Education

Schools face new expenses, increased funding, from COVID

July 31, 2020

Ray Carter

Oklahoma schools face unexpected costs due to COVID-19. But they are also benefiting from substantial one-time funding due to the pandemic. That extra money includes not only emergency federal funding, but also millions in savings generated by the pandemic-related closure of school sites in the spring.

“Almost all, if not all of them, should have had increased carryover savings since they weren’t meeting in person,” said Rep. Chad Caldwell, R-Enid.

At the end of the 2018 budget year, Oklahoma’s more than 500 school districts carried over a combined $791.5 million from their general funds, according to state records. At the end of the 2019 state budget year, schools carried over a combined $910.7 million, a year-to-year increase of 15 percent. The $910.7 million carryover was the largest reported by Oklahoma public schools since at least 2006 in both raw and inflation-adjusted dollars.

It’s not yet known how much money districts carried over at the end of the 2020 state budget year, which concluded on June 30. Final figures reflecting carryover from all districts are not typically released until December.

But there’s reason to believe school carryover surged again, due in part to the spring shutdown. The spring shift to distance learning generated savings on things such as utilities and transportation for roughly 40 days, or 23 percent, of the school year. Based on reported spending in the 2018-2019 school year, it is estimated that schools could have saved up to $300 million due to the shutdown.

Those savings would carry over into the current school year, along with hundreds of millions more that schools were planning to hold in reserve prior to the shutdown.

The anticipated increase in savings put some schools in jeopardy of financial penalties.

Under Oklahoma law, schools may carry over anywhere from 14 percent of their general fund balance to 40 percent, with smaller districts allowed to hold the largest share in reserve. However, districts that exceed those limits in consecutive years face financial penalties.

Expecting a COVID-related surge in carryover, lawmakers revised that law. House Bill 3964, by Caldwell, temporarily lifted penalties to allow schools to save larger sums.

Given the “unique” circumstances, Caldwell said lawmakers wanted to encourage districts to save their carryover “as much as possible so they could utilize those funds for the upcoming school year when they will hopefully be meeting in person.”

“I know for a fact that if that law hadn’t gone into effect, there were several districts that would have received a penalty because this was their second-consecutive year,” Caldwell said.

The savings generated by the COVID shutdown are further augmented by federal Coronavirus Aid, Relief, and Economic Security (CARES) Act funding. While state appropriations to schools were reduced by $78.2 million this year due to the COVID recession, that cut was more than offset by $160 million in additional CARES Act funding for schools.

During legislative debate in May, Sen. Dewayne Pemberton, a Muskogee Republican and former school administrator, said, “The school districts are going to get quite a bit of money. They can use that money pretty much how they want to.”

Yet, even as schools have millions of dollars they did not anticipate a year ago, they also face unexpected expenses. The question is whether those expenses will exceed the funding increase.

Recent reports suggest funding will cover schools’ cost of the most obvious COVID expense: personal protective equipment (PPE) and greater sanitation.

When NBC-affiliate KFOR recently surveyed schools in the Oklahoma City area, districts’ reported spending on PPE was often only a fraction of the districts’ total CARES Act funding, typically between one-fourth and one-third of a district’s CARES funding.

For example, Oklahoma City Public Schools received $17.3 million in CARES Act Funding and reported spending $550,000 on PPE as of July 8.

Gov. Kevin Stitt has since announced the state purchase of millions in PPE that will be distributed to all school districts.

But schools may face other expenses. Schools that plan to remain online-only at the start of the 2020-2021 school year may reap additional savings, but also face the expense of providing computers and online access to many students.

A March 2020 technology survey found an estimated 167,000 Oklahoma students lacked Internet connectivity capable of supporting online learning. That represents roughly 24 percent of the more than 700,000 students in public schools.

However, state officials have announced federal COVID funding will provide hotspots for up to 50,000 of those families. The 50,000 hotspots will likely aid more than 50,000 students since many families lacking Internet access have more than one child.

