mckinsey -从盈余走向紧缺 K-12 学区准备迎接财政拮据的数年 From surplus to scarcity K–12 districts brace for leaner years

Mcsey

&company

September2025

EducationPractice

Fromsurplusto

scarcity:K–12districtsbraceforleaneryears

Decliningenrollmentandfunding,risingcosts,andincreasingstudentneedsareputtingpublicschooldistrictsunderpressure.Ourlatest

surveyrevealsK–12leaders’concernsandreactions.

byJakeBryantandWayneRedmondwithEmmaDornandNeilShelat

SchooldistrictsacrosstheUnitedStatesarefacinganincreasinglyuncertainfundingenvironment.MostofthetemporaryCOVID-19stimulusfundinghas

beenspent

1

;federalactionsareaffectingfunding,

enrollment,anddistrictpriorities;andstatesface

myriadfundingdemandsbeyondeducation.Rising

inflationisdrivingupthecostsofhealthinsurance,

utilities,transportation,food,andclassroom

supplies.Meanwhile,thedemandsforfundsareever-rising—learninggapspersist,studentmentalhealthchallengesaregrowing,teachersareseekingsalaryincreasesthatreflectinflation,andagingfacilities

desperatelyneedupgrading.

Inlightofthischallengingcontext,McKinseysurveyedmorethan300K–12leaderstounderstandhowthey

plantorespondoverthenextthreeschoolyears(see

sidebar,“Aboutthesurvey”).Thisarticleusestheresultsofthatsurveytoanswerfourinterrelatedquestions:

—HowwillK–12fundingevolveatthefederal,state,andlocallevels?

—HowwilloverallK–12spendinglevelsadapttofundingshifts?

—Whatwilldistrictsprioritizeforspending,andhowwilltheydealwithtoughtrade-offs?

—Givenfinancialpressures,howwilloutsourcingevolve?

ThisarticlediscussesthebroadercontextinwhichleadersinK–12districtsaremakingfinancial

decisionsanddescribeshowtheseconditionsareinformingleaders’concerns,expectations,and

strategies.

K–12funding:Districtsfaceupcomingfundingandenrollmentchallenges

Schooldistrictfinancingisdeterminedbyper-pupilspendingatthefederal,state,andlocallevelsas

wellasdistrictenrollment.Bothelementsareunderpressure,yetmanydistrictleadershaven’tfully

recognizedthepotentialworst-casescenarios.

Per-pupilfunding

Ingeneral,K–12schooldistrictsareinforanother

coupleoftoughyears.Basedonhistoricaltrends,

recentlegislation,andthird-partyestimatesof

thelikelihoodofarecession,theMcKinseySchoolFundingModelprojectsthatper-pupilspendingintraditionalpublicandcharterschoolscouldremainflatinnominaltermsforthe2025–26and2026–27schoolyearsbeforepickingbackuptogrowwith

inflationin2027–28.Consideringthatcurrent

inflationratesareabout3percent,

2

thistrajectoryrepresentsadeclineinthereal(inflation-adjusted)per-pupildollarsavailabletodistricts(Exhibit1).Putanotherway,iffundingremainsflatbutthecostofeverythingincreases,districtswilleffectivelyhavelessmoneytospend.

Aboutthesurvey

ConductedinJuly2025,thissurveyis

McKinsey’sfourthannualsurveyofdistrictleaders,gatheringviewsfrommorethan

300administratorsinK–12publicand

charterschooldistrictsintheUnited

States.Participatingadministratorseitherprovideinputintoadistrict’sschoolyear

budgetoraredecision-makerswhosetthebudget.Respondentsincludesuperin-

tendents,chiefacademicofficers,chief

technologyofficers,andchiefbusinessandoperationsofficers.

Respondentstothesurveyrepresented

acrosssectionofdistrictsbysize(31

percentaresmall,39percentmedium-size,and30percentlarge);geography(38per-centurban,45percentsuburbanortown,

and15percentrural);andincomelevel(45percenthigher-incomedistricts—withlessthan40percentofstudentseligiblefor

freeandreducedlunch—and55percentlower-incomedistricts,withmorethan40percentofstudentseligibleforfreeand

reducedlunch).

Thesurveyaskedquestionsaboutexpec-tationsforfundingatthefederal,state,andlocallevels;districtpriorities;andantici-

pateddistrictspendingbycategory.

