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The Bottom Line

    The Next 10 Years of Ed Finance: Declining Enrollment

    This article is the second in a series that reviews “10 Predictions for the Next 10 Years of Education Finance.” Read on for learnings and predictions around the dominant themes and challenges facing education finance over the next decade!

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    For the first time in decades, enrollment in K-12 public schools is precipitously declining: estimated public school enrollment for 2023 was a million students short of 2019 levels; about a 2% drop. Where have all the students gone, and what are the consequences of a shrinking student population? 


    Figure 1. Enrollment in K-12 public schools is on the decline, dropping about 2% since 2019. (Source)


    Since the majority of state and federal education funding (about 55% of all K-12 funding) is determined by enrollment counts, shrinking student counts means shrinking budgets.* Declining enrollment and the shifting demographics of student populations will be a major theme over the next decade. 


    Buckle up, we've got a lot to consider here: 

    • 1. Private Schools & Homeschool Options
    • 2. Fewer Babies, Fewer Students
    • 3. Decline in Immigration
    • 4. School Consolidation
    • 5. School Closures
    • 6. Recommendations


    * There is another school of thought suggesting that budgets will increase on a per-pupil basis if budgets stay flat and enrollment decreases. I don’t believe this will be the case. States may maintain funding for a year or two, but I suspect they will quickly adjust funding levels to match enrollment. 


    1. Private Schools & Homeschool Options


    Let's look at some numbers. The primary narrative I hear about student enrollment is that families are fleeing public schools for private schools and homeschool options. This narrative didn’t emerge with the pandemic—I’ve been hearing this for well over a decade, yet the data doesn’t support it. Between 1999 and 2019, private and homeschool enrollment actually decreased from 13% to 12% of K-12 enrollment. However, there has been a steady shift towards homeschooling and away from the private/religious school enrollment among non-public enrollment.


    Figure 2. Contrary to popular opinion, enrollment in private school and homeschool options is not a primary driver of declining enrollment in public schools. (Source)


    Figure 3. Data on private school and homeschool enrollment from the Household Pulse Survey (above) is in conflict with other demographic trend data. (Source)


    The most current data we have available for private school and homeschool enrollment comes from the Household Pulse Survey administered by the Census Bureau, which has huge margins for error due to the small sample size. This is the source of all those headlines that homeschool enrollment has jumped to 3.3 million students, or 5.4% of total enrollment (up from 1.5 million students and 3% total enrollment in 2019). This same survey also reports 55.2 million students in public schools—up from 49.5 million in 2021—yet no other demographic trend data supports a school-age population increase of 13% over the past 18 months. So, what’s really going on?


    Here are my predictions for what is most likely to be true once we account for the pandemic-related anomalies of 2020-2022 and normalize the trajectory:

    • Homeschool enrollment will increase, more at the expense of private schools than public schools, and hover between 3-5% of K-12 enrollment for the next 5-10 years.
    • Private schools and public schools will continue to experience 1-2% annual enrollment declines due to declining birth rates.


    2. Fewer Babies, Fewer Students


    No two ways about it: fewer babies born means fewer students enrolled in schools. Let’s look at the actual number of births in the U.S. for the past 50 years:


    Figure 4. The number of live births in the U.S. has been on the decline since 2007. (Source)


    After three decades of steady growth in births since the mid-1970s, there was an inflection point in 2007 that reversed the trend. Births haven’t been as low as they are today since the early 1980s. Since 1980, the number of births per year has grown and reversed by 700,000—when those babies grow up, that’s the difference of 700,000 greater or fewer school-aged children per year. For thirty years, we built schools, bought furniture, and hired staff to teach a growing number of students in schools— now, we are experiencing the painful downward trend. 


    3. Decline in Immigration


    There’s another major component to these population trends: immigration. Immigration and foreign-born populations in the U.S. also climbed steadily after the 1965 Immigration and Nationality Act was passed in 1965. However, migration to the U.S. has dropped sharply since its peak in 2016 as a combined result of Trump-Era immigration policies and the pandemic. 


    Figure 5. Migration to the U.S. has been on the decline since 2016. (Source)


    We’re already in the midst of this contraction. While this change has accelerated in many urban areas by the growth of suburbs and resulting population and demographic shifts, this contraction will have far-reaching consequences on schools of all types in all geographies if the declining birth rate continues.


