5 Intertwining Financial Challenges New England Districts Are Facing

New England’s public-school systems have long been viewed as among the strongest in the country—and they remain among the most heavily invested in. Across Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont, districts serve roughly 2 million students and spend more than $50 billion annually on public K–12 education.

Yet even before the pandemic, New England was losing ground in student achievement.

And—like many districts around the country—these historically high-performing systems are facing a convergence of financial pressures. Individually, any one of these pressures would demand difficult trade-offs. Taken together, they create a moment of real urgency for district leaders and the students they serve.

If New England is to sustain strong public schools—and reverse troubling trends in student outcomes—leaders must first understand the scale and intertwining nature of the financial challenges now shaping the region’s education systems.

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• Unpredictable Federal Funding
• State Economic Conditions
• Enrollment Decline
• Rising District Costs
• Increased Student Need

1. Unpredictable Federal Funding

On February 3^rd, 2026, Congress approved $79 billion in education funding, which included essentially flat funding for Title I and IDEA. Compared to the $12.9 billion reduction in federal education funding initially proposed by the president in May of 2025, flat funding seems like a victory. However, flat funding doesn’t account for inflation, let alone other expense challenges. (See Challenge #4, Rising Costs.)

THE BOTTOM LINE FOR FEDERAL FUNDING:

Changes to Medicaid and SNAP, the elimination of hundreds of federal grant programs, and the potential for future funding disruptions mean less money for school districts to provide essential learning and services to their most vulnerable students.

Federal Cuts & Continuing Uncertainty

Even if core federal funding were keeping pace with inflation and rising costs, previous moves by the administration have left districts uncertain about whether they can count on future funding. For several weeks in July 2025, the administration had frozen and then released $271.4 million in federal grants for New England districts that had already been approved for the coming school year. And although the latest bill seemingly guarantees that approved funding will be released in a timely manner, we’re already seeing the administration finding ways to hold back funding.

Beyond the approved Title funding, schools are also experiencing the loss of anticipated funds through smaller grant programs. In 2025, Mark Lieberman at Education Week documented “more than 760 in-progress [Department of Education] grants, collectively worth more than $2 billion, that were discontinued or terminated.”

And it’s likely that the administration will continue to change rules for—or cancel altogether—additional competitive grants.

The Medicaid Factor

House Resolution 1 (H.R.1) (a.k.a. the One Big Beautiful Bill Act), signed into law on July 4, 2025, includes changes to Medicaid that are estimated to result in a loss of up to $48 billion in New England over ten years. And as many as 252,000 New Englanders are predicted to lose coverage in just the first year under the bill’s new work requirements.

Why does lost Medicaid coverage matter for schools? Today, over 1 million children in New England are enrolled in Medicaid. And New England school districts bill Medicaid for over $242 million in school-based health services each year. These services include specialized transportation, speech and language therapy, psychological counseling, nursing, diabetes and asthma management, and more—all services designed to support high-need students and students with disabilities.

Federal Medicaid Revenue as a Percent of Total K-12 Revenue in New England (FY24)

Source: Medicaid totals are from CMS 64, line 39 as reported in the FY2024 Financial Management Report at Medicaid.gov. FMR contains total federal share of Medicaid for school-based services and associated administrative costs (reported separately). Dollars are for IEP-related services only. Total K-12 revenue from the U.S. Census Bureau 2024 Public Elementary-Secondary Education Finance Data.

As New England children lose their coverage—either due to family members not meeting the new work requirements or failing to navigate additional administrative challenges—school districts will receive less funding to cover these essential services. Connecticut, Massachusetts, and New Hampshire are 3 of the 28 states that have taken advantage of school Medicaid expansion, receiving federal funding to pay for health services beyond what’s legally required by Individualized Education Plans (IEPs). And Maine and Vermont will likely face challenges simply because school-based Medicaid accounts for more than 1% of their total education revenue, which means that any reduction will be felt, especially in high-poverty areas.

“With other federal programs being cut, Medicaid-to-schools funding is a critical resource for districts in meeting the needs of students with disabilities who require medically necessary services to access their education.”

— Director of Student Services, Rural District, New Hampshire

SNAP and Universal Free Meals

H.R.1 will also directly impact district budgets via changes to the Supplemental Nutritional Assistance Program (SNAP). As with Medicaid, more stringent work requirements are expected to result in lost coverage. In this case, 800,000 parents/guardians of children ages 7-18 are predicted to lose eligibility nationwide.

