Getting better soon?

Schools and districts have responded to the recent economic downturn by cutting costs and, increasingly, reducing staffing levels; they have not, however, taken steps to diversify away from a nearly total dependence on government support (99% of school funding comes from local, state, and federal government sources). This strategy assumes a temporary downturn followed by a corresponding uptick; however, the latest stats show that there's no turnaround coming in the short term.

Consider the Reuters article US States suffer unbelievable revenue shortages:

Tax revenues used to pay teachers and fuel police cars continue to trail even the most pessimistic expectations, despite the cash from the economic stimulus plan pouring into state coffers.

"It's crazy. It's really just unbelievable," said Scott Pattison, executive director of the National Association of State Budget Officers, and called the states' revenue situations "close to unprecedented."

Most states had been pessimistic in forecasting their tax revenues for the 2010 fiscal year, Pattison said. So far, collections have fallen below even those low targets.

And, according to a new paper by the Center on Budget and Policy Priorities titled New fiscal year brings no relief from unprecedented state budget problems:

• At least 48 states have addressed or still face shortfalls in their budgets for fiscal year 2010 totaling $168 billion or 24 percent of state budget.
• An unusual number of these states are still struggling to balance their 2010 budgets two months after the start of the fiscal year. Three states — Arizona, Michigan, and Pennsylvania — have not yet adopted budgets for 2010. In addition, new shortfalls have opened up in at least 15 of the states that have adopted budgets — California, Colorado, Georgia, Hawaii, Kansas, Kentucky, Maryland, New Mexico, New York, Rhode Island, Utah, Vermont, Virginia, Washington, and Wyoming — plus the District of Columbia . These additional gaps — some of which have already been addressed[1] — totaled $28 billion.
• The states’ fiscal problems will continue into the next fiscal year and likely beyond. At least 36 states have looked ahead and anticipate deficits for fiscal year 2011. These shortfalls total $74 billion — 15 percent of budgets — for the 30 states that have estimated the size of these gaps by comparing expected spending with estimated revenues, and are likely to grow as more states prepare projections and revenues continue to deteriorate.
• Combined budget gaps for the next two fiscal years — those already mostly closed for 2010 and those projected for 2011 — are estimated to total at least $350 billion.

These numbers are better than they otherwise would have been, thanks to the stimulus funds. As Scott Pattison noted in the Reuters article, "The states are very, very concerned about that cliff -- they're concerned about when this recovery money stops."

But the reality is that the stimulus money will stop after next year. Even if there is a second stimulus package passed, it will almost certainly not include a large package of funds dedicated to education spending. And assuming that major stimulus funds for education will dry up in the near future, that the state budget conditions noted above are accurate, and that long-term trends work against funding for K-12 education...should districts limit their thinking solely to cost-cutting? Or is it time to look for alternate sources of support?