1WayneRedmond,EmmaDorn,NeilShelat,andStephanieMcBride,“Whenthemoneyrunsout:K–12schoolsbraceforstimulus-freebudgets,”McKinsey,September18,2024.

2“Inflationexpectationstickup;consumersmoreoptimisticabouttaxesandtheirfinancialsituations,”FederalReserveBankofNewYork,August7,2025.

Fromsurplustoscarcity:K–12districtsbraceforleaneryears2

Exhibit1

Fromsurplustoscarcity:K–12districtsbraceforleaneryears3

K–12fundingislikelytobefiatoverthenextfewyears.

FederalESSERFederalnon-ESSER¹MedicaidStateLocalPrivateTotalschoolfundingbysource,$billion

2

6

6

Historical

843

80016776

6055

5

377384

363

335347360

1210562018–192019–202020–21

Changein4.93.15.4

funding,%

Changeintotal00.2–2.8

K–12public

school

enrollment,%

666

2021–222022–232023–242024–25

8.62.82.60.4

0.10.4–0.2–0.7

1,000

82

451

457

2027–28

2.9

–1.3

447

427

66

965

51

77

6

423

402

940

52

75

6

412

390

2025–262026–27

0.10.2

–2.4–3.6

969

28

79

435

414

972

80

439

442

915

42

83

401

378

5

6

969

81

5

73660

Projected

Note:Figuresmaynotsumtototals,becauseofrounding.

1ElementaryandSecondarySchoolEmergencyRelieffunds.

Source:NationalCenterforEducationStatistics(NCES)CommonCoreofData;NCESDigestofEducationStatistics;McKinseyanalysis

McKinsey&Company

Fundingprojectionsalwayscontainanelementof

uncertainty,andourmodelisnoexception.Some

changesaremorecertain:TheElementaryand

SecondarySchoolEmergencyRelief(ESSER)

fundingisexpiring,andnewfederalstimulusdollarsareunlikely.Othershiftsaremorecontingenton

policychoicesandtheresponseoftheeconomy.Inaworst-casescenario,withamajorrecessionaffectingstatefundingandwithadditionalfederalfundingcuts,theremaybeadeclineintotalper-

pupilfundingofupto2.5percentinthe2026–27schoolyear.Inabest-casescenario,inwhich

policychoicesremainfavorabletoeducationandtheeconomyavoidsarecession,fundinginthe

2026–27schoolyearcouldcontinuetogrowat

3percent(Exhibit2).Eveninthismorepositive

scenario,however,inflationwilleatintothesegains,suggestingthatrealspendingpowerwillremainflatinthenextcoupleofschoolyears.

Exhibit2

Fromsurplustoscarcity:K–12districtsbraceforleaneryears4

Arangeoffundingoutcomesispossible,dependingonpolicychoicesandeconomicresponses.

PrivateLocalStateMedicaidFederal

77968

5

821,000

5

861,032

5

428

451

473

452

457

461

2.5

2.9

3.3

2027–28fundingscenarios,$billion

%changefro2026–2

6

6

6

m

7

m

6

Worst-case439

scenario

6

Midpoint442

scenario

6

Best-case444

scenario

6

77945

5

80972

5

84998

418

439

460

–2.5

0.2

3.0

2026–27fundingscenarios,$billion

%changefro2025–2

5

Note:Figuresmaynotsumtototals,becauseofrounding.

Source:NationalCenterforEducationStatistics(NCES)CommonCoreofData;NCESDigestofEducationStatistics;McKinseyanalysis

McKinsey&Company

Regulatorychangesandthemacroeconomic

environmentarelikelytoaffectper-pupilfundingatthefederal,state,andlocallevels.

Federallevel.ESSERstimulusfundsneedtobefullyliquidatedbyFebruary2026,resultinginalarge

declineinoverallfederalfundingrelativeto2019

pre-COVID-19levels.Meanwhile,districtsandstatesarefacinguncertaintyoverthetiming,

3

amounts,

4

andstructure

5

ofcurrentandfuturefederalfundingresultingfrombothlegislativeandexecutive

branchactionsandproposals.Forexample,the

Administration’sFY2026budgetintroducesaK–12SimplifiedFundingProgram—asingleblockgrant

thatwouldconsolidate18formulaandcompetitive

federalK–12grantsintooneprogram,representinga$4.5billionreductioninfundingacrossthese

programs.Atthetimeofpublication,theseproposalsarestillworkingtheirwaythroughSenateandHouseappropriationscommittees.

