Several New Orleans charter schools are looking at payroll protection loans and other safety nets as schools brace for a potential financial hit from COVID-19. But it’s not yet clear how much schools stand to lose from the economic fallout caused by the virus.
Public schools in Louisiana receive a mix of state and local funding for each student they enroll. Local dollars come from property tax revenue and a portion of sales taxes, which are dependent on the local economy. In New Orleans, a significant portion of sales tax collections are dependent on tourism and food service, which have ground to a halt as much of the country, and the world, has sheltered at home to try to stem the spread of the coronavirus.
The New Orleans Ernest N. Morial Convention Center is projecting tens of millions of dollars in financial loss. And at a press conference Thursday, Mayor LaToya Cantrell detailed the potential financial hit to the city as she pledged to seek federal relief funds.
“Our losses will be over $150 million and growing,” she said. That’s an increase of $50 million from projections in late March.
The city had estimated it would collect about $225 million this year in tourism-dependent taxes from general sales and hotel sales. That represents nearly a third of its projected 2020 revenues.
New Orleans schools likewise rely heavily on local sales tax collections. The Orleans Parish School Board collects a one-and-a-half percent sales tax, totalling $148 million in 2019, according to its most recent financial audit.
Most of that money is passed on to the city’s publicly funded, privately run charter schools to pay for school operations, including employee salaries, transportation contracts and classroom materials.
Doug Harris, professor and chair of the Department of Economics at Tulane University and director of two education research organizations, said that while some school revenue sources, like local sales taxes, are likely to take a hit, schools also receive a significant chunk of their funding from the state Minimum Foundation Program, which is constitutionally guaranteed.
“I think Louisiana, on the one hand, is in worse shape than most states, as far as state and local revenue sources go,” he said pointing to local economies dependent on the oil and gas industry — which has taken two major hits from decreasing demand and an international price war — and tourism. “The flip side is the constitutional requirements that protect K-12 funding more so than just about any other kind of funding.”
Louisiana has strong protections for K-12 funding, Harris said. So even when revenue projections begin to emerge, which he said could be “appalling,” schools might be ok.
“It’s not clear how much it will hit schools, given both the constitutional requirements and the federal support that is coming,” he said in an interview Thursday.
Federal support from the CARES Act, the recently passed $2 trillion federal coronavirus stimulus package, does provide funding for state and local governments. But the stimulus law was written to compensate those governments for coronavirus-related expenditures, not revenue losses.
Charter schools in New Orleans, however, may have an advantage that traditional, direct-run school districts in other parts of the state do not. As private, nonprofit organizations, they may be eligible for forgivable loans from the Small Business Administration meant to keep employees on payroll during the crisis.
In the last two weeks, several charter schools have received approval from their nonprofit boards to apply for payroll protection loans, something organizations like New Schools for New Orleans are encouraging, as well as other financial safety nets like Economic Injury Disaster Loan. NSNO Chief of Policy and Portfolio Holly Reid explained the organization’s work in an email Thursday.
“Given the future financial uncertainty our schools are likely to face in the next few years, we think it is critical that our schools take advantage of government funding opportunities to ensure students and educators can continue to be supported and strive toward excellence,” she wrote. “NSNO has taken the lead on encouraging eligible New Orleans charter schools to apply for SBA loans.”
Crescent City Schools, which runs three elementary charter schools, is one of them.
“There’s a lot of uncertainty about how much this epidemic will impact school finances over the next few years. This is one option that may be available to us,” Crescent City Schools Operations Director Chris Hines told The Lens last week.
Einstein Charter Schools, The NET charter schools, and Arise Academy have also sought out this option, according to public school board meeting agendas.
“They are private organizations and private organizations are allowed to do that,” Harris said. “For New Oreans, it also further insulates the schools from any financial hit that might be coming down the way. And other school districts can’t do that. It’s because they are private organizations that they can exercise that provision.”
The NOLA Public Schools district did not answer specific questions about what it was recommending schools do financially or whether it was seeking additional emergency funding from the Orleans Parish School Board.
But the district issued the following statement late last week:
“Understanding the short-term and long-term fiscal impacts of COVID-19 on our schools is a priority for the district at this time. NOLA-PS is working to build tools and resources for schools to leverage as they budget for the next school year and beyond. Additionally, NOLA-PS continues to consider what actions the district may need to take to support our schools moving forward.”
Asked Thursday whether they had any additional answers to the questions or information, a district spokesperson said no.
At a meeting in mid-March before the school closure was announced, district officials recommended schools budget conservatively for next school year. That process occurs over the summer.
“We know that there are going to be impacts to the sales tax collections due to the tourism nature of our city,” Chief Operations Officer Tiffany Delcour said. “This will be an ongoing conversation with the city as their budgets are affected and our budgets are affected.”
At that meeting, Chief Financial Officer Diane Allison said a bump in property tax collection will help offset those projected losses. Still, she said, the district is encouraging schools to keep their budgets for next year similar to this year’s.
But the district hasn’t released specific guidance yet.
Orleans Parish School Board member Ben Kleban said in a text message Friday that he would ask the district for a financial analysis at the board’s upcoming meeting.
Some schools with alternative models will face unique challenges because of the timing of the crisis. Elizabeth Ostberg is the CEO of The NET’s charter group, which runs three campuses for expelled 7th through 12th grade students and also admits high schoolers who want an alternative education model.
“We applied because usually March-May is when we have an influx at all of our schools of students who are expelled so we are losing a large amount of revenue that we had projected for this year,” Ostberg explained.