Which Districts Are Most at Risk If America Breaches the Debt Ceiling?

EduationWeek | By Mark Lieberman & Maya Riser-Kositsky | May 23, 2023

The winds on Capitol Hill are blowing in the direction of cuts to federal funding for K-12 schools, one way or another.

The nation is on the verge of crashing through its legally mandated debt ceiling. That could happen as early as next week. If it does, the world could plunge into an unprecedented economic crisis that could include a long-term recession.

In the meantime, members of Congress and the White House are negotiating over a bill that would raise the debt ceiling and prevent default. But House GOP leadership is holding firm to its position against moving forward unless Democrats in the Senate and the White House agree to cap federal spending and make cuts to non-defense programs, including K-12 schools.

Many district leaders are currently preoccupied with the oncoming expiration of federal COVID relief aid, tense school funding negotiations in state legislatures, prolonged labor market challenges that have left crucial positions unfilled, and the annual puzzle of crafting local budgets. So the consequences of either a federal default or cuts to federal education spending aren’t yet the top consideration for most.

But a loss of federal funds, either temporary in the wake of a default or longer term as a policy choice by Congress, will be problematic for nearly all U.S. school districts—particularly those that rely more heavily on federal dollars. Key academic initiatives paid for by federal funding streams could be cut, staff members could be laid off, and important upgrades to facilities and technology could be delayed.

Who’s most at risk?

The federal government annually contributes roughly 8 to 10 percent of the nation’s overall K-12 spending. But that aggregate figure obscures major differences—many districts receive less than 3 percent of their funds from the federal government, while thousands of others draw substantially more.

Using federal data from the 2019-20 school year, the most recent available set, Education Week compiled a list of the roughly 2,900 public school districts, out of more than 13,000 overall, that draw more than 10 percent of their annual budgets from federal funding sources like Title I, the Individuals with Disabilities Education Act, and the Impact Aid program for schools with large plots of federal land within district boundaries. The analysis excludes districts that have an annual revenue below $1 million.

These data also exclude charter-only districts, special education districts, education service agencies, and other anomalous entities that fall under the category of “local education agencies.”

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