Congressional Negotiations for Second COVID-19 Relief Bill Collapse. Nothing Is Forthcoming to Repair State Budgets or Help Local School Districts

The prospect of a second coronavirus relief bill devolved into chaos over the weekend as the White House/Congressional negotiations disintegrated, and President Donald Trump offered to replace Congressional action with executive orders and executive memoranda which are reported to be of questionable constitutionality. Left out entirely was federal assistance to support public school reopening and to keep state and local government services fully staffed and functioning.

Not only has chaos ensued, but the President has actively politicized the situation. On Monday morning at 9:10 AM, President Trump tweeted: “So now Schumer and Pelosi want to meet to make a deal. Amazing how it all works, isn’t it. Where have they been for the last 4 weeks when they were ‘hardliners’, and only wanted BAILOUT MONEY for Democrat run states and cities that are failing badly? They know my phone number!”

In the real world where the rest of us reside, school districts—trying to figure out how to reopen as the pandemic rages or provide additional access to online learning— face huge costs, which many school districts are clearly unable to afford.  I was stunned on Sunday night by an NBC news report that the Collier County Public Schools in Florida—a geographically large district covering Naples on the Gulf Coast, the Everglades, and agricultural communities like Immokalee—had spent $26 million ($578 per student) to make its schools safe for 45,000 public school students to return.  It is wonderful that this school district is able to support such preparations, but most school districts cannot afford adjustments amounting to $578 per student.

Over the weekend, Trump promised through executive action to provide an unemployment benefit supplement of $400 per week with 25 percent of the money coming from state governments. The President’s allegation is that states have lots of CARES Act money (from the first stimulus bill passed in March) left over.  Ohio’s Republican Governor Mike DeWine had already slashed his state’s FY 2020 state budget by $775 million before the end of the fiscal year on June 30, with $300 million of those cuts coming from promised FY 2020 state aid for local school districts. On Monday the Associated Press reported that DeWine has announced that he will happily accept the President’s $300 per week unemployment benefit supplements, but that Ohio is unable to pay the 25 percent addition of $100 per benefit.  Last evening the Washington Post reported that, due to shortages in state budgets,  the White House has decided states will not be required to pay the $100 weekly contribution to each benefit in order to have their unemployed citizens receive an extra $300 per week, as long as the funds last.

Now, recognizing the reality that the rapid spread of the virus is forcing many school districts to go online and that the federal government is not moving forward promptly with a relief bill to support cash-strapped school districts, Ohio Governor DeWine has been forced to end the requirement that local school districts match state funds to qualify for state assistance to help with remote learning costs. Ohio has been providing $50 million across its 610 local school districts, but as of this week, the state will no longer require a local match.

Democratic governors have also spoken out. New York’s Governor Andrew Cuomo worries that his state’s “budget hole could force cuts of up to 20 percent for schools, health care programs and local governments.”  Michigan’s Governor Gretchen Whitmer condemns Trump’s “refusal to provide full federal funding to states across the country…. Whitmer also chastised the president for not addressing issues that will help keep students and educators safe as schools across the country prepare for the possibility of going back to school this fall. ‘The president has repeatedly said that it’s time for our kids to return to school for in-person learning, but he won’t work with Congressional leaders to provide districts with the support they need to keep students, educators, and support staff safe… His executive actions yesterday do nothing to protect our kids form the spread of this virus.'”

On Saturday, the executive director of The Center on Budget and Policy Priorities, Robert Greenstein  condemned the breakdown in Congressional negotiations and Trump’s attempted replacement of a federal relief bill with a series of constitutionally questionable executive orders and memoranda.  Greenstein also contradicts the President’s allegation that states have unclaimed, leftover CARES Act dollars: “President Trump’s new executive actions should deeply concern all Americans. They fall dramatically short of responding effectively to the enormous need across the country due to COVID-19 and the deep recession… That we have reached this point is a national tragedy. The executive actions raise serious legal issues and may not withstand legal challenge.  Nor is it clear that the Administration actually can implement them—in particular, that it can secure the funding and use the funds as the executive actions direct.  Of note is the requirement that states pay 25 percent of the $400-a-week unemployment benefit supplement that the Presidential directive claims to provide—even as today’s executive actions provide no fiscal relief to states despite the massive pandemic-driven budget shortfalls they face. With most of the limited funding that the CARES Act provided to states through the Coronavirus relief Fund already spoken for, the 25 percent requirement will force states to choose between letting the federal supplemental unemployment benefits end entirely and slashing other parts of their budgets—likely including laying off teachers, health care workers, and others—to find the funds for the new match while balancing their budgets at the same time, as virtually all states are legally required to do… (E)ven if every state could find new money to cover 25 percent of these unemployment benefit costs, the benefits apparently would run out after about six weeks.”

Greenstein continues, specifically addressing problems for states—where state aid for public schools in some states comprises half of the annual general revenue outlay—and their local school districts: “(S)tate and local governments face enormous budget shortfalls due to CCOVID-19 and the recession… and many of them have delayed implementing draconian budget cuts as they awaited the outcome of White House-Congressional negotiations over the next economic relief package, which was widely expected to include significant new state fiscal relief. Instead of providing such relief, however, the executive actions make this problem worse by trying to pressure states to put up billions of dollars to help finance the supplemental unemployment benefits.”