These changes impact both individual high-need children across all six New England states and the schools and districts that serve a high percentage of these students.

For individual children, SNAP and Medicaid are used for “direct certification,” allowing them to receive free school meals without going through a separate application and qualification process. An Urban Institute study estimates that in Rhode Island, as many as 8,900 students are at risk of reverting to manual school meal applications as a result of the new legislation. And since the manual application process is known to be unreliable, thousands of eligible children in New England will likely go without free or reduced-price meals.

New Hampshire’s children could be particularly affected by the SNAP changes, since the state hasn’t yet added Medicaid to its certification process and relies solely on SNAP eligibility.

A change in the number of direct-certified students will also affect schools and districts participating in the Community Eligibility Provision (CEP), which provides federal funding for universal free meals to over 1.1 million students in New England. Participating districts will receive less federal funding if fewer students are certified and may even lose CEP eligibility altogether.

The Impact of Federal Funding

Federal funding accounts for only 8.5 % of public-school funding in New England, and many would argue that state and local factors play a larger role in districts’ ability to support students.

While that’s true overall, federal funding—by design—largely goes to the highest-need students. Title I predominantly funds schools in high-poverty areas, IDEA is for students with special learning needs, and many of the recently canceled grants target other vulnerable populations: Native Americans, unhoused, immigrants, children who have experienced abuse, and more.

And so, while federal funding makes up a relatively small percentage of total education revenue in states across New England, it can impact high-need districts within those states much more. For example, Manchester School District in New Hampshire received 22% of its total revenue from federal sources in FY22-23.

That means that the districts, schools, and students who already face the greatest challenges will be hit the hardest by any federal actions that take money off the table.

Percentage of Total Students in NE Served in a High-Need District

Percentage of that state’s students who attend
districts with more than 20% of students living
in poverty. (Source: U.S. Census Bureau SAPIE
School District Estimates for 2023)

2. Shifting State Economic Conditions

While federal funding means a lot to certain students and schools, nationwide—including in New England—public education receives far more in state dollars. This means that public school districts stand to lose considerable funding when state revenue as a whole declines; with less money to go around, education budgets often pay the price.

The good news for New England schools is that, historically, the region tends to prioritize education budgets a bit more strongly and restore those dollars more quickly in the face of economic downturn. (Compared to the country overall, New England states during the 2008 Great Recession made less dramatic cuts to education.)

Even so, states are likely to be facing a storm of financial pressures. And with tight budgets, funding for public education might be cut to make way for other priorities.

Medicaid, SNAP, and State Finances

While changes to Medicaid and SNAP will directly affect local funding, their impact on overall state budgets will be even more significant. As we mentioned above, New England may lose up to $48 billion over ten years. Connecticut alone could lose up to $14B—or 15% of its total funding for government-assisted healthcare.

This loss of federal funding will leave New England states trying to figure out how to provide healthcare for their residents. And it leaves schools hoping that the lost $48B doesn’t come from the states’ public education budget. Massachusetts, Rhode Island, and Vermont all require residents to have health insurance, so they’ll certainly be looking for ways to fill the gap.

In terms of SNAP, with changes to eligibility rules, states will likely be thinking about how to keep folks fed, but they’ll also be looking at sizable cost increases in administering their existing programs for those who maintain eligibility. H.R.1 included legislative changes to administrative cost-sharing and benefits cost-sharing. A recent analysis by the Urban Institute used FY24 error rates and FY23 benefit and administrative costs to estimate the total cost increase by state.

Total Estimated Increase in SNAP Benefit and Administrative Costs FY27

Source: Urban Institute, “Federal Changes to the Social Safety Net Are Tightening State Budgets. School Meal Programs Could Pay the Price,” April 2026.

One final, but critical piece of this puzzle: direct certification. As previously mentioned, many states use some combination of Medicaid and SNAP enrollment to identify students as “economically disadvantaged.” These numbers are used to qualify the students for free and reduced lunch, but they’re also used in a host of other scenarios.

Many districts across New England use this data in need-based funding formulas to determine how to distribute funding among their schools. And all six New England states use this data for their state funding formulas to determine how to distribute funding among their districts. The problem is that just because these families are no longer enrolled in Medicaid or SNAP doesn’t mean that the children don’t still have the same high needs.

For example, in one small western Massachusetts district, if only 50–75 students lose their enrollment in these federal programs, it would change how the district is categorized under the state’s school funding formula, resulting in a loss of up to $5 million in state funding.