6

Ontheflipside,moreestablishedprograms—suchasTitleI,IndividualswithDisabilitiesEducation

Act(IDEA)grants,andschoolmealsfunding—have

3“DepartmentofEducationtorelease$6.2billionitwithheldinpubliceducationfunding,”EconomicPolicyInstitute,July25,2025.

4AnnaMerod,“EducationDepartmentcancelsESSERspendingextensions,”K-12Dive,April1,2025.

5CollinBinkley,“K-12schoolsmustsigncertificationagainstDEItoreceivefederalmoney,administrationsays,”AssociatedPress,April3,2025.

6MackenzieWilkes,“Houseappropriatorsadvance$12BcuttoEducationDepartment,”Politico,September2,2025;KaraArundel,“SenatecommitteerejectsK-12grantconsolidationsinFY26bill,”K-12Dive,updatedAugust1,2025.

Fromsurplustoscarcity:K–12districtsbraceforleaneryears5

bipartisansupportandareunlikelytoexperience

decreasedcongressionalappropriations.Anew

federaltaxcreditofupto$1,700fordonations

toscholarship-grantingorganizationsincreases

availablefundingforschoolchoice.

7

Whilethe

scholarshipsgrantedbytheseorganizationsare

typicallygearedtowardprivateschooltuition,theremaybepotentialforthesefundstobeusedfor

publicschool–relatedcosts,suchastutoringorotherextracurriculars.

Giventhesetrends,weprojectfederalfunding

todecreasebyasmuchas22percentbetween

academicyears2024–25and2025–26(drivenbytheexpirationofESSERfunds),representinga$24billionlossforschooldistricts.Wethenprojecta

modest4percentfundingdeclineinthe2026–27

schoolyearbeforereturningtomodestgrowthin

2027–28.Whilethisseemslikealargedecline,

federalfundingpriortothestimulusaccountedforjust7to10percentoftotalschoolfunding,

8

sothe

trajectoryforstateandlocalfundingendsuphavingalargerimpactonK–12districtbudgets.

Statelevel.Statefundingtypicallyaccountsfor

about45percentoftotaldistrictfundingandhas

grownhistoricallyat2to4percenteachyear.Goingforward,however,factorsoutsideofeducationmayinfluencehowandwherestateschoosetospend

money.Forinstance,26stateshavecutpersonal

orcorporateincometaxrates;estimatesfromthe

CenteronBudgetandPolicyPrioritiessuggestthatthiscouldloweravailablestaterevenuesoverthe

nextfiveyearsbyabout$111billion.

9

Statesmay

alsobeunderpressuretobackfillMedicaidand

SupplementalNutritionAssistanceProgram(SNAP)cutsrecentlypassedintheOneBigBeautifulBill

Act(OBBBA).

10

Finally,statefundingisvulnerabletorecessions.TheWallStreetJournal’srecentsurvey

ofeconomistsputtheprobabilityofarecessionoverthenext12monthsat33percent,givenadditional

tariffhikesandinflationpressure.

11

Inprevious

recessions,statespendingoneducationhasbeencut;between2008and2009,itwascutby6.4

percent.

12

Inthatrecession,statefundingcutswereoffsetbytheAmericanRecoveryandReinvestmentActfederalstimulus,butfederalprogramsmaybelessforthcominginanupcomingrecessiongiven

therecentESSERfunding.

Giventheserisks,weprojectstatefundingto

decreaseby2percentin2026–27andthenresumegrowingattherateofinflationforthe2027–28

schoolyear.Thisrepresentsamidpointscenario:

Intheeventofarecession,statefundingcould

decreasebyupto6.5percentin2026–27.Inthis

recessionaryscenario,K–12districtswouldlose

$29billion,resultinginafiscalcliffsimilartotheonecausedbytherecentexpirationofESSERfunding.

Locallevel.Incontrast,localfundingtendstobe

resilienttorecessionandeconomicshocks,even

whenpropertyvaluesfall.Localgovernmentsor

schoolboardscanraisethepropertytaxratetokeeptotalrevenuestable—propertyassessmentsusuallyreflectmultiyearaverages,thussmoothingyear-on-yearfluctuations,andvoterscanapproveoperatingoverridesduringdownturnstomaintainschool

spending.However,46statesandWashington,DC,alreadylimitpropertytaxincreases,

13

andtherehavebeenrecentmovestofurtherlimitlocalgovernmentflexibilityinraisingrevenue,includingrecentbillsin

Texas,

14

Ohio,

15

andFlorida.