And for public school districts: “The executive actions… offer no help for schools, which face substantial new costs to make their facilities safe when they can open and to facilitate effective online learning when students attend school online, in whole or in part… COVID-19 and the deep recession have caused deep and widespread hardship and, due to longstanding inequalities, Black, Latino, immigrant, and Indigenous communities have been hit especially hard. The failure to enact measures to substantially reduce hardship and bolster the economy will make racial disparities, which the pandemic and recession already are exacerbating, even starker.”

Myths and Facts About the COVID-19 Public Education Relief Being Debated in Congress

Congress is debating a new COVID-19 relief bill, and there is much unhappiness, mythology and confusion about what is being proposed to support the nation’s 98,000 public schools, which are being forced to undertake big expenses to reconfigure classrooms and buses for social distancing and to improve ventilation systems.  At the same time school districts are coping with unprecedented state budget cuts which are forcing districts to lay off teachers and other essential staff.

Here is some background.

  • The first gambit in the Congressional negotiations over more COVID-19 aid was the HEROES Act, passed on May 15, by the U.S. House of Representatives and sent to the Senate, where the bill languished for two and a half months. The House’s  HEROES Act (if passed by Congress) would provide $90 billion for public education (including higher education) along with $915 billion to shore up state, local, and tribal governments during the COVID-19 fiscal downturn.
  • The HEALS Act, proposed piecemeal on July 27th by U.S. Senate Republicans, includes $105 billion for education—$70 billion for K-12 public schools and the rest for higher education.  For Forbes, Sarah Hansen explains the so-called bill’s release: “Senate Republicans on Monday released their plan for the next coronavirus relief package: the Health, Economic Assistance, Liability Protection, and Schools (HEALS) Act. But the legislation didn’t come all at once: instead, it trickled out from a handful of Senators and committees in different outlines and bills, including a few items that predate the Covid-19 crisis.”
  • As of yesterday, the terms of the negotiations had shifted. Senate Republicans and the Trump administration were fighting to reserve the $70 billion in their HEALS Act proposal for schools opening with in-person classes. Senate Democrats had reduced their demand for relief for state and local governments to $875 billion and increased their request for combined relief for public schools as well as child care for a total of $430 billion, the amount needed for funding services outlined in a separate bill introduced on June 30 by Senator Patty Murray (D-WA).

Sometimes on the news shows there is considerable confusion about the details of the various proposals. Here are some of the myths and lies you may hear from politicians. Sometimes the myths and lies get reported as though they are the truth.  Even as the negotiations for public education assistance are developing and shifting, you are very likely to hear the following myths.

First Myth     The leaders in the U.S. Senate say there is more money for public schools in the HEALS Act than there is in the HEROES Act: The HEALS Act would award $105 billion for K-12 and higher education while the HEROES Act would award only $90 billion.

The Facts     The problem is that, while he House HEROES Act would support state and local governments with $915 billion, the Senate’s HEALS Act does not contain relief for state and local governments at a time when income, sales, and property tax revenues are collapsing.  State aid for K-12 public schools is among the biggest lines in any state budget, in some states comprising half of the annual general revenue outlay.  States need assurance that federal assistance will protect primary state functions—Medicaid, public education, public higher education, and corrections—without drastic cuts in services. The Vice President for State Policy and Tax at The Center on Budget and Policy Priorities, Michael Leachman explains that already, “Huge state and local budget shortfalls are forcing schools to lay off teachers and other employees, making it even harder to open safely or provide adequate remote instruction.  Because the pandemic forced states to shut down their economies, state and local revenues have fallen off the table. Already, states and localities have furloughed or laid off 1.5 million workers, including 667,000 bus drivers, cleaning staff and other school workers, and imposed other steep funding cuts.  Without more federal aid, cash strapped states—which must balance their budgets each year—likely will continue cutting school funding, forcing more layoffs and other cuts in school support… Yet the Senate Republican plan… offers no new general fiscal aid to states, only to schools to cover reopening costs… With fewer staff and dollars, schools would find it even harder to open safely and provide high-quality instruction.”

Second Myth      The Trump administration and Senate Republicans claim there is a lot of money left over from the CARES Act, the first COVID-19 relief bill, money sitting around that states haven’t yet spent.  Maybe, say these politicians, since there is leftover CARES Act money, states don’t really need another relief package. Or maybe the President could use an executive order to redirect leftover money to areas where it can be spent.  Or at least as part of the HEALS Act, instead of appropriating relief money to states, Congress could just give the states more freedom about how to spend any leftover CARES Act money.

