Funding Education Opportunity: Public schools closing as enrollments decline

Good morning,

Public school enrollment dropped by 1.2 million during the pandemic. In some states and school districts, this was a continuation of years of declining numbers of students. Over the long term, the National Center for Education Statistics estimates that enrollment will drop by another 2.7 million students by 2031-2032. 

With falling birthrates—and parents looking to K-12 alternatives such as private schools and homeschooling—state and local policymakers will need to right-size public education. In school districts with significantly fewer students—and presumably fewer dollars— public school closures will be necessary since under-enrolled schools spread resources thin, are costly to maintain, and are often lower-performing.

The most recent federal data from 2021-22 shows that school closures were down by nearly one-third compared to pre-pandemic levels. That’s because many school districts could plug budget holes with the $190 billion in federal COVID-19 relief funding they got during the pandemic. Now that these federal dollars are expiring, public schools are feeling the fiscal impact of losing students.

As states and districts begin grappling with having fewer students and their fiscal realities, new data published by Reason Foundation indicates that public school closures were on the upswing across states in 2024. Reason obtained school closure data from 15 states, including California, Colorado, Florida, and New York, finding that total school closures returned to pre-pandemic levels in 2023-2024. Across the 15 states with data available, there were 98 public school closures in 2023-2024—nearly the same number closed, 99, in 2019-2020.

Despite losing over 5% of their public school students, California’s public school closures declined each year since the start of the COVID-19 pandemic. In 2023-24, only seven public schools in California closed—down from 31 closures in 2019-2020. This was fewer closures than in rural states like Utah, South Dakota, and Iowa.

One reason is that California’s public schools have been flush with state and federal cash, giving them little incentive to right-size. California’s public schools got $23.4 billion in federal COVID-19 relief funds during the pandemic, while non-federal funding increased by $1,691 per student in real terms between 2020 and 2022—the highest growth rate in the country.

In the coming years, school closures will be a heated issue on school board agendas in California and other states. Already, battles are taking place in big cities experiencing significant enrollment declines, such as Oakland, San Francisco, Boston, Seattle, and others.

Reason Foundation offers five recommendations for how state policymakers can address declining public school enrollment, including shoring up teacher pension systems that can drain money away from classrooms, eliminating hold harmless funding protections that give schools money for students no longer there, and modernizing facilities funding and management by right-sizing operations, selling unused land and buildings. 

Lawmakers should also pay close attention to Indiana, which offers a model for shining a light on empty school buildings and strengthening rights for charter schools. In 2023, Indiana lawmakers established reporting requirements for school districts whose enrollment declined by 10% or more in the preceding five years. These districts must conduct an annual review to identify buildings eligible for closure under the policy and report their findings to the state. Importantly, under-enrolled school buildings are now included in the state’s right of first refusal policy, which gives charters access to vacant or under-utilized facilities for just $1. Policymakers in other states could also consider extending these protections to non-profit education providers.

Public schools must adapt to their new enrollment reality. This won’t be easy, but in the long-run it’s best for students, taxpayers, and communities. 

From the States

In other important education and school choice developments across the country, South Carolina policymakers are seeking to bypass constitutional challenges to private school choice, and Tennessee and Wyoming policymakers introduced proposals to significantly expand existing private school choice programs.

In a proclamation, Tennessee Gov. Bill Lee called for a special legislative session, beginning Jan. 27, to pass expansive private school choice reforms. Nearly identical proposals in the state House and Senate would make about $7,100 private school scholarships available to 20,000 students annually. The first 10,000 scholarships would be reserved for students whose families’ incomes are below 300% of the federal poverty limit. Currently, private school scholarships are only available to students from low-income families in Davidson, Shelby, and Hamilton counties.

South Carolina’s State Supreme Court struck down the state’s private school choice program in 2024 as unconstitutional, stating that the state cannot directly fund private schools. However, South Carolina policymakers aim to circumvent this ruling with funding tweaks. Instead of funding the program via the general fund, the new proposal would use funds from lottery revenues. If passed, 15,000 eligible students could receive scholarships valued at $8,500 to pay for private school tuition in 2027.

