Over the past several years, revenue sources for Pennsylvania’s school districts have tightened considerably. State and federal allocations for school districts have declined and legislation has limited the ability of Pennsylvania’s school districts to generate revenue by increasing local property taxes. At the same time, school district expenditures continue to rise creating considerable fiscal pressures. Educational mandates and changing student enrollment patterns further exacerbate these pressures by limiting the degrees of freedom districts have to reduce expenditures in response to fiscal pressures.

The purpose of this study was to examine how Pennsylvania’s small, rural, and low income school districts respond when faced with fiscal pressures. Thirty-six Pennsylvania school districts simultaneously met all three of the relevant criteria and were selected for the study. School district financial data provided by the Pennsylvania Department of Education (PDE) and the Pennsylvania School Boards Association (PSBA) were reviewed for the time period studied. To enrich the analysis, a survey was designed to gather additional financial data not available from PDE or PSBA and to determine the extent of and responses to fiscal pressures being experienced by the districts.

Total revenues increased for the school districts studied from FY 2006 to FY 2010. However, a more in-depth review of school district financial data revealed that several local, state, and federal funding category allocations started to reflect the impact of the nation’s economic troubles toward the end of the five year period. In 2009–10, the districts were buffered from a significant revenue decrease because of the infusion of federal American Recovery and Reinvestment Act (ARRA) funding. With the expiration of ARRA funds following the 2010–11 school year, districts experienced a substantial decrease in their recurring revenues.

When faced with fiscal pressures, the school districts in this study responded by raising local property taxes and implementing fees in order to increase revenues. In order to reduce expenditures, they first employed numerous measures designed to achieve cost savings by improving efficiencies. Then, when additional reductions were necessary, they made more painful program and staff cuts.