missouri reduced overhead or administrative expenses and, as Baker puts it, these school districts “have largely been able to achieve and maintain reasonable minimum school sizes, with only modest increases in the shares of children served in inefficiently small schools.”
However, rightsizing is easiest when school districts plan for the long term by using actual student counts and avoiding overly rosy projections. Shortsightedness can lead to painful layoffs or substantial budget deficits, as experienced by the School District of Philadelphia and Detroit Public Schools last decade.
A Guide to Rightsizing
A key to effective rightsizing is flexible spending options for district and school leaders. As Reason Foundation education researchers pointed out, right-sizing is about “optimizing all facets of operations with the goal of providing high-quality options to all students at a cost that aligns with revenues.” This means that state policymakers must resist the temptation to make overly prescriptive policies that tie the hands of school leaders. It is important to maximize flexible spending options for district leaders to ensure that education funds are not tied to well-intended but overly-specific schooling inputs or other mandates, such as class-size requirements.
For example, when state education dollars are earmarked for specific music instruction or counseling services, school district leaders can’t repurpose those funds for more pressing priorities even when budget cuts are necessary. Prioritizing flexible spending options for school districts helps ensure that school leaders have more options when they have to reduce expenditures and lets them use funds in ways that are best for their students.
Amidst the economic uncertainty and high inflation, some states will need to tighten their fiscal belts, especially as federal emergency relief funds dry up. California’s Legislative Analyst’s Office published a report last month estimating the state will face a $24 billion deficit in 2023-24. The report urged California legislators to “consider saving reserves for a recession when the budget problem could be twice as large as the one identified in our outlook.”
School districts should act now to prevent flat-footed responses to potentially lower enrollments in the years ahead. The good news is that school districts can adopt a variety of policies that can relieve tight budgets. A few of these policies are discussed below.
Adopt Weighted Student Funding. This policy allocates education funding to students based on their real needs and the money follows the students to the school within the school district in which they enroll. For instance, students in Atlanta Public Schools receive additional dollars based on their grade level, prior academic performance, or if they are English Language Learners or living in poverty. Weighted student funding (WSF) ensures that resources are directed to the schools that students actually attend. This means that under-enrolled schools are no longer unfairly subsidized by schools with higher enrollment. As a result, school budgets are based on actual student counts instead of staffing positions.
“WSF mitigates these problems by equalizing dollars for similar students and by empowering local leaders with the flexibility to make budgeting decisions that are best for their communities,” Reason Foundation’s Christian Barnard wrote. In fact, a 2019 nationwide study by the U.S. Department of Education showed that “WSF district administrators reported that …53 percent… of their total operational spending was under school discretion, compared with 8 percent in non-WSF districts.”
Currently, at least 30 school districts and Hawaii have implemented weighted student funding.
Adopt K-12 Open Enrollment. This policy lets students transfer to a public school with available capacity other than their residentially assigned one. Open enrollment breaks the artificial lines drawn by school district boundaries and catchment zones and allows students to enroll in schools that are a good fit for them. For districts facing declining enrollment, this policy presents an opportunity to attract new students from other school districts. In fact, rural school districts in Texas have been found to use open enrollment to keep the lights on when too few students live inside the district boundaries to support the district. These school districts actively seek to attract students from other districts to make ends meet. Currently, only 11 states have mandatory open enrollment laws.
Leverage Retirements and Staff Leaving. While labor might feel like a fixed cost to many school districts, it does not have to be. As aging teachers and staff retire or leave, school districts should resist the temptation to replace them if they’ve lost students in recent years. Labor is often a school district’s biggest cost so being wise with staffing is a key to balancing the budget. In fact, Edunomic Lab’s Marguerite Roza notes that staff turnover can be an “opportunity to stash more in reserves, use stipends to boost the pay for current staff to pick up some of the load or issue a service contract. Reducing the overall staff count results in fewer dollars tied up in benefits and more dollars available to retain existing staff in a downturn.”
Closing Under-Enrolled Schools. Unfortunately, massive enrollment loss can mean that some school districts must prepare to close under-enrolled schools. Permanent school closures often face formidable pushback from affected families, even when the closures would benefit most students. As a result, school district leaders need to prepare a robust strategy that is transparent and shows parents why those schools must be closed and how students will be served.
Paul Hill and Parker Baxter from the Center for Reinventing Public Education have pointed out that a successful strategy for necessary school closures must include clear metrics for closures, public data on all schools, and transparency. They wrote, “School system leaders need to strike a balance between using simple, transparent criteria while providing enough leeway to consider subjective factors, such as school leadership quality or whether the low-performing school seems to be improving. These criteria also need to be spelled out in advance.”
While rightsizing a school district is often painful, it can make education funds more flexible and versatile, ultimately benefiting students. When education dollars are flexible and reflect actual student counts, school leaders can make the spending decisions that will help their students best.