School leaders lower expectations for Student Success Act funds

Student Success Act grant applications are due Wednesday, April 15, even though school leaders know they won’t be getting the money to do everything on their lists.

The Student Success Act, passed in 2019, includes a corporate activity tax that was predicted to provide roughly $1 billion a year for preK-12 public education. School districts were told to create plans to share $472 million starting July 1 from the act’s Student Investment Account.

With the coronavirus pandemic cratering the state’s economy, Gov. Kate Brown said during Wednesday’s news conference that districts should put their plans “on ice.”

The Oregon Department of Education told school districts last month that they still must turn in plans by April 15, even if they are not complete. As of Friday, ODE had received 105 plans.

ODE assigns each application a manager and two reviewers. ODE has assessed 40 applications so far, with 36 meeting or nearly meeting requirements on first review.

The Corvallis School Board approved its plan Thursday, April 9. School Board Chair Sami Al-AbdRabbuh said the expected funding reduction did not change the district’s plan, which had a first board reading March 5.

He said the plan was based on district priorities and they would evaluate programs based on the resources available. The pandemic, though, has made the plan’s student mental and behavioral supports more important than ever, he said.

“These challenging times are reminding us about the critical need for public schools having students feel and be connected and cared for,” Al-AbdRabbuh said.

The Pendleton School District submitted its plan March 11, before the school closures started.

Superintendent Chris Fritsch said they know they will probably have to drop some things from their plan, such as teaching positions, a high school on-track coordinator or elementary school music expansions. He said they will also hold some positions open as they brace for cuts.

“The sad thing about this is there was some real, genuine excitement when the staff learned of our plan,” he said. “There is going to be a lot of disappointment when they realize what we can and can’t do.”

Like Corvallis, Fritsch said their plan’s inclusion of counselors is more important than ever. The district has already made contract offers for two elementary school mental health specialists and one middle school counselor.

“Now more than ever we are going to need those positions,” he said. “We are going to hang onto them at all costs.”

State economists and the Legislative Revenue Office are working to figure out the impact on the Student Success Act, said Rick Crager, Oregon Department of Education assistant superintendent in the finance office. He said the governor and Legislature would work together to decide whether the act’s revenue shortage would be handled through revenue replacements, budget adjustments or targeted reductions.

The act supports a wide range of programs, dividing up an expected $1.6 billion for 2019-21 among the Student Investment Account, statewide initiatives, early learning and the State School Fund. 

“We will not get that amount of money,” said Sen. Arnie Roblan earlier this month. The Legislature will receive an economic forecast May 20. Roblan said early indications are that it looks as bad or worse than the 2007-09 Great Recession.

With the coronavirus pandemic bringing many businesses in Oregon to a near stand-still, the corporate tax on revenue over $1 million a year will be collecting significantly less. The tax took effect Jan. 1, but the first quarterly collections are due this month. Businesses have been pressing for a delay.

“We have a whole lot of businesses frightened that they don’t have income,” said Roblan, co-chair of the Joint Special Committee on Coronavirus Response. The committee’s recommendations for state actions did not include a tax delay because the state doesn’t have enough information yet, Roblan said.

Roblan, D-Coos Bay, said the tax functions like a sales tax and no state has suspended its sales tax. Additionally, the tax is collecting money from online sellers, such as Amazon, that were not subject to Oregon taxes before.

Sen. Mark Hass, chair of the Senate Interim Finance and Revenue Committee, said the state budget could end up being down as much as $2 billion from projections.

“We have some pretty good economists,” he said. “They didn’t predict a global pandemic.”

Hass said schools should consider freezing hiring now. Schools will receive their State School Fund allotments for 2020-21, but the Legislature must balance the budget by June 2021.

Oregon is in better shape now than it was for the last recession. Oregon has more than $1.3 billion in reserve funds and roughly $1 billion in ending balance funds in its most recent economic report.
Still the State School Fund could feel the pinch.

Hass, D-Beaverton, said holding the State School Fund harmless could mean targeting social service and health programs that receive matching federal dollars, forcing deeper cuts.

Hass said the corporate activity tax’s future depends on when businesses can get back to earning.

An Oregon Office of Economic Analysis report says the state’s health situation and economy are intricately tied. Depending on when the governor can drop the stay-at-home order, people returning to work and pent-up demand could take the economy from near depression levels to a bad recession, it said.

District leaders won't know for a while how much they will have to cut, but they have some idea already about how to adjust their planning.  

The public process that used staff, student and community engagement to set spending priorities will help districts decide what needs to be cut, said Forest Grove Communications Director David Warner.

Emotional support programs were a high priority and will be even more necessary now, he said. But reducing their plan won’t be as simple as just cutting from the bottom. The district west of Portland wants the maximum effect for its spending and will have to look at how programs interrelate and support each other, he said.

“If we pull this away, what also is going to crumble?” Warner said.

- Jake Arnold, OSBA
jarnold@osba.org