Economic Shifts

Each state’s conditions when it comes to taxation, property values, and revenue reserves will affect how well the state is able to weather the changes brought on by H.R.1 and any general economic downturn the state may experience.

1. Decreased Income Tax Revenue: All six New England states are likely to see reduced income tax revenue in the near future, with varying severity based on:
   • Population decline: While all six New England states have seen decreases in birth rates, Connecticut and Massachusetts have also seen significant out-of-state migration. These factors together effectively reduce the number of taxpaying residents, which may or may not outpace the decline in K-12 student enrollment.
   • Rising unemployment: Average annual unemployment rates in all six New England states have steadily been on the rise since 2023, with Rhode Island experiencing a very high 1.6% increase.
   • Conforming to federal tax cuts: Rhode Island and Connecticut use the current federal tax code as the basis of state income tax rates, which means that if the federal government lowers taxes, these states need to pass legislation to avoid adopting these lower rates.
   • Recent reductions in income taxes: Connecticut, New Hampshire, and Massachusetts have recently passed, or are considering, legislation that reduces state income tax.
2. Rainy Day Funds: Some states’ reserve funds are also at risk, impacting their ability to absorb future budget challenges. For example, Rhode Island’s rainy day fund balance is only 5.1% of FY26 expenditures. And reserves in New Hampshire and Vermont have remained relatively stagnant, and are small (14.8% and 12.8%, respectively) as percentages of FY26 expenditures, which may not be sufficient in the event of a further economic downturn.
3. Changes in State and Local Property Tax Revenue: Property taxes are one area where the region has benefited. All six New England states have seen a significant rise in property values since 2020. And because property tax rates remained mostly steady during this time, these states collected a lot more in property tax revenue—experiencing between 14% and 33% growth.

It’s worth highlighting the local property tax dynamic in particular, since an overreliance on local property taxes is a major factor contributing to inequities in district funding. A recent report from the Albert Shanker Institute found that New England states have among the largest funding gaps between high- and low-poverty districts in the country. That inequity should encourage state leaders to take another look at their education funding formulas and to seek alternative certification methods to ensure that high-need students aren’t overlooked, widening the opportunity divide even further.

3. Enrollment Decline

In 2019, K-12 enrollment hit an all-time high: 50.8 million students were enrolled in public schools across the country. Since then, enrollment has steadily declined in every New England state. In fact, nearly 85,000 students have left the public school system in New England. Of the six states, New Hampshire has experienced the most significant decline: dropping by 8.7% in just six years (compared to an average of 2.5% nationwide).

K–12 Enrollment Decline in New England Since 2019

Source: National Center for Education Statistics, ELSI Table Generator, Total Enrollment (Exclude AE) SY2018–19 to SY2024–25. 2019 enrollment = 100; values reflect relative change over time.

Why Enrollment Decline Matters

When enrollment drops significantly, districts—and students—are affected. The most obvious impact is a financial one: federal, state, and local funding formulas typically distribute dollars according to the number of students. That means districts experiencing the greatest enrollment loss will have less money to pay for all the elements of a high-quality education.

It also matters which student populations are declining. A 2024 study of enrollment decline in Boston Public Schools showed that enrollment decline in the district is especially exacerbated by the departure of wealthy families—often before their children even reach school age: Around 25% of middle-income and 50% of high-income families left Boston before their children turned five. A 2025 statewide study showed that the wealthiest 20% of districts in Massachusetts were losing 1.5 times as many students as the remaining 80% of districts combined. The result is that public schools are not only losing students, but are being left with a higher concentration of students with greater or more complex needs. (See Challenge #5, Greater Student Need). Today, over 81% of Boston Public Schools students are classified as “high needs”—the highest percentage that the district has experienced in a decade.

And while enrollment decline certainly spiked as a result of COVID, slowing birth rates across the country were impacting many New England districts long before the pandemic. With COVID introducing a host of new challenges, district leadership was rightfully focused on addressing student needs and academic recovery. Difficult conversations about school closures and consolidation plans that might have “right-sized” a declining-enrollment district were put on pause.

The result in many New England districts was a sharp increase in the number of small, under-enrolled schools. And while this challenge is frequently discussed in large metropolitan districts, it can pose equally complex challenges in rural areas, where already small schools have gotten even smaller.

