Funding Education Opportunity: School districts slow to close schools despite losing students

Good morning,

With the new school year fast approaching, many public school districts are expecting fewer students. As of 2024, K-12 enrollments in traditional public schools nationwide had dropped by 2.5% or 1.3 million students since the onset of the COVID-19 pandemic. This enrollment decline appears to be the “new normal,” as rebounding student counts have plateaued since 2023. Overall, between 2020 and 2024, public school student counts fell in 41 states, with decreases of 2% or more in 30 of them.

However, this loss of public school students and funding for them shouldn’t come as a shock to state policymakers and school districts. Before the pandemic, 17 states, such as Illinois and Michigan, were already experiencing declining enrollment. 

One major contributing factor to declining K-12 enrollments is the birth dearth: fewer babies means fewer students. According to the Centers for Disease Control and Prevention, the number of births in the U.S. decreased by 16% between 2007 and 2024, resulting in nearly 700,000 fewer children being born in the US in 2024 than in 2007. 

Fewer kids being born, combined with increased competition from private and charter schools, put lower enrollment rates on the horizon for many states. The pandemic exposed parents to many more educational options and made the enrollment decline happen faster and worse than expected in some cases. 

These lower student counts have significant implications for school district finances because education funding is generally based on the number of students enrolled. When school budgets shrink due to significantly fewer students, districts have to rightsize through a combination of staff reductions, school closures, or other cost-cutting measures. 

But many school districts delayed closures, relying on federal COVID-19 relief funds to keep their under-enrolled schools afloat. 

Reason Foundation research examined school closures in the 15 states that provided data, including California, New York, and Florida. Table 1 below shows the relationship between school closures and enrollment fluctuations before and after the pandemic’s onset in these 15 states.

Table 1: Public school closures before and after 2020

For example, as California’s enrollment declined by 0.9%, more than 55,000 students, between 2018 and 2020, the state’s school districts closed 63 schools. Yet only 65 schools closed in California between 2020 and 2024, when the state’s public school student counts plummeted by 5.2%, or nearly 325,000 students.

By contrast, Colorado’s public school districts faced the reality of declining enrollments sooner. Only 12 schools closed in Colorado between 2018 and 2020 as the state’s student population increased by about 0.3%. Yet this growth was reversed after the pandemic. Colorado closed 51 schools, as its public student counts dropped by 5.2%, or almost 48,000 fewer students, between 2020 and 2024. 

Unfortunately, Colorado’s initiative wasn’t the norm. Data from these 15 states showed that most delayed school closures, likely because they had federal funds temporarily bolstering their budgets. If this enrollment and closure trend holds in the other 35 states, it means that widespread school closures will likely need to occur in the coming years, as districts are forced to close or consolidate schools to reflect lower student counts and reduced funding.

To make closures fair and cost-effective, state lawmakers should have a process to identify empty schools. For example, when the student counts in Indiana school districts decline by 10% over a five-year period, they must review school building occupancy and identify schools that could be closed.  

Right-sizing schools and increasing transparency aren’t the only reforms available to policymakers. They can eliminate unfair funding protections, such as hold harmless provisions that provide funding based on outdated student enrollment figures and give districts funding for students who no longer attend those schools, spreading resources thin.

Notably, 15 out of the 16 states with declining enrollment provisions that give districts money based on outdated student counts experienced overall enrollment declines since 2020. These states are ripe for education funding reform. A better policy is to base education funding on current student counts so school districts have incentives to rightsize when their local enrollments drop. 

In the post-pandemic K-12 education landscape, there are fewer students enrolling in traditional public schools than in previous decades. Combined with the birth dearth, it’s unlikely that public school enrollments will rebound in the near future. This makes it imperative that policymakers and school leaders implement reforms that fund students and streamline school closures.

From the states

In other significant developments, policymakers in New Hampshire took a step forward on K-12 open enrollment while Vermont took a step backward, and a federal school choice bill became law.

In New Hampshire, lawmakers passed Senate Bill 97-FN, codifying a statewide within-district open enrollment program. Students can now transfer to any public school inside their residentially-assigned school district with open seats. The bill currently awaits Gov. Kelly Ayotte’s signature.

Vermont Gov. Phil Scott signed House Bill 454, which limits how families can use public dollars to pay for private school tuition. Previously, students who lived in school districts that didn’t serve their grade level could use public education funds to pay for tuition at the private school of their choice. Under the new law, however, eligible students cannot use their education funds to pay for private schools located outside of Vermont or for private schools located inside a school district that offers schooling at all grade levels, likely excluding private schools in areas with denser populations. Moreover, only private schools where 25% or more of students are publicly funded are eligible to receive public funds. This new law is a major blow to Vermont’s private school scholarship program, the oldest in the nation. 

At the federal level, President Donald Trump signed the Educational Choice for Children Act into law, codifying the first federal tax-credit scholarship program. Eligible students must come from households whose incomes don’t exceed 300% of the median gross income of their locality, according to the K-12 Dive. Scholarships are only available to students who live in states that opt into the federal program. Students can use their scholarships to cover approved educational expenses, including tuition, tutoring, transportation, and homeschooling costs.

What to watch

In Ohio, a Franklin County Judge ruled that the state’s EdChoice Scholarship, a voucher program benefiting 140,000 students, is unconstitutional. However, the judge did not order the program to stop until after appeals, acknowledging that shutting down the program would cause “significant change to school funding in Ohio,” according to The74. Ohio Attorney General Dave Yost has appealed the ruling.

In Wyoming, a Laramie County district judge paused the implementation of the state’s private school scholarship program, which was codified during the 2024 and 2025 legislative sessions. The ruling said the program likely violates the state constitution, which “bars the legislature from appropriating money for educational or benevolent purposes to any person or entity ‘not under the absolute control of the state,’” according to the Cowboy State Daily.

Recommended reading 

Democrats’ School Choice Dilemma
Michael J. Petrilli in The Wall Street Journal

“It’s a tough dilemma. Will Democratic leaders opt their states into the new federal school choice program, allowing families to accept scholarships that are funded by charitable donations from taxpayers nationwide—scholarships that don’t cost their state a penny, and therefore can’t be said to be taking any money from their public schools?Or will they bow to the demands of the teachers unions and bar the schoolhouse door instead, creating a grand opportunity for GOP candidates running against them?”

New Federal Tax Credit Boosts School Choice—But Blue States Face Big Decision
Matt Barnum in The Wall Street Journal

“The law, enacted earlier this month, will soon allow taxpayers to redirect a portion of their tax bill to nonprofit scholarship-granting organizations or SGOs. The taxpayer could write a check of up to $1,700 to an SGO but get that full amount back via a reduction of the same amount in their income taxes, instead of a regular tax deduction for the donation. It is a donation that doesn’t ultimately cost the donor anything.”

Parents Win Key Supreme Court Test in Mahmoud v. Taylor
Joshua Dunn at Education Next

“Recognizing what a disaster the case was for the school district and the public education establishment, American Federation of Teachers president Randi Weingarten lamented on X that the case “should have been worked out on a local level, it’s a shame it went all the way to SCOTUS. Parents must have a say about their own kids, they are our partners in education.” Except a belligerent school board that was too stubborn or mathematically challenged to count votes on the Supreme Court made that impossible.”

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Source: https://reason.org/education-newsletter/school-districts-slow-to-close-schools-despite-losing-students/