States Ramped Up K-12 Spending in 2022, But Growth Likely to Slow

Staff Writer

Overall state spending on K-12 education continued to increase in fiscal year 2022, rising 8 percent over the previous year to hit $538 billion, as federal aid and state investments continue to fuel growth, according to a new report.

It’s unlikely, however, that large year-to-year jumps will continue in the years to come.

The increase in 2022, based on estimates in the National Association of State Budget Officers’ 2022 State Expenditure Report, is more modest in comparison to 2021, when federal pandemic aid drove overall state spending on K-12 to rise a whopping 16.6 percent.

States have poured a lot of their recent funding into one-time needs, from replenishing rainy-day funds to addressing learning loss.

“It’s less growth, but it’s important to remember it’s less growth off of an already elevated level,” said Brian Sigritz, director of state fiscal studies for NASBO.

For example, K-12 federal funding to states rose 94.3 percent in fiscal 2021, and then grew by just 4.5 percent in 2022.

The fact that overall state spending on K-12 still increased 8 percent in 2022, despite the sharp drop off, shows that federal funding is still working its way through state budgets, he said.

At the same time, strong tax revenues and the continued need to address pandemic-related learning loss have spurred states to ramp up their own K-12 spending from state revenue sources.

Since 1995, state lawmakers have directed between 34 percent and 37 percent of their general funds to K-12 education, the report said, meaning states’ pre-college spending is often tied closely to the health of their general funds.

In 2021, state funding for elementary and secondary education grew by 4 percent, according to the report, and rose by another 8.9 percent in 2022.

“We’ve now had two consecutive years of very strong growth in revenues, including double digit growth in tax collections both in fiscal 2021 and 2022, which is considerably higher than what we typically see,” Sigritz said.

As pandemic-related learning loss remains a top concern for state lawmakers, and deadlines for spending federal pandemic aid loom, he said states have used some of their recent revenue windfalls to invest in long-term K-12 funding efforts such as increasing education funding formulas and boosting teacher pay.

However, Sigritz noted that states have largely focused on spending the additional funds on temporary programs, especially as tax revenues are expected to decline as economic pressures mount.

“States recognize they aren’t likely to continue to see that level of growth, so they’re directing this one-time revenue to one-time purposes,” said Sigritz. He added that he’s seen states pay down debt, fund rainy day reserves, make pension fund payments, offer grants to address pandemic-related learning loss, and support districts’ capital projects.

Spending Likely to Slow

Overall, he anticipates states will see continued revenue and spending growth in 2023, although at lower levels than recent years as federal funds continue to wane and economic pressures ramp up.

The NASBO report also breaks down state spending by both region and individual states, and found that all regions of the U.S. recorded overall increases in K-12 spending in 2022 — except for the Southwest.

The regional decline can be attributed to the very large increase the region saw in fiscal year 2021, and timing of expenditures within the year. That timing and comparisons are further complicated by one-time federal fund expenditures and when they are recognized in a state budget.

It’s likely the regional data is skewed by the unprecedented influxes in federal aid and differences in state budget cycles, Sigritz said, and it will be easier to draw insights from the data when looking at them in the long term.

“We’re seeing with data and state spending overall there are some fluctuations due to additional federal funds,” he said. “It makes apples-to-apples comparisons more difficult.”

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