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‘Very worried’: Public-school advocates fret over impact of debt-ceiling crisis

Federal aid accounts for 8 percent of all public-education funding, but a much higher share in needy schools.

Sen. Tina Smith (Greg Nash/Pool via AP)
May 25, 2023, 7:12 p.m.

Count public schools among the most vulnerable victims of a potential government default.

Lawmakers and the White House are racing against an as-early-as June 1 deadline to come to a deal and lift the debt ceiling—when the country runs out of money to pay for already incurred debts—to avoid a default, which most analysts warn would unleash devastating economic impacts.

And education advocates are watching closely, with their fears growing.

If a default happens, it will set funding levels for 2024 into chaos and question, Sarah Abernathy, executive director of the Committee for Education Funding, told National Journal. That's because schools are forward-funded, meaning they receive their money during the last quarter of the fiscal year that they can use for the following fiscal year. The last quarter begins July 1, and the federal fiscal year runs from Oct. 1 through Sept. 30, making the fast-approaching June “X-Date” one of grave concern.

“School districts and states don't have yet most of their fiscal-year ‘23 funding. And so if the federal government can't meet its obligations by July 1, that money probably wouldn't go out,” Abernathy said. “It’s unclear how [the Treasury] prioritizes the obligations that they have to make—whether they pay Social Security beneficiaries before they pay school districts, for example. There’s all these choices that the federal government will have to make and has never had to make before.”

If the government defaults, Abernathy says, it’s not clear schools could meet their payrolls. This threat comes as public schools are already facing teacher shortages exacerbated by the COVID-19 pandemic. According to data released last year by the National Center for Education Statistics, 45 percent of U.S. public schools had at least one teacher vacancy. Lower-income communities have also tended to be hit hardest, research shows.

Many districts have already set their budgets for the upcoming year.

“You don't need a year's worth of money the first month, but you need a month's worth of money the first month. The question is: Do they think that some or all of it is going to be in jeopardy, and are they going to start giving pink slips to people for the fall [semester] because they don't know that they'll be able to hire them?” Abernathy said.

A bicameral group of Democratic lawmakers have reintroduced legislation to combat the nationwide shortages of early-childhood and K-12 teachers, an issue that will most certainly get worse if there is a default, and possibly if a deal is struck that includes some of the cuts GOP lawmakers are seeking.

“Let’s be clear about what’s happening right now: Extremist Republicans are holding the economy hostage while they seek to slash funding for public education. Their proposal would kick 200,000 children out of Head Start, lay off 60,000 educators, and reduce classroom support services for 7.5 million children with disabilities,” Sen. Tina Smith, who sits on the Health, Education, Labor, and Pensions Children and Families Subcommittee, told National Journal in a statement. “That’s not a good faith conversation about fiscal responsibility.”

Federal funds account for a relatively small slice of the overall public-education spending pie—about 8 percent—but they comprise a much higher share when it comes to the nation’s poorest schools, which need extra resources.

The federal government sends states money for programs that address special education, high-need students, and more.

“To some degree, schools are insulated that the majority of their funding isn't federal funding. But that's not true for all programs, and it's not true for all school districts, and some get much more than others, depending on things like the economic makeup of their students or special-ed needs,” Smith continued. “There are going to be ramifications of default.”

To avoid a default, President Biden has been meeting with Speaker Kevin McCarthy and other House Republicans to try and reach a deal. Negotiations have proceeded at a near-glacial pace, with lawmakers seemingly still stuck despite optimism that a deal was taking shape.

But at the center of those negotiations have been spending cuts—ranging from work requirements for federal aid programs to rescinding unused COVID-19 funds.

Education advocates worry cuts involving funding for public schools may also be discussed, or inevitably included if there are widespread cuts to federal agencies and programs.

“We are very worried about fiscal-year 2024, because we've seen that when there are these types of spending cuts, education funding doesn't fare very well amongst other priorities,” Abernathy said.

She pointed to 2011, when President Obama and Congress reached a deal on the debt ceiling just 72 hours before a default. The agreement capped federal spending through a budgetary process called “sequestration,” which triggered automatic spending cuts in most government programs. Federal education spending was hit particularly hard from the caps put into place from the Budget Control Act of 2011.

The Century Foundation, a progressive think tank, estimated K-12 public schools are underfunded by nearly $150 billion annually, in part because of the sequestration caps imposed more than a decade ago.

In April, House Republicans passed the ​Limit, Save, Grow Act, which would raise the federal borrowing limit by $1.5 trillion and push the debt ceiling well into next year while cutting billions from government programs, including education.

The Education Department released a fact sheet around that vote, stating that the legislation would cut nearly $4 billion in funding for schools for low-income children, potentially impacting nearly 26 million students. The Department also said the bill would cut program funding to its lowest numbers in nearly a decade, the equivalent to removing more than 60,000 teachers from classrooms.

The House legislation—which never had any chance of advancing past a Democratic Senate and White House—has been the foundation for Republicans in their negotiations with Biden.

Sen. Michael Bennet of Colorado, a former superintendent of Denver Public Schools, told National Journal: “The bill that Speaker McCarthy and House Republicans passed would cut $4 billion in funding from schools serving low-income students, reduce support for students with disabilities, and take away funding to support students’ mental health. Leaving our students, their parents, and teachers in the lurch should not be a condition to pay our bills.”

Negotiations over a debt ceiling extension will resume over the weekend, and lawmakers could vote as early as next week if there is a deal.

Education “is a great investment,” Abernathy said. “One dollar spent on education is not necessarily equivalent to $1 spent on something else, because you are creating the future workforce. You're boosting the economy.”

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