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AEP
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Blaschke on Federal FundingState Revenue Shortfalls and Anticipated K-12 Budget Cuts Suggest Greater Purchasing Opportunities Using More Stable Federal Funding, Especially in Title I Market NicheThe Center on Budget and Policy Priorities (CBPP) has identified at least 41 states that have faced shortfalls in budgets for this year or next year; over half of the states already have cut budgets, used rainy day funds, or raised taxes. The current budget shortfalls are the most significant since the recession of 2001-02. Between 2002 and 2004, 34 states reduced per-pupil allocations to school districts for K-12 education, which strongly suggests that the financial troubles confronting states will deepen in 2010 and 2011. According to the CBPP, currently, at least 16 states are cutting or proposing to cut K-12 and early education funding. These projections indicate that Federal education funding -- particularly in Title I, which received its largest increase in its history for this school year -- will increasingly provide the best opportunities for firms which have products and services that meet the increasing needs of districts and schools which are "similarly-situated" and that are having to set aside funds specifically for certain types of instructional programs, professional development, and related services. Moreover, it is very likely that Congress and the new Administration will extend the FY 2009 Continuing Resolution (which is scheduled through March 6, 2009) to the end of the 2009 fiscal year (September 30); this will ensure 18-20 months of level and stable Federal education funding. Even though Federal funding will likely remain high in Title I, identifying specific opportunities will require close monitoring. For example, within the overall Title I budget of slightly over $15.5 billion allocations to states can change annually. This could have an even greater impact on district allocations, which are highly dependent on the Bureau of the Census counts of students from low-income families that are based on annual surveys using new data sets. Moreover, within districts, the amounts allocated to schools will also vary between this year and next depending on the number that are identified for improvement and/or entering "corrective action" or "restructuring." In schools that are entering corrective action/restructuring for the first time, increases of 100 percent in Federal Title I funding could be anticipated. When USED's final guidance relating to the use of the 15 percent set-aside of IDEA funds for early intervening services is released, certain types of schools, such as schoolwide programs in Title I, are likely to be a major beneficiary. On the other hand, many districts may designate more Title I schools as schoolwide programs in order to have increased funding flexibility and perhaps misuse Title I funds to make up for state and local shortfalls for regular teacher salaries.
Questions, ideas, or in need of more information? Please contact Stacey Pusey at 302-295-8349.
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