Enrollment Decline in Massachusetts Public Schools By Race/Income (2019-25)

Source: Education Next, School Enrollment Shifts Five Years After the Pandemic, July 2025.

The Unintentionally Small School

When it comes to enrollment decline, these “unintentionally small schools” create difficulties not just for district administrators, but for the students they serve. To be clear, we’re not just talking about small schools in general. Large areas of rural Maine, for instance, have operated small schools for decades. And while these schools may lack some of the advantages found in larger districts, they’re at least small by design.

By contrast, rapidly declining enrollment across New England, including the sharp drop brought on by COVID, has left schools operating well below their intended capacity.

An ERS analysis found that, since the pandemic, the percentage of schools classified as “small” has risen in all six New England states (i.e., elementary and K-8 grades smaller than 60 or middle/high school grades smaller than 125). Massachusetts, New Hampshire, and Rhode Island face the greatest challenge, with an increase of over 6% in the number of small schools. In New Hampshire, this shift has been brewing for years: 57.3% of the state’s schools were small in 2014, while today over 63% fall into that category.

In times of economic strain, it’s important to note that unintentionally small schools lead to higher operational costs: they spend 20–30% more per pupil. And while spending more might sound like a good thing for kids, in small schools, much of that spending goes toward fixed, recurring costs—not deliberate investments in student experience or research-backed initiatives known to improve outcomes.

In fact, in unintentionally small schools, it’s more difficult to provide high-quality student experiences, period. Though families tend to love the idea of a small school where their child gets more attention, when schools simply become small, students often lose access to arts programs, advanced coursework, electives, and more.

Percent Increase in Share of Small Schools in New England (2015-25)

Source: National Center for Education Statistics, ELSI Table Generator, Change in Enrollment in New England, SY2014–15 to SY2024–25. Small schools are defined by elementary and K-8 average grades smaller than 60 or middle/high school grades smaller than 125.

How Did We Get Here and What’s Next?

Exactly why a district’s enrollment declines is an important consideration and may impact what steps leadership would take in response. So, the first step for any state or district is to understand what’s causing the decline. Here are the four main drivers, both nationally and in New England:

1. Falling birth rates: Since the late 2000s, the primary driver of enrollment loss across the country has been decreasing birth rates, and New England’s rate is the lowest of any region in the country. Between 2013 and 2023, New England’s birth rate decreased by 6.1%, with Vermont experiencing the sharpest decline of the six states at 9.3%.
2. Migration / urban flight: In New England’s largest metropolitan areas, school enrollment is being significantly impacted by “urban flight,” in part fueled by families choosing to seek what they perceive to be better schools outside the city. From 2021 to 2022, 1.2 million people moved out of the country’s large urban cities. Two New England states (Connecticut and Massachusetts) are also losing students to out-of-state migration, with Massachusetts ranking sixth in the nation with a 4.9% loss in residents between 2014 and 2024.
3. Non-traditional public schools: Enrollment in public school alternatives has negatively impacted public school enrollment in Connecticut, Maine, Massachusetts, and Vermont, but it remains a very minor driver of enrollment decline overall. This is partly because the region’s total school choice numbers are relatively small (from 2011 through 2021, only about 15% of students didn’t attend traditional public schools) and partly because any increases in charter school enrollment or homeschooling have been offset by a somewhat precipitous drop in private school enrollment. Maine has been most affected: The number of students homeschooled in the state increased by 78% during the pandemic and many have remained at home.
4. Immigration policy: For decades, one factor has been offsetting declines due to decreasing birthrates: new families arriving in the U.S. and sending their children to public schools. (In 1990, just 13% of students nationwide were children of immigrants, while in 2021 that number was 25%.) That growth, however, has slowed. And with the administration’s aggressive stance towards immigration, districts can expect continued stagnation. For example, the number of multilingual learners enrolled in Massachusetts public schools dropped by about 7,000 in 2025 compared with the prior year. And while not reflected yet in statewide datasets, many districts—particularly those serving large immigrant communities—are reporting even larger enrollment losses in SY2025–26.

Births per 1,000 Women Ages 15-44, National vs. New England

Source: KFF Births per 1,000 Women Ages 15–44, 2013-2023.

It’s important to note that districts can and should look at birthrate trends in order to estimate the five-year projections for kindergarten enrollment. Districts can also monitor trends in families leaving their district, particularly before children turn five. This can be a clear indicator that families believe that neighboring districts offer better educational opportunities for their children.

