School District Financial Distress, Part 1: Treat the Real Problem, Not Its Symptoms
Based on the most recent Survey of School District Finances from the US Census, in FY 2023, 4,522 (32%) out of the country’s 14,088 school districts ran a deficit, defined as total expenses in excess of total revenues. In aggregate, these deficits totaled $1.6 billion. And that was before the last round of ESSER funding rolled off. With falling enrollment in many district-managed schools, financial distress is poised to get much worse in the years ahead.
The great challenge facing a growing number of school districts is how they will respond to this accelerating crisis.
The situation they face is made worse by recent research findings by Marguerite Roza, the leader of Georgetown University’s Edunomics Lab: “Most school board trustees do not actively engage in public deliberations about budgets, and most budget items are approved with little public discussion or consideration of alternatives.”
Thus far, most districts have treated increasing financial distress at the department level, separately addressing problems of enrollment declines, falling school facility utilization, and/or growing operating costs. Yet in many districts, financial distress has worsened.
The critical issue is that these are just symptoms of the actual problem: How to keep a complex system in balance to maintain a district’s financial health in the face of accelerating and uncertain change.
Before discussing how best to solve this problem, let’s review its three major symptoms: falling enrollment, declining facility utilization levels, and increasing operating costs.