16

Meanwhile,localvotershavebecomelesslikelytoapprovetaxoverridesin

recentyears.InOhio,forexample,onlythreeofthe

16newoperatingleviesonballotspassedin2024—a19percentpassageratecomparedwithahistoricalaverageof37percent.

17

7MattBarnum,“Newfederaltaxcreditboostsschoolchoice—butbluestatesfacebigdecision,”WallStreetJournal,July21,2025.

8“Digest2021,Table325.10,”NationalCenterforEducationStatistics,April2022.

9WesleyTharpe,“States’recenttax-cutspreecreatesbigrisksforfamiliesandcommunities,”CenteronBudgetandPolicyPriorities,November30,2023.

10“H.R.1-OneBigBeautifulBillAct,”119thCongress(2025–2026),accessedSeptember15,2025.

11PaulKiernanandAnthonyDeBarros,“Economistsseelowerrecessionriskandstrongerjobgrowth:WSJsurvey,”WallStreetJournal,July12,2025.

12“Table235.10:Revenuesforpublicelementaryandsecondaryschools,bysourceoffunds:Selectedschoolyears,1919–20through2020–21,”NationalCenterforEducationStatistics,accessedSeptember8,2025.

13“Whataretaxandexpenditurelimits?,”TaxPolicyCenter,accessedSeptember8,2025.

14MeganKimble,“TexasHousebackstightercaponpropertytaxincreasesforcities,counties,”HoustonChronicle,August26,2025.

15“HouseRepublicansunveillegislativeefforttodeliverbillionsinpropertytaxrelief,”OhioHouseofRepresentatives,June4,2025.

16LoganEvanGansandAndrewM.Piper,“FloridaGov.RonDeSantissigns2025taxbillintolaw,”Holland&Knight,July14,2025.

17NedOliver,“Ohioschoolleviesarefallingflat,”AxiosColumbus,March27,2024.

Fromsurplustoscarcity:K–12districtsbraceforleaneryears6

Per-pupilfundingisonlyhalfof

theequation,anddistrictsalsofacechallengesindecliningenrollment.

Giventhesetrends,weprojectlocalgovernment

spendingwillcontinuetogrow,slightlyfasterthan

inflationbutslowerthanhistoricalrates.Mostlocal

governmentsareunlikelytopickupthefullslackof

decliningfederalspendinganduncertainstatefinances.

Districtleaders’perspectivesonfunding.Stakeholdersareslightlymoreoptimisticaboutgo-forwardfunding,

especiallyregardingtheresilienceofstatefundingfor

education.Onaverage,respondentspredictedadeclineofabout2.7percentperannuminfederalfunding,flat

statefunding(witha0.1percentincrease),anda1.2percentincreaseinlocalfunding.

Onesuperintendentnoted,“Iffederalfundinggets

limited,thestateswilltrytokeeptheirfundingat

thesamelevels.ButiftheyhavetooffsetSNAPor

Medicaid,theymighthavetocutelsewhere.”Anothersuperintendentsuggested,“Ourstatecannothelp

usbackfillfederalfunddecreases—itisgoingtogetworseandworseoverthenextbiennium.”

Somerespondentsweremorehopefulaboutlocal

funding,butothersexpressedconcernaboutrecentstatelegislationandvoterfatigue.Onerespondentnoted,“Weareseeingpropertytaxcutsatthe

statelevelthataregoingtohitschooldistrictsthe

hardest.”Anothersuggested,“Familiesaren’tvotingforlocaltaxoverridestosupportschools,becausetheirkidsaren’tinthelocalpublicschoolsanymore.”

Ofcourse,per-pupilfundingisonlyhalfoftheequation,anddistrictsalsofacechallengesindecliningenrollment.

Enrollment

TheNationalCenterforEducationStatistics(NCES)projectsthat34stateswillexperiencestudent

enrollmentdeclinesbetween2025and2031,

with11statesexperiencingdeclinesof5percent

ormore(Exhibit3).Thisdeclineislargelydueto

demographicchangesoverthepasttwodecades.

Birthratespeakedin2007andhavebeenfalling

eversince,meaningfewerchildrenhavebeen

enteringschools.Therewere700,000fewer

birthsin2020(thebirthyearofmostincoming

kindergarteners)thanin2007(thebirthyearof

graduatingseniors).