On the flip side, it’s more difficult to predict what impact federal policy may have—either directly or indirectly—on immigration or school choice. Currently, New Hampshire is the New England state most under threat from ESAs/vouchers, with the Education Freedom Accounts established in 2021 and opened to all income levels in 2025. But that could soon change.

That said, declining birth rates remain the single largest driver of enrollment change, with no indication that these trends will reverse. And so, leaders will continue to face reductions in revenue and will need to make difficult choices to ensure that the “portfolio” of schools in their district is designed to successfully—and sustainably—serve every student.

4. Rising District Costs

While district revenue is under threat from enrollment decline and shifts to federal and state funding streams, districts also face more localized challenges in the form of increasing costs, which are often incredibly challenging to combat.

Once again, this is partially caused by the rise of unintentionally small schools. But low enrollment is just one contributing factor. Many of the costs that are steadily rising are rooted in other so-called “legacy cost structures”: ways of organizing schooling that build year after year without asking whether a more significant change is possible—or even necessary.

There are several factors that district leaders can tackle; this paper focuses on three that are having a big impact on districts today. They meet these criteria:

• The related costs increase regardless of revenue: A district may be shrinking or losing money, but these costs are still going up.
• The system or structure isn’t necessarily related to the district’s strategy or evidence of what works for students.
• It carries with it a significant financial impact, consuming an outsized proportion of the total operating budget. (This also means that if leaders don’t tackle these legacy structures, they’re going to have a hard time operating in a strained fiscal climate.)

And if you’re wondering why these decades-old systems remain unchanged, remember that making changes at this scale is often time-consuming, politically fraught, and can require upfront investments before you experience cost savings. District leaders need a lot of support to effect this kind of change.

Traditional Teacher Compensation Models

Educator compensation—the combination of salaries and benefits—is the single largest expense in K-12 education, accounting for nearly 50% of all K-12 expenditures nationally in FY24. In New England, the share is slightly higher, with educator compensation accounting for 52.4% of K-12 expenses in the region. And the total cost of teacher compensation has been rising—in New England and across the country.

Instructional Compensation as Percentage of Total K-12 Expenditures in New England (FY24)

Source: U.S. Census Bureau. (2024). Current spending of public elementary-secondary school systems by state: Fiscal year 2024. Public Elementary-Secondary Education Finance Data Summary Tables. Instructional compensation comprises the salaries and wages and employee benefits of instruction-related roles.[1]

While these costs may be rising across the board, it’s essential to understand why teacher compensation is on the rise; different drivers may call for a different set of actions for district leaders, state policy, or local advocacy. So first, let’s take a look at what causes teacher compensation to rise:

1. Rising cost of benefits: In New England, the bulk of the increase in educator compensation comes from a rapid rise in the cost of benefits: health insurance, retirement, unemployment, etc. Between SY2011–12 and SY2021–22, for example, total benefits for instructional roles in New England rose by 32.1%. By comparison, the total spend on instructional salaries rose by just 11.5%.[2]
2. Base salary increases: In union states, including all six states in New England, an annual cost-of-living adjustment (COLA) is often written into multi-year teacher contracts. The most recent collective bargaining agreement with the Boston Teachers Union (2024) included a 2% annual increase, which has not kept up with inflation but remains a fixed cost the district must account for regardless of revenue growth.
3. Workforce experience: Teacher contracts also typically increase pay based on experience. And so, hiring and retaining early-career teachers generally has a stabilizing effect on total teacher compensation, since the salaries of these teachers are lower. In times of enrollment decline, low teacher turnover, or layoffs, however, districts end up holding onto their more experienced—and more expensive—teachers.

These fixed compensation costs are challenging to tackle, but once a state or district identifies the primary drivers of the rising costs, leaders can take action. When it comes to the rising cost of benefits, for example, the state can help lower costs for districts through state-sponsored plans. Connecticut, Massachusetts, and Vermont cover nearly all employer pension costs, and Rhode Island pays 40%. When it comes to health insurance, several states offer state-run options, which can lower costs, but the cost isn’t subsidized. Maine and New Hampshire don’t have state-level involvement in health insurance, but many districts obtain coverage through large health trusts, established to consolidate needs and save on costs.

