Oregon’s June economic forecast confirmed that school leaders must switch from envisioning new investments in students to planning painful cuts.
The forecast released Wednesday revised state revenues down $2.7 billion from just three months ago. The state’s estimated net General Fund available resources will be $1.2 billion less than the 2019-21 budget, according to state economists.
“It’s ironic that exactly a year ago today we were celebrating Gov. (Kate) Brown’s ceremonial signing of the Student Success Act and its historic investment in our students,” said OSBA Executive Director Jim Green. “Now we are looking at budget cuts.”
Green said the COVID-19 pandemic has highlighted the vital services schools offer in educating, nurturing and feeding Oregon’s children.
The coronavirus response’s budget impact is magnified for schools, ramping up costs for next year. In addition to buying items such as more cleaning supplies and technology, districts have potential physical challenges such as changing facility layouts, running more buses for social distancing or needing more staff for holding smaller classes in shifts.
“The budget is going to be terrible, and we’re going to be asked to do more with less,” said Canby Superintendent Trip Goodall. He says he stays centered on doing everything he can for the education and well-being of all his students.
The actual spending cuts will depend on how the Legislature reallocates spending, whether it taps reserve funds and the use of federal emergency funds.
Brown told state agencies earlier this month to prepare plans for 8.5% budget cuts, which would translate into a $653 million blow to the State School Fund. That calls for bigger cuts than the current report indicates. If the governor recalculates her proposed allotment reductions based on Wednesday’s forecast, the reduction to the State School Fund would work out to about $308 million, according to the Confederation of Oregon School Administrators.
The Legislature is expected to hold a special session to balance the state’s budget, but it is unclear how legislators will approach education funding.
At the same time, economists estimate the business tax in the Student Success Act will produce $414 million less this biennium than the $1.6 billion originally forecast, with lower amounts for biennia to come. COSA calculates the Student Investment Account, the act’s direct grants for school districts, would receive $278.5 million for 2020-21, almost $200 million less than originally expected.
For school leaders, it has been a precipitous tumble from considering how to use the biggest school investment in a generation to staring down steep school funding cuts.
“It’s utterly disheartening,” Goodall said. “You can’t even put it into words.”
Oregon Office of Economic Analysis economists presented the quarterly update to the Senate and House revenue committees Wednesday. The report was the office’s largest quarterly downward revision.
On the positive side, Oregon has $1.6 billion in its reserve Rainy Day Fund and Education Stability Fund.
When last the Legislature heard from state economists, Oregon was in the unprecedented 11th year of an expansion. Recession fears had abated, and the report predicted hundreds of millions in excess income.
That report’s worst-case scenario for a severe recession pales in comparison to the reality. Oregon is in the deepest recession since data collecting began in 1939 and it will take years to climb out, the report said.
The coronavirus has devastated the economy, and the ongoing effects are hard to predict.
“The economic forecast and the health forecast are intricately connected,” State Economist Mark McMullen told legislators.
Oregon’s recovery will depend on when the state can reopen and how businesses will bounce back, he said.