In Wyoming, House Bill 199 aims to expand the state’s limited education savings account into a universal program, providing $7,000 scholarships per family to pay for non-public education costs. Last year, state policymakers passed an expansive private school scholarship program, but Gov. Mark Gordon line-item vetoed the proposal to limit student eligibility to those whose families’ income was less than 150% of the federal poverty limit.

What to Watch

Indiana Gov. Mike Braun called for universal private school choice.

In his first state budget, Indiana Gov. Mike Braun announced plans to increase K-12 funding by 2% each year and make the state’s near-universal private school scholarship universal. Currently, students whose families’ incomes are less than 400% of the federal poverty limit can receive $6,200 scholarships, which can pay for private school tuition.

Texas Gov. Greg Abbott announced he has the necessary votes to pass school choice proposals this year. Moreover, policymakers in both the state chambers set aside $1 billion for education savings accounts in their budgets. Although the bills haven’t been introduced, a 2023 proposal that passed the Senate would have established education savings accounts valued at $8,000 per student. 

The Latest from Reason Foundation

–More than 20 percent of publicly funded students in Delaware use open enrollment to choose schools About 26,000 students, more than 20%, used K-12 open enrollment in Delaware during the 2020-21 school year. This policy can help students escape bullying, access specialized courses, smaller class sizes, and shorten commutes.

–Public school closures were on the upswing in 2024 Permanent school closures seemingly paused during the pandemic as districts were temporarily buoyed by federal pandemic relief funds. But as those funds expired and districts felt the effects of lower enrollments, school closures increased in regularity. 

Fiscal Analysis: How Arkansas’ Education Freedom Account program is impacting taxpayers and students “The Arkansas EFA program’s true cost (i.e., net cost) is substantially lower than its total cost. That’s because switchers generate substantial offsetting state fiscal savings that can account for as much as half of the total costs” writes Reason’s Christian Barnard.

–Public school enrollment is plummeting. Here are five things policymakers can do about it Instead of delaying the inevitable, policymakers should proactively consider how they can shore up districts’ finances, especially as K-12 enrollments drop and enrollment projections look grim. Solutions include shining a light on vacant facilities, strengthening rights for charters and other K-12 providers, eliminating funding protections, and shoring up teacher retirement systems.

Universal School Choice Programs Probably Cost States Money. They’re Worth It. At Education Next, Reason’s Christian Barnard analyzes how universal school choice policies impact state budgets by using Arizona’s universal education savings account program as a case study. He argues that while it’s likely that universal school choice costs states money in the short run, the costs aren’t nearly as high as opponents claim and are still a small portion of state budgets. Additionally, he argues that the benefits of expanding educational options on a large scale are worth the cost tradeoff.

Recommended reading 

Public Schools Added 121,000 Employees Last Year, Even as They Served 110,000 Fewer Students
Chad Aldeman at The74

“Despite all the continued attention to supposed teacher shortages, the truth is that schools employ more educators than ever. At the same time that student enrollments fell by 1.3 million (a decline of 2.5%) over the last five years, schools added the equivalent of 55,000 teachers.”

Shrinking Indianapolis Schools Could Be Dissolved, Turned Into Charters
Patrick O’Donnell at The74

“The bill targets districts where so many students have left for charter and private schools that fewer than half remain in district schools. It would shut all five districts, including the Gary Community School Corporation near Chicago, by 2028. Schools would then be turned over to charter schools that would be overseen by new panels appointed by the governor, Indiana charter school boards and local officials.”

Don’t want to close underenrolled schools? Here’s how to make the math work.
Marguerite Roza at the Thomas B. Fordham Institute

“What isn’t financially viable? A school with the full complement of typical school staff but fewer kids. These aren’t purposely designed small schools, rather they’re underenrolled large schools (sometimes called “zombie schools”). Los Angeles Unified School District, for instance, has a slew of tiny schools spending over $30,000 per pupil. Such schools vary in performance, but all sustain their higher per-pupil price tag by drawing down funds meant for students in the rest of the district. In the end, no one wins.”

The post Funding Education Opportunity: Public schools closing as enrollments decline appeared first on Reason Foundation.

Source: https://reason.org/education-newsletter/funding-education-opportunity-public-schools-closing-as-enrollments-decline/