    What happens next? Two other “c” words: consolidation and closure.


    4. School Consolidation


    Viral TikTok Takes the Internet Inside a Huge School

    Last week, a TikTok video of students showcasing the facilities of Carmel High School in Indiana went viral as the internet marveled over the several gyms and other instructional amenities that rival the offerings of many colleges. The internet was quick to call out funding inequity due to wealthy communities’ ability to raise local tax revenue for schools. Normally, I’d suspect the same, but looking at the data, there’s another side to the story.


    The per-pupil spending for Carmel High School in fiscal year 2020 was just $9,629—about 75% of the national average. But it is a relatively wealthy community, with just 10% of their students considered economically disadvantaged, compared to 65% economically disadvantaged in nearby Indianapolis Public Schools. How is this possible? Did Carmel High School have a million-dollar bake sale? 


    The enrollment of Carmel High School is 5,400 students—larger than most school districts, many colleges, and a number of entire towns. It’s the only high school in a town of 100,000 people. Their annual operating budget is over $50 million—larger than most municipal governments. If Carmel High School were its own district, it would land in the largest 15% of school districts. The Carmel Clay district in which it resides includes 16 schools, but Carmel High School accounts for over a third of the district's $160 million budget and 16,000 students (the other 15 schools are elementary and middle schools that feed into the high school). 


    Large Schools Have Opportunities for Efficiencies 

    The national average public school size is about 500 students, making Carmel High School about 10 times larger than any average school, and about 6.5 times larger than the average high school. Why does this matter? Many programs that are inefficient in small schools work well in larger schools. Carmel’s shop classrooms were impressive. In a school with 5,400 students, it’s quite possible to have just 2% of students participating in this program and over 100 students enrolled in these classes. That efficiently and effectively pays for one full time shop teacher with a full class all day. Conversely, for a school with 500 students, that same 2% interest is only 10 students—hardly sufficient for a robust offering with specialized staffing. The same is true for AP classes, additional sports teams and facilities, and clubs.


    Larger schools also have more efficient economics for administration. Consider this: if the average principal’s salary and benefits costs $130,000 ...

    • The principal costs $24 per pupil at the 5,400-student Carmel High
    • The principal costs $260 per pupil at the average 500-student school 


    Denominators matter. Adding three assistant principals to Carmel High for $100,00 each to account for the complexity of a larger school only adds another $55 per student. Now, consider teachers. Assuming that teachers make up 65% of the annual operating budget—what remains after this cost is accounted for? 

    • In a 5,000-student school, nearly $20 million remains for everything else.
    • In a 500-student school, less than $2 million is left for everything else.


    Most Education Costs Do Not Flexibly Scale Up or Down

    A core challenge with school budgeting is that most education costs do not flexibly scale up or down on a per-pupil basis, and the pains of enrollment swings that require quick additions or reductions of resources are felt most acutely in small schools.


    Last week, a high-ranking Texas Education Agency official, Steve Lechelop, was recorded on audio advocating for voucher expansion, glibly telling a parent, “School districts, what they have to do if they lose a student, [is] be smart about how they allocate their resources, and maybe that’s one less fourth grade teacher.” Let’s play this out: how would a district allocate “one less fourth grade teacher” if a school loses “a” student? What happens to the other 25-28 students in that 4th grade class? Will Mr. Lechelop be calling those parents and students personally to say, “Sorry, Johnny, we had to make some budget cuts and 4th grade isn’t in the cards for you this year—why don’t you take the year off and we’ll see you for 5th grade"?  


    The problem, of course, is that enrollment declines never happen in a way that makes uniform cuts logical. If the entirety of a 1-2% enrollment loss was concentrated in a single grade, then those cuts would be quite simple. The more likely reality is that every other class in each school will lose one kid, reducing district revenue by 1-2% without reducing costs in any meaningful way. The remaining 98-99% of kids in every class in every school still need the same ratio of teachers, principals, cafeteria and custodial staff, a safe school building, etc. Instead, resources like art, music, library, advanced course offerings, counselors, and administrative staff are regularly on the chopping block. “One less fourth grade teacher” is not a serious solution to the very real fiscal challenges created by slow, evenly distributed enrollment loss. 