Also, several schools have indicated digital-gap expenses are being covered in part with existing resources.

Putnam City Public Schools plans to operate online-only for the start of the school year, but reports that a bond package approved this year has already “created the funds to provide devices to all students.” Similarly, Norman Public Schools was already providing students with computer devices prior to the COVID pandemic thanks to previous bond packages.

Nolberto Delgadillo, chief financial officer for Tulsa Public Schools, said that district also bridged the digital gap thanks to a 2015 bond package. As a result, Tulsa schools did not have to redirect funding from other areas or draw down savings to address those needs.

However, providing technology to families also required some extra expenditures on training.

“It’s one thing to provide hotspots,” Delgadillo said, “but it’s another if they’re not turning it on and knowing how to use it.”

The Tulsa district increased its general fund balance and carried over an additional $5 million into the current budget year. Delgadillo said approximately $3 million of that $5 million came from savings realized during the spring shutdown of physical sites.

Tulsa has a little under $15 million in CARES Act funding. Delgadillo said up to $7 million may be used to offset the reduction in state appropriations, while another $6 million will fund back-to-school efforts.

The latter category may include paying to upgrade student IDs to allow for easier contact tracing when a student tests positive for COVID-19. Tulsa officials are also discussing replacing air-filtration systems. Delgadillo said bond financing could be part of that discussion. Without bond financing, air-filtration and PPE expenses combined could take up to $6 million of the district’s federal COVID funding, he said.

Smaller districts face different challenges, according to Andy Evans, the finance director for the Oklahoma Public School Resource Center, which provides services to many small schools.

“Not everybody is able to use a bond issue to go purchase those,” Evans said, referencing technology needs. “Bond issues, they are so different in each particular district.”

Evans, who previously served as the superintendent at the Mountain View-Gotebo and Prague school districts, said some schools have also experienced a reduction in revenue from local sources, and predicts statewide carryover may not increase as much as anticipated.

Because policymakers delayed the collection date for property tax payments for several months, some districts experienced a temporary decline in those local funding sources, Evans said. And the crash in oil prices has reduced school funding due to lower gross production tax collections.

For some districts, the financial challenges created by COVID will be greater than in others, he said.

“The CARES money is not going to make them 100 percent in revenue,” Evans said. “The part we don’t know is how this is all going to play out.”

Delgadillo said Tulsa officials are also discussing efforts to keep some funding in reserve for the 2022 budget year. While discussions are now underway on another potential round of federal bailout funding, Oklahoma government is expected to face a state shortfall of as much as $1 billion next year that could translate into reduced school appropriations.

“Obviously, everyone is thinking about FY21 and starting school and everything that’s happening now,” Delgadillo said. “I don’t think many of us are having conversations about fiscal year 22 and what would that look like.”

The amount of increased funding in Oklahoma’s school system, combined with divergent needs in each district, means the financial situation of individual schools may vary wildly. In this environment, Caldwell said, local oversight is more important than ever.

“There are a lot of dollars that are available to our schools and a lot of resources that are available to our schools,” Caldwell said. “This is where you have to place our trust in the local school board to ensure that those dollars are being spent in the most effective and efficient way possible.”

The Oklahoma Media Center, launched by Local Media Foundation with financial support from Inasmuch Foundation and the Walton Family Foundation, is a collaborative of 18 Oklahoma newsrooms that includes print, broadcast and digital partners. The OMC’s first project is “Changing Course: Education & COVID.” This story is part of that effort. Participating newsrooms are Big If True, the Center for Independent Journalism, CNHI Oklahoma, Curbside Chronicle, Griffin Communications, KFOR, KGOU, KOSU, The Luther Register, Nondoc, Oklahoma City Free Press, Oklahoma Eagle, OU Student Media, Oklahoma Watch, The Oklahoman, StateImpact Oklahoma, Telemundo Oklahoma, and the Tulsa World.