Just like that, 2020 is looking a lot like 2008.
A national and global economy in shambles. An unprecedented spike in Idaho jobless claims, with 32,941 new claims filed in the fourth week of March alone. A tenuous budget outlook for Idaho schools — and a picture, not unlike the coronavirus outbreak, that is likely to get worse before it gets better.
And an infusion of federal money to provide backfill.
As with all things pandemic-related, Idaho’s economy went south quickly. It was only four weeks ago that legislative budget-writers approved a stay-the-course K-12 spending plan — more frugal than previous years, but still enough to provide about $86 million in new money for public schools. They committed to Gov. Brad Little’s education shopping list. This included the first installment in another long-term plan to boost teacher pay, at a projected five-year cost of $223 million.
The big debate wasn’t over the $86 million in new money, or embarking on a five-year plan for pay raises. Instead, lawmakers sparred over a plan to shift $2.7 million and 18 full-time positions out of state superintendent Sherri Ybarra’s office budget. (That proposal passed.)
It certainly was an interesting political power play at the time. Now, in contrast, it feels like small ball.
Staring into a deteriorating economy — skyrocketing jobless claims, an anticipated dropoff in big-ticket consumer purchases — Little ordered a 1 percent cut in state spending, affecting almost all state agencies. That equates to a $19 million cut for K-12, and a $3 million budget cut for higher education.
During a Friday news conference, Little expressed hope that the cuts, $40 million across state government, should be enough to balance the books. But he’d also seen enough. “The time to act is now.”
For school officials, the timing is trying. Like all state agencies, K-12 will have to absorb the cuts in the final three months of the budget year.
“Delivering on this holdback is going to be an incredible challenge for you,” Greg Wilson, Little’s education adviser, told educators during a webinar Monday.
School officials face added uncertainty. The holdback and the economic downturn coincide with spring contract negotiations.
At the risk of stating the obvious, a coronavirus-driven downturn or recession will have a dramatic effect on state revenues, and the state’s ability to sustain a $4 billion general fund budget. The state derives general fund revenues from three sources: corporate and personal income taxes, and sales taxes.
Income tax revenues might not plummet immediately. But with the dismal new jobless numbers released Thursday, we now know that 46,526 Idahoans have filed an unemployment claim since March 13, when Little declared a statewide coronavirus emergency. Those staggering losses will affect 2020 income, and the taxes Idahoans pay in the spring of 2021.
Sales tax revenues are more volatile, reflecting real-time swings in the economy. If people are out of work, or worried about their job prospects, they will spend less in the stores, and pay fewer sales tax dollars. At the end of the day, Idaho’s only going to derive so many sales tax dollars from the purchase of toilet paper.
“We do anticipate the biggest impact in the current fiscal year to be from declining sales tax revenue,” Alex Adams, director of Little’s Division of Financial Management, said Thursday.
There’s a bit of lag time. March sales tax collections won’t show up in state revenue reports until May, Adams said. But there’s ample time for a sales tax slump to register a profound impact. If collections fall by 10.5 percent — a number in line with the Great Recession of 2009 — revenues could fall $57 million below projections between now and June 30, the Idaho Center for Fiscal Policy said in a report issued Thursday.
And the fortunes of the K-12 system are inextricably tied to Idaho’s fortunes. When the Legislature rolled back property taxes for schools in August 2006, replacing most of that money with a sales tax increase, the schools became even more reliant on state dollars. According to the most recent U.S. Census Bureau report, Idaho schools received 65 percent of their money from state coffers in Fiscal Year 2017, the fifth highest percentage in the nation.
That’s the precarious situation Idaho K-12 finds itself in, heading into the coronavirus economic crunch.
But just like in 2008, when the Great Recession triggered unprecedented cuts in state spending on K-12, help will come through federal economic stimulus.
The $2 trillion Coronavirus Aid, Relief and Economic Security Act — or CARES Act, in Congress-speak — contains nearly $31 billion for education. Based on early estimates, Idaho’s cut could exceed more than $101 million:
- A $47.9 million line item for K-12, which will come with wide spending latitude.
- A higher education line item could come to roughly $37.8 million, State Board of Education executive director Matt Freeman said this week. This money comes with strings attached; at least half of the money must go to direct student aid. The rest can go to the institutions themselves.
- A separate $15 million, which Little could use for K-12 or higher education.
In essence, some of this federal money is spoken for already. When Little ordered K-12 to cut spending last week — after sparing public schools from the cuts he ordered last fall — he did so knowing the stimulus money was on its way.
The feds’ money will help in the short run, heading into a cloudy future.
The coronavirus could trigger an unprecedented downturn, the Idaho Center for Fiscal Policy said — marked by “a dramatic decline and potentially shorter recovery.” But consider the recent past. When Idaho cut education budgets during the Great Recession, it took seven years for K-12 budgets to rebound to pre-recession levels. It took higher education nine years. And that’s just in terms of flat dollar figures, not accounting for inflation or growth.
Given that, educators can only hope 2020 isn’t a repeat of 2008.
Each week, Kevin Richert writes an analysis on education policy and education politics. Look for it every Thursday.
