A Revised Approach to Budget Planning for 2021-22

We are halfway through the 2020-21 school year. While much work remains in order to support students through the spring semester, school system leaders are also in the process of planning for 2021-22. 

The uncertainties that schools have faced this year are not going away — revenue projections will continue to fluctuate, enrollment numbers are still difficult to predict, and we are still working to understand ongoing costs related to COVID. At the same time, there is a difficult reality: students will begin the 2021-22 school year with a greater breadth and depth of need than ever before, and it will take a transformed vision of schooling to effectively meet these needs.

Districts have a critical window of opportunity this year to disrupt inefficient spending patterns and make foundational investments that pave the way for a “next-level normal” in K-12 education. To capture this opportunity while also managing external uncertainties, CFOs and district leaders should revise their 2021-22 budget planning processes to be more flexible, data-driven, and grounded in new needs. 

During our December 2020 series of CFO Strategy convenings, district leaders across our networks shared their perspectives and insights about the work ahead. Below, we summarize six crucial approaches to budgeting and planning for the 2021-22 school year and share their key considerations and advice.

1. Evolve existing guiding principles to drive decision-making in this new context.

A district’s decision-making process around budgeting should always be grounded in priorities and guiding principles. This year, districts should ensure that their priorities are revised to match our current conditions — particularly as they relate to managing uncertainty, meeting new student and staff needs, and responding nimbly to new information. Ultimately, guiding principles should help stakeholders to understand the need for adaptation and to evaluate difficult tradeoffs.

Key considerations for this approach:

• Are the ways in which we expect decisions to be made differently this year reflected in our district’s guiding principles?

• Have we clearly prioritized the student, staff, and community needs that are most urgent and foundational to address in the upcoming year?

• How will we use data to assess the impact of potential investments relative to our district’s priorities?

• How will we promote equity and ensure that more resources are allocated to the students and school communities who have been most impacted by COVID-19? 

“We’ve revised our planning this year to reflect shifting priorities — students’ academic, mental health, and technology needs, as well as training for staff. We’re adjusting school allocations from equal to equitable to support that, and data will drive all budget decisions. We’re not continuing any projects or contracts without looking at data on usage and impact.” - District Leader, ERS/Consortium CFO Convening

2. Develop various revenue scenarios and communicate about uncertainty.

Over the course of the pandemic so far, revenue projections have continually fluctuated. And while 

the negative outlook on state revenue has softened in some parts of the country recently, much remains unknown about districts’ full revenue picture for 2021-22, including the distribution of “bridge funding” from the most recent federal relief bill, the likelihood and magnitude of future stimulus, how local revenue will be impacted, and how states will prioritize K-12 relative to other areas.

At the same time, districts must be ready to communicate concrete budget proposals to their Boards and give school leaders actionable budgets and staffing allocations for school planning purposes. To ensure that communities have transparency into the process and can act as partners, CFOs and finance teams should organize the budget planning process to be responsive to a range of revenue scenarios, and communicate clearly and often about the contingencies attached to each number.

Key considerations for this approach:

• Have we identified the highest-impact variables that drive revenue uncertainty and developed a range of assumptions for each?

• What is the timeline for when we expect new information? Are we providing our community with transparency about this timeline?

• How will we manage expectations about school-level allocation? (For example, should we allocate more but reserve discretion to pull back vs. allocate less and give more resources later?)

“We can do all the scenario planning in the world, but principals need a number. And, we need our Board to engage in difficult decisions, without losing credibility and crying wolf. So how do we balance this? One, we always put out numbers with upside and downside risks to drive the discussion as much as possible. And we’re explicit about when they’re going to hear from us next, so they know what to expect.” - District Leader, ERS/Aspen CFO Convening

3. Invest the time needed to understand enrollment projections and family preferences.

Districts around the country are facing drops of 10-20 percent in pre-K and Kindergarten enrollment, and many have lost students in upper grades as well. Fluctuations of this size have tremendous implications for both revenue (for funding streams that are per-pupil) and cost (most notably, for staffing and school portfolio decisions). District teams must invest the time to understand enrollment projections at a more granular and dynamic level this year, and to consider how family preferences for schooling may have changed as a result of the pandemic (such as continued preference for virtual options and openness to multi-grade classrooms).