If a district or state is primarily contending with across-the-board contractual increases (including COLA and experience-based step increases), leaders should consider approaching the next contract negotiation cycle differently. For instance, they could reduce the amount typically allocated to across-the-board increases and reserve the remainder for more strategic, targeted pay increases. This could mean aligning some money toward teacher effectiveness, giving your newest teachers more rapid salary growth, or providing incentives for hard-to-staff roles or schools. And while ideally these strategic compensation moves might be supported by state funding and policy, they can also be achieved at the local level alone.

And finally, if a district is in the unavoidable position of having to enact layoffs, leaders should consider making termination decisions based on something other than the traditional “last-in, first-out” (LIFO) approach. As of 2012, Massachusetts requires districts to take teacher performance into account when making necessary layoffs and, in fact, only permits seniority as a “tie-breaker” when considering two equally effective teachers. On the flip side, Rhode Island law actually requires districts to lay off the most junior teachers first. The four other New England states leave this decision at the local level, which, in practice, means that LIFO is the standard built into most contracts. More and more districts, however, are taking into account teacher effectiveness or prioritizing educators for their highest-need schools and students.

Across-the-Board Reductions in Class Size

Across the country, classes are getting smaller: between 2015 and 2020, average elementary class sizes decreased by nearly 10%; between 2012 and 2022, student-teacher ratios declined by 3.8%. And in New England, the change has been even more dramatic, with student-teacher ratios declining by more than 9%.

Pupil-Teacher Ratios in New England (2012-2022)

Source: National Center for Education Statistics, Digest of Education Statistics (2013-2023), Table 208.40.

These changes have largely been driven by enrollment decline, with many states reporting fewer students without a commensurate reduction in the number of teachers. Between 2016 and 2022, New England’s teacher count actually rose by roughly 6,500 (+4%), while the student count decreased by over 90,000 (-4%). And while many of these new roles were funded by ESSER to support student learning, in some cases, district leaders have held on to the new roles, arguing that recovery isn’t over, even though the funding has ended.

When it comes to class sizes, it’s important to remember that enrollment decline isn’t the full picture. Shrinking class sizes are also fueled by policies or intentional district strategies, often citing evidence that—in some contexts—smaller class sizes result in positive outcomes. This research comes into play when class-size maximums are built into teacher contracts or, in the case of Maine, when the state sets maximum schoolwide student-teacher ratios.

Yet, smaller class sizes have a significant impact on per-pupil spending, and the gains in student performance—particularly for across-the-board reductions—are typically lower than expected.

In 2024, Vermont boasted the lowest student-teacher ratios of any state in the country at just 10.3 (compared to a national average of 15.1). It also had the second-highest per-pupil spending of any state at $29,534 (compared to a national average of $17,840). And while these numbers may seem like something to boast about, in the 2024 NAEP results, Vermont’s 4th-grade reading scores were “not significantly different” than the national average, and the state performed “significantly lower” than the national average in 4th-grade mathematics. Without a clear correlation between costly small class sizes and high student achievement, it’s no surprise that last year, Vermont enacted a class-size minimum policy in an attempt to reduce the prevalence of small classes, small schools, and small districts.

Simply put, across-the-board reductions in class sizes are extremely costly and don’t necessarily lead to improved outcomes for students.

As district leaders face increasing financial pressures, they’ll need to consider a more strategic approach. For instance, schools might increase class sizes in certain electives to maintain small classes in critical subjects such as 9th-grade English language arts and math. Or they might consider alternative staffing models that pair larger base class sizes with opportunities for small-group instruction.

Increases in Special Education

In an ERS survey of school district CFOs from across the country, the most frequently cited fiscal challenge was the rising costs of serving high-need students. And it’s no wonder: Many districts spend over one-third of their budget on special education.

In New Hampshire, 40% of the state’s districts spend over 25% of their budget on special education, with the tiny Brentwood School District reaching 46.7% in SY23–24. And these numbers are on the rise. Between SY22–23 and SY23–24, 71% of the state’s districts saw an increase in their total special education spending.

At the same time, federal and state dollars supporting these services aren’t keeping pace. In 2024, federal and state revenue covered just 16.65% of New Hampshire’s overall special education spend, and the burden on local funding has been steadily increasing each year. (In 2022, federal and state funding accounted for 18.6% of special education spending.)

While some of these increases can be attributed to rising identification rates, we also see spending per special education student increasing. Per-pupil special education spending rose significantly across all New England states over the last few years, with a median increase of 14%.

Cumulative Percent Change in SPED Expenditures in New England (2018-2024)

Special education expenditure data is not directly comparable across states because states differ in what costs are included, particularly for tuition and capital expenditures/debt service. In addition, New Hampshire reports expenditures for “Special Programs,” a broader category that includes services for students with disabilities as well as other programs such as bilingual and gifted education.