The Facts     The Center on Budget and Policy Priorities’ Michael Leachman devotes an entire brief to clearing up this set of myths: “The Trump Administration and some news outlets are citing Treasury Department data showing that states had spent 25 percent of the CARES Act Coronavirus Relief Fund (CRF) as of June 30 to argue that states don’t need more fiscal aid to address their massive, pandemic-induced budget shortfalls.  Policymakers shouldn’t take this argument seriously for three main reasons: (1) States have already allocated three-quarters of the CRF, a survey by the National Association of Budget officers found.  This means they’ve committed these funds to health care providers, local governments, businesses, and others whose costs have risen due to the pandemic. Those entities are counting on the funds to reimburse costs they’ve already incurred or will soon incur… (2) Treasury’s data cover less than half the time that states have to spend the CRF.  Recipients may spend the CRF to cover costs incurred to respond to Covid-19 from March 1 through December 30… (3) Treasury’s confusing guidance has hampered CRF recipients. Treasury’s confusing and contradictory guidance about the CRF’s allowable uses, which it issued gradually over several weeks, slowed the process… as states, localities, and other governments tried to decipher it and sought further clarification.  Most importantly, Treasury barred states from using the aid to offset the massive revenue losses from the pandemic and resulting economic downturn, which is the main cause of the fiscal crisis… The reality is that states, localities, tribal nations, and U.S. territories need significantly more federal aid… States and localities already have furloughed or laid off some 1.5 million workers.”

Leachman provides further details about why it won’t significantly help states if Congress gives states additional flexibility to use CARES Act CRF dollars: “For starters, some states have already allocated all of their CRF funding (such as California, Colorado, and Mississippi) or large parts of it (such as Iowa, Kentucky, Louisiana, New Hampshire, North Dakota, and South Carolina); and others, including Alaska and Minnesota have promised nearly half the money to local governments.  Indeed, Treasury told states to give nearly half their allocations—$50 billion of the $110 billion total—to small local governments.”

Third Myth Being Spread by Deficit Hawks     What about the idea that federal deficit spending is dangerous? People say that if we run up the federal deficit now by passing a huge relief bill, it will just make our children and grandchildren shoulder an unbearable debt burden.

The Facts     Paul Krugman, the Nobel Prize winning economist and NY Times columnist doesn’t worry about this a bit. Krugman says “(T)his… slump doesn’t have to be accompanied by severe financial hardship…There’s also no reason we should see punishing cuts in essential public services… When I say that we have the resources to avoid severe financial hardship, I’m referring to the federal government, which can borrow vast sums very cheaply. In fact, the interest rate on inflation-protected bonds, which measure real borrowing costs, is minus 0.43 percent. Investors are basically paying the feds to hold their money. So Washington can and should run big budget deficits in this time of need. State and local governments, however, can’t, because almost all of them are required by law to run balanced budgets. Yet these governments, which are on the front line of dealing with the pandemic, are facing a combination of collapsing revenue and soaring expenses.”

How Much Does All This Matter?     All this seems extremely technical.  Does another significant COVID-19 relief package really matter that much and is relief to prop up state budgets really that important?  This week C. Kirabo Jackson, a social policy professor at Northwestern University and two colleagues released a study about the effect on school achievement nationwide of the Great Recession and the 2009, American Recovery and Reinvestment Act stimulus bill. The report is short—only three pages—but relatively technical. I’ll let you read the details.  It is, however, important to look at the researchers’ conclusions, for they show that, despite a sizeable 2009 federal stimulus bill, cuts to education funding were large, and they have been long lasting. Staffing levels have not yet fully recovered. Among the students in America’s public schools over the last decade, overall test scores dropped, fewer students went on to college, and the effects were most harmful in schools serving African American students.

Here are some of Jackson’s conclusions: “We find that, by and large, money matters. On average, a $1,000 reduction in per-pupil spending reduces average test scores in math and reading by 3.9 percent of a standard deviation and increases the score gap between black and white students by roughly 6 percent.  A $1,000 reduction also lowers the college-going rate by about 2.6 percent.  Declines in test scores and college-going tracked the recession-induced decline in per-pupil spending and did not abate as the economy recovered….”

School districts did not make the greatest cuts in programs and operating expenses; instead they put off capital expenses—building maintenance and repairs.  “Even so, districts still made substantial cuts to instructional spending.  For every dollar in spending cuts, we find districts reduced instructional spending by $0.45, on average.  Reductions in payroll costs for instructional employees account for roughly half of that amount… Districts trimmed their spending on payroll across the board, taking particular aim at the guidance office.  We look at overall staff counts and find that, on average, a $1,000 decline in spending was associated with hiring 3.7 percent fewer teachers, 5.3 percent fewer instructional aides, 3.3 percent fewer library staff members, and 12 percent fewer guidance counselors.  This led to roughly 0.3 more students per teacher and 80 more students per guidance counselor.”

Finally: “We show that declining state support and subsequent cuts in local school budgets can slow student progress with potentially lasting consequences. First, the spending declines that followed the Great Recession halted a five-decade-long increase in student test scores in reading and math, kicking off what some have called a ‘lost decade’ in terms of student achievement.  Second, those cuts also were associated with slower rates of college-going among students on track to become first-time college freshmen, possibly undermining some students’ momentum during a critical moment of transition from K-12 to higher education… More than a decade later, some of the education spending cuts linked to the Great Recession have yet to be fully restored. In the pandemic era, as we face another impending recession and constrained state budgets, the years ahead appear likely to include further cuts.”