By Karen Pierog
RACINE, Wisconsin (Reuters) - The public school system in this city hugging the shore of Lake Michigan is running low on money and options for educating its 21,000 students as federal stimulus cash dries up.
Anticipating this summer's end to the $10 million boost it received from the stimulus, Racine Unified held a referendum in April asking to replace some of the lost cash with local property tax dollars. Voters said no.
Facing its own budget troubles, Wisconsin is slashing more than $16 million in state funding for the district, and a state-imposed voucher system could drain even more money if parents pull students out of the district.
With the recession decimating the coffers of states, cities and schools and pushing up the unemployment rate, the government in 2009 began pouring $830 billion into the economy in the hope of creating or saving jobs like those of teachers.
Now that the flood of federal money has ended, cities and school districts like Racine must come up with new ways to cover expenses for the most basic services, including policing, healthcare, schooling and other day-to-day operations.
Racine Unified adhered to a main stimulus tenet of preserving jobs and also made one-time investments with the funds, according to David Hazen, the district's chief financial officer.
But now it must lay off about 60 employees, mostly teaching assistants, as part of its plan to close a projected $25 million budget deficit that depended mainly on salary freezes and higher employee contributions to healthcare and pensions.
"I'm just envisioning the worst," said Michael Anton, president of Racine Unified's parent teacher association council. "What I see is larger class sizes and staff being stretched to the max."
Milwaukee Public Schools, Wisconsin's biggest district, said that in anticipation of state cuts and the end of federal stimulus dollars, its fiscal 2012 budget eliminated almost 1,000 jobs, closed 12 schools, dropped most funding for new textbooks and decreased summer school options. Last week, the school system said it sent out layoff notices to 519 workers, including 354 of its 5,474 teachers.
Parents, teachers and administrators in other districts across the country are having the same negative vision for the new school year starting in a few months. Few places can make up for the loss of the $135 billion state fiscal stabilization fund that was included in the stimulus plan mostly for education and few have other places to turn.
"The end of stimulus funding is now coupled with cuts in state education aid and the decline in local revenues," said Deborah Rigsby, federal legislation director for the National School Boards Association. "You've got those three things going and then, number four, there's the uncertainty of the federal appropriations process."
States contribute 48 percent of funding for primary and secondary education, while the federal government pitches in about 8 percent, according to Fitch Ratings. School districts "have little if any control over revenue raising," the agency said in a report highlighting state aid cuts as a risk to districts, which largely rely on local property taxes for the remainder of their funding.
Even districts with the authority to raise local taxes may not be able to increase revenue due to declines in property values and voter resistance to tax hikes, Fitch added.
CUTS, CUTS, CUTS
"Most of the conversation is about how it impacts teachers, and that's real easy -- they're going to lose jobs," said Dennis Van Roekel, president of teachers union the National Education Association. "The real impact is on students. The educators who are laid off will just not go to work, but the students will still have to go to school."
Ultimately, he said, students will receive less individual attention and instruction, as their class sizes swell and school supports such as nurses and librarians vanish.
"It's a dark picture for school funding," wrote the American Association of School Administrators in a report.
"We're just trying to educate students with high needs with less money than other districts that don't have as many high-need students because poverty is linked to performance unfortunately," Racine's Hazen said about the district, where the unemployment rate is higher than the state average.
He said class sizes in the district's six preschool to fifth-grade schools may rise to 28 from a previous maximum of 25.
The school board is considering a lawsuit against Wisconsin that would claim the state's new two-year budget creates unconstitutionally unequal funding among districts.
"The state budget problem is being borne by urban districts -- they're the ones losing the state aid. Suburban districts that are not losing state aid are afforded property tax relief. The result is disequalizing," Hazen said.
Schools have moved from making more moderate budget moves, such as adjusting thermostats, to "cuts and reductions in budget areas that directly impact student achievement: programs and personnel," according to the school administrators survey.
The group, which represents school system leaders such as superintendents, previously found that a growing number of districts consider themselves inadequately funded and almost all -- 82 percent -- expect cuts in state and local revenues for next school year.
STATE CUTS COLLIDE WITH STIMULUS END
Colorado has slashed public school spending by $227.5 million, dropping the average per pupil funding in the state by $346 to $6,468 in the coming school year from $6,814 in fiscal 2011 when federal stimulus dollars were used to prop up spending, according to Leanne Emm, assistant commissioner for public school finance at the state's education department.
Governor John Hickenlooper recently said the decision was made only after the state had "cut everything that you can cut" in other areas.
"Look, nobody wants to cut education, right? There is not a single governor in America that went through the grief of an election to come in and say, 'All right, we have to make all these cuts.' Well, this is the world we live in," he said.
Some districts are chopping hours or days off schedules. Even in South Dakota, where the recession was relatively mild, many schools will be open only four days a week.
Public education has long inflamed disputes at every level of government, and possibly no fight is more persistent or rancorous than how to fund it. Both primary and secondary education typically take up 40 percent of a state's budget, according to the Center on Budget and Policy Priorities.
States often consider schools sacrosanct in drafting budgets, but as the recession and housing crisis caused an historic revenue collapse almost all had to consider trimming education. According to CBPP, a think tank that tracks their fiscal conditions, at least 34 states have cut funding for schools and 43 for higher education since 2008.
The federal government stepped in with the 2009 stimulus plan. Last summer, as the stimulus money was largely spent, Congress allocated another $10 billion for education jobs.
That money was absorbed quickly and by February school districts were laying off workers. The future of education in America still looks austere.
Nearly three-quarters of school districts in the United States will cut jobs for the Fall term, according to the school administrators group, which projects that 227,000 education jobs for the 2011-12 school term are "on the chopping block."
(Additional reporting by Lisa Lambert in Washington; Editing by James Dalgleish)