Source: Public state education agency websites (CT, MA, NH, RI, VT). Maine data not available.

Keep in mind that while spending levels are going up, IDEA funding, which many would say is already inadequate, remains flat. And as districts experience losses in other revenue streams, these rising costs remain.

To be clear, we’re not highlighting these trends as commentary on districts’ prioritization of special education services, but rather to shine a light on the growing difficulty of meeting expanding needs when funding fails to keep up.

5. Increased Student Need

Though we’re listing this challenge last, in many ways, persistent and widespread increases in student need lie at the very heart of district strategy today. Districts have a responsibility to prepare students with the knowledge and skills they need to succeed both today and in the future. But as student need rises and achievement gaps widen, the core work of our public schools becomes increasingly complex. And while district leaders contend with the many financial burdens enumerated above, serving the needs of all students becomes even more difficult.

A Steady Decline in Student Outcomes

During the COVID-19 pandemic, as districts scrambled to provide virtual learning and meet unprecedented student and community needs, many states saw a considerable decline in student outcomes. But, like most of the country, New England’s achievement has been sliding over the last decade.

NAEP 4th Grade Reading Scores in New England (2013-2024)

Source: NAEP Data Explorer, Average Scores for Grade 4 Reading, 2013–2024.

Many education leaders use state assessments to track student outcome trends, develop priorities, and inform policy decisions, but the National Assessment of Educational Progress (NAEP) is the best tool for comparing state-by-state performance, since there’s substantial variance in how states assess proficiency.

The most recent NAEP scores demonstrate that, while overall scores are starting to rebound, performance gaps widened between the highest- and lowest-performing students.

NAEP Results Achievement Gap in New England — Change in 4th Grade Scores (2003-2024)

Source: NAEP Data Explorer, Percentile Scores for Grade 4 Reading and Math, 2003–2024.

Massachusetts remained the highest-performing state in fourth-grade reading in 2024, with an average score of 225. However, this represents a notable decline from 2017, when the average score was 236—much closer to NAEP’s proficiency benchmark.

This slide is even more severe when looking at economically disadvantaged students. Their average reading score was 204 in 2024, down from 219 in 2017. While that 219 score was still far below proficient, it was ranked first in the nation for that student group. In 2024, they ranked 11th nationally.

Across New England, these patterns contribute to some of the widest fourth-grade reading achievement gaps in the nation, with Connecticut (-37), Massachusetts (-35), and Rhode Island (-33) all ranking among the top five states for disparity.

Another alarming example is Vermont, which used to be one of the top-performing states in eighth-grade math. In 2015, Vermont was the fifth-highest-performing state, with an average score of 290. In 2024, that average score dropped to 276, only four points above the national average and 21st in the nation. Also, while achievement gaps and trends are important, we shouldn’t lose sight of what these numbers tell us in any given year: students are simply not as proficient in reading and math as they should be. In Massachusetts, with its best-in-the-country reading scores, 60% of students are still not proficient in reading.

4th Graders in New England Below Proficiency in Reading and Math (2024)

Source: NAEP State Profiles, Grade 4 Reading and Math, 2024.

While NAEP is an effective tool for identifying national trends and making state-to-state comparisons, many state leaders use their own assessment systems to track student progress, develop priorities, and inform education policy.

Yet the results on these state assessments are also failing to rebound from the pandemic fully. In Massachusetts, the state assessment scores are even lower than the state’s NAEP scores, likely due to the rigorous nature of the state test. But when you look at year-over-year performance, it reveals an even more alarming decline in reading scores, stemming from the COVID-19 pandemic. The fourth-grade reading proficiency rate on the state assessment went from 52% in 2019 to 38% in 2022 and 37% in 2024. Eighth-grade math saw a similar drop, falling from 46% to 36% from 2019 to 2022, though that score rebounded to 38% in 2024.

Yet, whether we consider NAEP in isolation or alongside state assessments, it’s clear that student achievement in New England has not recovered and was already on a downward trend even before the pandemic. And these declining student scores represent real challenges in the classroom. Fourth grade is right around the time when students shift from learning to read to “reading to learn.” Research shows that students who cannot read at grade level by third grade are four times less likely to graduate. Mastery of eighth-grade math determines whether students can take advanced courses such as algebra or calculus. And proficiency in math is closely linked to economic mobility and career impact.