Key considerations for this approach:

• What data or information are we using to make enrollment projections and planning decisions for PreK-1, where schools have seen the most disruption? What kind of family outreach have we done to understand preferences for next year? 

• What assumptions are we making about unenrolled students — including what choices they made for 2020-21 and their likelihood to return?

• Do we need to build new assumptions into our projections for upper grades enrollment? (For example, how is our district thinking about student retention and how it will impact grade sizes?)

“Our planning team is getting deep on enrollment — how many students went to private school, charter schools, home school, or didn't show up? We have people getting on the phone with families. Our choice window is in February and March, and we’re giving principals flexibility to adjust their planning based on that.” - District Leader, ERS/Aspen CFO Convening

4. Ensure school designs are targeted to meet students’ distinct needs. 

The landscape of student need in every school will be different post-COVID — and how we design schools to meet those needs should be different too. We know which students’ learning has been most disrupted in a virtual environment. We know which students have experienced the most trauma. And we have real data about students’ learning loss. Districts should use all of this knowledge to inform how (and for whom) schooling needs to look different next year. Those school design strategies should then be the foundation of budget decisions — ensuring that even if districts are faced with tough decisions about reallocations or cuts, they are paving the way for new ways of “doing school” that are targeted to meeting students’ distinct needs. 

Key considerations for this approach:

• How are we prioritizing and protecting investments in early learning, social-emotional support, and academic recovery for the students who need it most?

• How can we use real data to understand student needs at a more granular level — including attendance, assignment completion, and course grades? 

• Are there foundational investments we can make now (such as extended learning time or teacher professional learning) that will create enabling conditions for strategic practices in schools? How can we evolve our underlying cost structures to enable these investments and promote equity? 

"One positive thing we got out of this year is great experiences with our community partners. So now we're thinking about integrating them into our multi-year learning loss strategy, at a lower cost per pupil. And virtual learning is working for some of our kids — so that could be an option we keep." - District Leader, ERS/California CFO/CBO Convening

5. Infuse flexibility into the process to adjust key decisions as needed.

Many districts traditionally approach the planning process in a linear way, where decisions to pursue certain initiatives are made from the beginning and drive a series of sequential budgeting, staffing, and planning decisions downstream. This year, however, districts find themselves in a position of knowing that big shifts will be needed, but lacking all of the necessary information to make specific decisions about strategy or implementation. 

In this environment, districts should strive to approach budget planning in a way that abides by critical milestones but also creates as much flexibility as possible for more specific decisions to get made later in the process. They should also examine whether there are process changes that could help create more predictability where possible.

Key considerations for this approach:

• Are there process milestones or deadlines that can be pushed back to allow more time for critical decisions (such as timelines for reducing or eliminating positions)?

• Are there processes we can accelerate to create more certainty (such as incentivizing early notification for retirement)?

• Are there ways to earmark funding for known, high-priority areas of need without making specific decisions about strategy implementation until later, when more information is available?

“Even before all this, we had an annual recalibration process for our five-year strategic plan so we could make changes mid-way. Now, we have an updated process where we can change mid-flight at any point as needed throughout the year, in alignment with our three priorities: safety, social-emotional support, and addressing learning loss.” - District Leader, ERS/Aspen CFO Convening

6. Use multi-year projections to think long-term.

Although the short-term future is hard to predict, in some ways the medium- and longer-term outlooks are more certain. We know that the economic impacts of the pandemic are still unfolding and will be felt for multiple years; and we know that learning and opportunity gaps across student groups were significant even before the pandemic and have only increased. Anchoring near-term planning decisions in this bigger picture context will ensure that this year’s budget decisions maximize the long-term value of available resources.

Key considerations for this approach:

• Have we identified one-time vs. recurring expenditures and matched them to short- and long-term funding streams?

• How are we using grants and other short-term funding to steer toward long-term strategic shifts — not just filling in gaps?

• Are we both building and communicating multi-year projections with stakeholders to drive long-term decision-making?

“We don’t know what the needs are, but we know we’re going to have them. This is not going to be a three-month sprint — this is our reality for a couple of years. We have to take a proactive approach and shift away from what we were doing before — so what do we have to do differently now, and how do we build systems to support that?” - District Leader, ERS/Aspen CFO Convening