How Will the Fiscal Cliff Impact Education Funding?

BY John K. Wilson  December 14, 2012 at 9:03 AM EST

Education and politics in the U.S. are far from strangers, and the current ruckus in Washington over the so-called “fiscal cliff” is making no exceptions. With tax increases and across-the-board spending cuts set to take effect in January if lawmakers and the President fail to reach a debt-reduction deal, education providers are being forced to plan for tighter budgets. In many cases, that would mean jobs lost and reduced services for students.

The aspect of the “cliff” that would impact education budgets most directly is sequestration — mandatory cuts to discretionary federal spending. The White House Office of Management and Budget estimates sequestration would reduce discretionary spending, which includes federal education money, by roughly 8.2 percent. But the effects those cuts would have on school districts and other education programs ends up being much more complex than that one figure suggests.

To get a better picture of how the fiscal cliff could affect education in U.S., here are some points to keep in mind.

1. The Education Department Is Just Part of the Picture

If sequestration happens, the Department of Education would see cutbacks in most of its major programs including funding for lower-income school districts, teacher training, special education and improvements for under-performing schools.

Sen. Tom Harkin (D-Iowa), Chairman of the Appropriations Subcommittee on Labor, Health and Human Services and Education, released a report earlier this year with detailed estimates of how sequestration would impact spending in those departments. Harkin’s report estimates that cuts to the Department of Education would result in 1.8 million fewer students receiving services from need-based grants, over $44 million less going to chronically struggling schools, and nearly 200,000 fewer teachers receiving professional development training.

But cuts in other, less-visible areas also have the potential to put a pinch on education programs, especially those helping young and impoverished kids. According to the National Association for the Education of Young Children, a non-profit advocacy group, 75 percent of funding for early childhood education comes from the federal government. That means programs like Head Start, a child development and school readiness program for low-income families funded by the Department of Health and Human Services, would be hit especially hard. Sen. Harkin’s report estimates Head Start would serve roughly 96,000 fewer children under sequestration, while another 80,000 would miss out on other childcare and development services.

2. The Effects Would be Uneven

While a straight 8 percent cut would seem to suggest everybody would share the fiscal pain equally, things get cloudier when you look at how federal education money is distributed. On average, money from Washington only makes up about 10 percent of public school funding, with the rest coming from state and local governments. But the actual spending breakdown is weighted towards services for the most vulnerable students. The New York Times’ Motoko Rich reported recently:

Cuts in federal funding would jeopardize services at schools that serve the neediest children. Federal funding for elementary and secondary education is directed primarily at low-income students as well as English language learners and those with special education needs.

“It in essence widens the gaps between the haves and have-nots,” said Daniel A. Domenech, executive director of the American Association of School Administrators.

“The wealthy suburban communities that receive very little federal funding — it’s not going to have much impact on them.”

But at urban school districts where a majority of the students are poor, a decline in federal funding, he said, “is going to be catastrophic…”

According to data from the White House Office of Management and Budget, the $15.75 billion the Department of Education currently allocates for disadvantaged students would drop by $1.3 billion. Special education spending would drop $1.03 billion from current a total of $12.64 billion.

3. It Won’t Happen All At Once

If educators were looking for any bit of good news, it might be that their section of the “cliff” doesn’t appear to be a sheer drop. Alyson Klein from Education Week explains:

Even if there is a stalemate and no action on Capitol Hill, your district probably won’t lose money right away…The big formula grants that school districts depend on most (Title I grants for disadvantaged students, special education, grants for teacher quality) are forward-funded. That means the cuts wouldn’t kick in until the start of the 2013-14 school year, giving districts a planning window.

The exception, though, would be the 1,200 or so districts that are on or near large chunks of federal land. These districts receive what’s called Impact Aid, intended to compensate for the smaller tax bases in government-owen areas. This type of funding mostly supports students who live on Indian reservations, have parents in the military or are otherwise connected with the federal government. Because Impact Aid is not forward-funded, schools receiving it would start to feel Sequestration cuts in January. Sen. Tom Harkin’s report estimates close to $90 million in Impact aid would be lost with Alaska, Arizona, California, New Mexico and Texas taking the brunt of the reductions.

4. Even If There’s a Deal, Things Aren’t Certain

With just under three weeks to go, there is still the possibility that the two parties could reach an agreement. But what’s not clear is what a deal would mean for education funding. Ed Week’s Alyson Klein reports that even if sequestration takes effect, “some programs are exempt, including federal student loans, some Pell Grant money, most child nutrition programs, and the Children’s Health Insurance Program,” which could likely mean they would also be kept off the table in a budget deal. But beyond that, neither Democrats nor Republicans have offered any specifics about how much discretionary spending would be left intact. Given GOP demands that increases in revenue be accompanied by spending cuts, there is no guarantee that tight education budgets wouldn’t be stretched even further in coming years.

Weigh In:

How concerned are you about the fiscal cliff’s impact on education funding? Do you think education is or should be a priority in fiscal cliff negotiations?



American Graduate is a public media initiative funded by the Corporation for Public Broadcasting to help local communities find solutions to the dropout crisis.