More High-Need Students

While student outcomes are yet to recover across the board, districts are also serving a growing share of students who require more intensive and specialized support. Rising proportions of high‑need students increase costs and operational complexity, pushing districts to support these students within systems that were designed for very different enrollment and need profiles.

As mentioned earlier, the total number of students with disabilities and related per-pupil costs are on the rise. So too is the proportion of students served by IEPs and, therefore, the share of enrolled students requiring legally mandated services. In New England, 17.2% of students were served by IEPs in 2019, compared to 19.5% in 2024. This change amplifies scheduling, staffing, and service‑delivery challenges, especially in smaller districts where fixed costs and specialized roles are harder to spread across a shrinking student base.

Percent of SPED Students in New England (2019-2025)

Source: U.S. Department of Education, Office of Special Education Programs, EDFacts Data Warehouse (EDW): “IDEA Part B Child Count and Educational Environments Collection,” 2023–24.

This trend is mirrored by a growing percentage of multilingual learners. Even as future immigration-related enrollment patterns remain uncertain, about 10% of New England’s students speak English as a second language. And in many communities, the challenge is not only more multilingual learners but also more home languages represented—requiring interpretation, specialized instructional staff, and culturally responsive programming, all of which add significant complexity to the challenge of serving all students.

Percent of Multilingual Learner Students in New England (2019–2026)

Source: Publicly available data from New England state education agencies (CT, MA, ME, NH, RI, VT), 2019–2026. Vermont data unavailable for the 2018–19 or 2023–26 school years.

Layered onto these increases in specific student need, the proportion of economically disadvantaged students remains high across the region, increasing demand for academic intervention, wraparound services, and community partnerships. Massachusetts’ share of students registered for free and reduced lunch prices grew from 31.2% in 2019 to 41.1% in 2026. And changes to Medicaid and SNAP eligibility could make these students harder to identify unless states and districts proactively adopt alternative certification strategies.

Percent of Economically Disadvantaged Students in New England (2019–2026)

Source: Publicly available data from New England state education agencies (CT, MA, ME, NH, RI, VT), 2019–2026. Vermont data unavailable for the 2018–19 or 2023–26 school years.[3]

Meanwhile, across all demographics, students are contending with historically complex needs outside of academics. State and local data mirror national trends in youth mental health challenges. In Massachusetts, 48% of young people during the pandemic reported prolonged feelings of sadness or hopelessness, and local surveys in Maine showed that 19% of high schoolers had seriously considered suicide.

Many districts used ESSER funding to provide extra support for these high-need populations, but with those dollars gone, district leaders have to make tough decisions about which investments offer the best return on investment and best meet students’ needs.

A Path to Progress

New England schools are facing significant financial pressures, and in many communities, these pressures are accelerating. But the outcome isn’t inevitable. While no one can forecast exactly how enrollment, revenue, or student need might evolve, education leaders across the region can take steps now to be ready for what comes next. That work begins with a clear-eyed assessment of what’s happening right now and an honest reckoning with the tradeoffs ahead.

New England’s history also offers reason for confidence: When leaders share a common understanding of the challenge and work across roles and agencies, meaningful change has been possible—even in constrained environments. In this moment, state education agencies, district leaders, and advocacy partners have an opportunity to act together to help districts navigate unprecedented uncertainty in service of students.

District leaders can position themselves for a challenging budget landscape by building alignment around a student-centered strategy, using return on investment to guide decisions about what to sustain, scale, or sunset, and rethinking long-standing cost structures that no longer reflect today’s realities.

At the same time, state leaders can play a critical role by anchoring policy priorities in data, expanding flexibility to enable timely local action, and supporting more deliberate choices about how limited resources are deployed—especially as districts confront difficult but necessary trade-offs in the years ahead.

Footnotes

1. In CT, MA, and VT, the state pays pensions on behalf of districts. In RI, the state pays 40% of pensions, and in ME, the state pays unfunded liabilities. In NH, districts pay pension costs.
2. Analyzed data from edfinr, a Bellwether R package for downloading and analyzing education finance data.
3. All states except MA use free- and reduced-lunch eligibility as their metric for economic disadvantage. MA uses a measure that includes direct certification through SNAP, foster, care, and Medicaid. All state reported numbers are within 1% of the FRL measure reported by NCES.

Looking for support navigating these intertwining financial challenges? Reach out for help!