18

Schoolshavebeendealing

withtheimpactofdecliningenrollmentforovera

decadenow,with40statesexperiencingenrollmentdeclinesbetween2019and2025.

19

Theserecent

declinesputmorestrainonsystemsthatwere

alreadyunderpressure.Migrationalsoplaysarole:Sunbeltstatesareseeinganinflowofpopulation

(andthuschildrenintoschools),whileCaliforniaandtheNortheastareexperiencingoutflows.

20

Recentfederalactionsmayalsoreduceenrollmentintraditionalpublicschools.Recentschool

choicelegislationisexpectedtoexpandoptions

forfamilies,potentiallyshiftingenrollmentfrom

traditionalpublicschoolstocharterandprivate

schools.

21

Theimpactofthislegislationwilldifferbystate,dependingupontheexistingsaturationofschoolchoicepolicies.Twelvestates(includingArizona,Florida,andOhio)havehaduniversal

ornear-universalschoolchoiceprogramssince

2021,

22

whileotherstatesareatanearlierstage

ofdeterminingschoolchoiceparametersandmay

18“NumberofbirthsintheUnitedStates1990-2023,”Statista,July2,2025.

19TaraMoon,“Publicschoolenrollmentisdeclining—butnoteverywhere,orforallstudents,”The74,August11,2025;TaraMoon,“K-12publicschoolenrollmentdeclines,explained,”FutureEd,August5,2025.

20AmelToukabrietal.,“Newestimatesshowpopulationrecoveredforlargecitiesandgrewinsmallplacesonoutskirtsofurbanareasin2023,”USCensusBureau,May16,2024.

21KaraArundel,“3thingstoknowaboutschoolchoiceinthe‘OneBig,BeautifulBill,’”K-12Dive,July8,2025.

22KeriD.Ingraham,“Policyfocus:Schoolchoiceinthestates,”DiscoveryInstitute,January13,2025.

Fromsurplustoscarcity:K–12districtsbraceforleaneryears7

Exhibit3

MoststateswillexperiencedecliningK–12enrollment.

Totalpublicschoolenrollmentinfall2025andchangebetween2025and2031

(x)Projectedchange,2025–31,%Percentchangeinenrollment,2025–31

–12%+7%

34states

projectstudentenrollmentdeclinesbetween2025

and2031

8states

projectstudent

enrollmentincreases

between2025and2031

MT(1.0)

WY(–1.9)

CO(–3.0)

NM(–9.2)

HI(–11.8)

AZ(0.2)

AK(–4.1)

NC(–0.2)

SC(0.6)

GA(–0.5)

FL(2.1)

ND(2.5)

SD(–0.2)

NE(–0.4)

KS(–4.0)

WA(–3.6)

OR(–5.8)

ID(6.6)

11states

projecta5%orgreater

declineinstudentenrollmentbetween2025and2031

8states

projectnooverallchangeinstudentenrollment

between2025and2031

ME

(–2.5)

MA(–3.1)

RI(–3.2)

CT(–4.9)

NV(–1.0)

CA(–9.1)

INOH

(0.1)(–3.4)

(–8.7)

MN(–1.6)

IA(0.4)

NJ(–4.2)

DE(–3.8)

MD(–4.5)

DC(–6.9)

WI(–2.3)

IL

(–5.0)

OK(–0.9)AR(–0.1)

NH(–4.1)

VT(–4.8)

Keyinsights

MS(–6.8)

VA

(–3.2)

MI

(–4.3)

LA

(–3.4)

NY(–7.3)

MO(–1.8)

AL(1.4)

KY(–2.2)

PA(–4.1)

TN(2.2)

UT(1.9)

TX(0.1)

WV

Source:NationalCenterforEducationStatistics(NCES)CommonCoreofData;NCESDigestofEducationStatistics

McKinsey&Company

seemoredramaticshiftsoverthecomingyears.23Changesinimmigrationpolicymayalsoreduce

thenumberofincomingimmigrantstudentsandincreaseabsenteeismamongstudentsfrom

immigrantfamilies.24

Districtleaders’perspectivesonenrollment.Our

surveysuggeststhatsomeschoolsystemleaders

areconcernedaboutdecliningenrollment,with37

percentexpectingenrollmentdeclines.K–12districtleaderspointedtoseveralfactorsdrivingenrollment

declines,manyofwhichareoutoftheircontrol—forexample,demographictrendsandschoolchoice

werethetoptworeasonsfordecliningenrollment(Exhibit4).Oneleadernoted,“Studentpopulationisdecliningbecausebirthratesaredeclining.”

