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This article orginally appeared in the January, 2010 issue of Catalyst. Click here to see that issue's table of contents.

Cincinnati's Mt. Airy School received lots of new technology this year, including this new computer lab. Stimulus money helped pay for some of the new technology in Cincinnati%u2019s Elementary Initiative, which directed resources to the district's underperforming elementary schools. [Photo by Tony Tribble]

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Today’s stimulus cash could leave schools in a bind later by Scott Stephens

So you’ve inherited a little money, and you’re feeling flush. Time to put in that backyard pool. Maybe some central air conditioning. Get that Rolls Royce you always dreamed about. Don’t worry: your new housekeeper will keep your home tidy while you’re out tooling around.

But after the windfall is gone, the costs you incurred will live on. That pool will inflate your water bill and the air conditioner will boost your electric consumption. You paid cash for the Rolls, but how will you now pay for fuel and repairs? And do you really want to lay off the housekeeper?

Schools are beginning to ask themselves the same kinds of questions. The federal stimulus program pumped an unprecedented amount of money into district coffers. But many worry that the one-time cash infusion will create jobs and programs that cannot be sustained after the extra money is gone—a funding cliff that could invite a future budget crisis.

“We’re very nervous going forward,” says Damon Asbury, a lobbyist with the Ohio School Boards Association. “We’re already starting out in a multi-billion dollar hole, and we know there won’t be any further stimulus funds.”

Ohio is a good example of how stimulus money can cloud economic reality. Even though sales tax collections in the state fell 12.1 percent in the third quarter of 2009, the state’s overall revenue dipped just 2.5 percent. The difference: a $363 million bag of cash from the federal government.

The arithmetic is not lost on Ohio school leaders. Even with stimulus dollars, state lawmakers struggled into the winter months trying the plug mammoth holes in the current 2009-10 budget. Superintendents hate to even think about where they will land in the next state budget.

Joseph Regano, superintendent of Solon schools near Cleveland, says his district tried to use the federal money for one-time expenses that benefited children, such as an elevator in the district’s special education building.

“To be truthful, I’ll take the money now and manage the funding cliff problem two years down the road,” Regano says.

“But it would be wrong for anyone to think it didn’t have an affect on what we did,” he adds. “Some student’s life was helped.”

Most of Ohio’s urban school leaders have been careful to avoid incurring costs they won’t be able to afford down the road, says William Wendling, head of the Ohio 8, a coalition of big-city superintendents and teacher union presidents. Many districts have spent stimulus dollars on things like professional development for teachers or parent outreach programs, which are worthwhile but could be axed if budgets shrink.

One of the most innovative plans was in Cleveland, where the district planned to use stimulus money for a buy-out program that would have paid about 200 older, higher-paid teachers for the next two years and replaced them with younger, lower-paid teachers. The plan drew national attention but fizzled when only 21 teachers volunteered for the buy-out.

In Columbus, some of the money was used to provide one-time help to struggling schools in the form of a special team of six teachers, two administrators and a data specialist. The team is charged with helping the schools implement an improvement plan.

“Most districts are being properly conservative right now,” Wendling says. “We’ll begin the next biennium budget process in a little more than a year. At that time, we'll have a better understanding of where the Ohio economy is or isn't, and how severe the funding cliff might be.”

If economic forecasts are correct, that cliff could be very steep. An October 2009 report by the Nelson A. Rockefeller Institute of Government says state budgets are still in big trouble from the second straight quarter of record drops in sales tax revenue. Many states used the first $40 billion in stabilization funds to plug budget holes. But the stimulus dollars end in 2011, as might the smoke-and-mirror budget-balancing tricks.

“Generally speaking, we have not seen enough worry about the funding cliff,” says University of Washington professor Marguerite Roza. “We hear district leaders say, ‘I won’t be here in three years anyway.’ ”

The short-sighted attitude about borrowing against the future was so pervasive in some states that the U.S. Department of Education issued a public scolding over the shell game they were playing with stimulus dollars.

In late September, the department singled out Connecticut, Massachusetts and Pennsylvania as states which blatantly switched state education funds to other programs, and then used stimulus money to fill the gaps. That’s OK to a point, so long as states don’t slash their education budgets below 2006 funding levels.

“My sense is that the motivation for most legislators is to get through the next two years,” says Gene Wilhoit of the Council of Chief State School Officers. “It’s easy to talk to them about long-term reform. But their life cycle is the next legislative session, and the one after.”