    School consolidation is not a substitute for adequately funding public education. As discussed in a previous post on teacher compensation, there is no amount of administrative efficiency that will solve structural problems with instructional funding. However, school consolidation may stem the tide of deeper cuts to instructional programming if it generates 1-3% annual resource efficiency for student services and administration. 


    5. School Closures


    We’re already a decade or more into enrollment declines in many major school districts. Most districts have kicked the can down the road pretty far when it comes to enrollment decline, and the only remaining option (short of magically reversing decades of enrollment trends) is school closures. 


    Closing schools hovers right around “stealing candy from babies” on the popularity index. Any superintendent who wants to keep their job will avoid school closures, often to an unreasonable degree. As a result, there are far too many schools operating well below their expected capacity—sometimes as low as 30-60% of building capacity. Economically, many districts are ripe for “right-sizing”—merging schools so that buildings operate at higher capacity, while reducing administrative overhead per school to a ratio that is better suited for the total district population.


    Politically, school closures are practically guaranteed to end a career. For all the hub-bub about dissatisfaction with public schools, the Gallup poll shows that 80% of parents are consistently satisfied with (at least) their oldest child’s education. Nowhere is this majority more clear than at a public hearing to discuss school closures. I’ve yet to see a school closure on an agenda that didn’t produce an outpouring of community support and tearful pleas from parents and students to keep their school open. 


    For many reasons with a long and ugly legacy, the schools proposed for closure are most often in communities that disproportionately affect poor or Black students. School closures can never be a pure economic decision. Well-intentioned attempts to keep low-capacity schools open often end up hurting all schools and students in the district, as resources that could be allocated to expanding instructional offerings or extracurriculars are instead used to subsidize under-capacity schools. Intentionally designed small schools have a place in the ecosystem, but too many districts are using “small schools” as shorthand for "schools with declining enrollment that are dramatically under-capacity."


    Avoiding these difficult conversations in the short-term will only hurt more students and close more schools in the long-term. 


    6. Recommendations


    This is pretty grim. Looking at the birth rates, I suspect it’s going to get a lot worse before it gets better. The ESSER stimulus funds were hailed as “transformational” for K-12 education, but the unfortunate reality is that these funds have likely been plugging holes and staving off already overdue cuts and right-sizing across the nation. I predict that we are in for some very hard times in the 2024-25 school year and beyond as stimulus dollars dry-up and the rubber hits the road on declining enrollment and budgets. 


    What are school districts to do? Consider these recommendations:

    • School districts that have fewer than 10,000 students can start to get ahead of this outcome by looking to merge with other area districts; they can retain instructional flexibility while consolidating administrative functions.
    • School districts that are already years or decades into declining enrollment must take a hard look at the number of schools they are operating relative to the current and projected enrollment. These conversations are not easy, but they are essential for preserving the integrity of education quality for students. This is particularly important during long-term capital planning—when should we fix and rehabilitate a school versus construct new buildings versus sell existing property?
    • Teachers and parents must sit at the table with district leaders and wrestle with these challenges alongside leaders instead of against them. No superintendent wants to close schools, but they do want to provide a quality education for all students in the district. Proactively exploring how school consolidation can be implemented equitably and paired with new transportation solutions or expanded instructional programs that can help build community buy-in around difficult decisions. 



    This article is second in a series that reviews “10 Predictions for the Next 10 Years of Education Finance.” Read other topics in the series now:



    Data Sources


    Figures 1, 2, 3


    U.S. Department of Education, National Center for Education Statistics, Statistics of Public Elementary and Secondary School Systems, 1980-81; Common Core of Data (CCD), "State Nonfiscal Survey of Public Elementary/Secondary Education," 1985-86 through 2020-21 and 2021-22 Preliminary; and National Elementary and Secondary Enrollment Projection Model, through 2030. (This table was prepared July 2022.)


    Figure 4

    Source: National Center for Health Statistics


    Figure 5

    Source: United States Census Bureau 


    Jess Gartner & Jason Becker

    Jess Gartner is the founder and CEO of Allovue, where edtech meets fintech - #edfintech! Jason Becker is Allovue’s Chief Product Officer. Allovue was founded by educators, for educators. We create modern financial technology to give administrators the power to make every dollar work for every student.