Anotherstated,“Intraditionalpublicschools,

we’regoingtoseeflattodecliningenrollment...buthigh-performingcharterschoolsaregoingtoseeincreases.”Anotherrespondentnotedthat

immigrationpolicyatthefederallevelwasalreadymakingadifference:“Wearealreadyseeingthe

23BenErwin,“50-statecomparison:Privateschoolchoice,”EducationCommissionoftheStates,January24,2024.

24TaraMoon,“Researchnotes:Studylinksimmigrationraidstoriseinstudentabsenteeism,”FutureEd,July23,2025.

Exhibit4

Fromsurplustoscarcity:K–12districtsbraceforleaneryears8

Districtleaderspointtodemographics,schoolchoice,andeconomicfactorsasleadingtodecliningenrollment.

Factorsofenrollmentdecline,1%ofrespondentsrankedintop3(n=117)

Fewerschool-agechildrenintheareaduetounfavorablepopulationdynamics(ie,decliningbirthrates,declining

immigrationrates)

Increasedschoolchoiceoptions(eg,charterschools,privateschools,homeschooling)

Economicfactorsandinfiation(eg,highcostsoflivingincertainareasaredrivingfamiliestorelocate)

Chronicabsenteeismandattendanceissues(eg,duetosocial-emotionalandmentalhealthchallengesamongstudents)

Immigrationpolicychangesatthefederallevelresultinginfamilieshavingtorelocate

Increasingdropoutrates(eg,unfinishedlearningand

economicpressureshaveledstudentstoabandonplansforfurthereducation)

75

72

34

23

9

85

1Question:Younotedyouexpectenrollmentinyourschooldistricttodeclineoverthenext3years(fromschoolyear2024–25toschoolyear2027–28).Whatisdrivingthisenrollmentdecline?

Source:McKinsey2025K–12DistrictSurvey(n=386)

McKinsey&Company

impactinenrollmentandattendance—immigrantfamiliesjustdon’tfeelcomfortableparticipatingintheschoolsystemrightnow.”

Anevengreaternumberofrespondents(51percent)expectenrollmenttoincrease.Thesedistricts

mayfaceunexpectedbudgettighteningifNCES

demographicprojectionsplayoutandschoolchoiceandimmigrationpoliciesleadtofurtherdeclinesintraditionalpublicschoolenrollment.

K–12spending:Spendingplanshavenotfullyadaptedtofundingrealities

Districtleadersrecognizetheuncertaintyofthefundingenvironment,buttheymaynotbefully

preparedtocutspendingtomatchpotentiallyreducedfunding.Onaverage,districtleaders

plantoincreasespendingacrossallcategories.

However,theirplansaresomewhatmoderatedby

therealitiesoffundinguncertainties.Theaverage

rateofprojectedspendinggrowthinthesurveywas1.6percent,farbelowhistoricallevels.

Districtsareincreasingspendingacrossall

categoriesforseveralreasons.Inflationhasraisedthepriceofmanyschoolcommodities,including

transportation,energy,foodandnutrition,andlaborandmaterialsforschoolmaintenance.Meanwhile,districtscontinuetograpplewithstudentlearning

andwell-beingchallenges.ThelatestNational

AssessmentofEducationalProgress(NAEP)found

Fromsurplustoscarcity:K–12districtsbraceforleaneryears9

that49stateshadstillnotreturnedtoprepandemiclearninglevels.25Sixty-threepercentofoursurveyrespondentsnotedthatstudentsstillhaven’t

recoveredlearninglostduringtheCOVID-19

pandemic,andasimilarproportionsaidthatchronicabsenteeismiscontinuingtorise.Onedistrictleadersaid,“Thefundingisless,buttheneedsarehigher.That’sthemismatchwe’retryingtosolvenow.”

Thissituationpresentsachallengefordistricts.

Whilemanydistrictsaredippingintoreserves,this

practicecannotcontinueforever,andindeedsomedistrictshavealreadyusedupsignificantportionsoftheirrainydayfunds(Exhibit5).

Manydistrictleadersareawareofthechallengethis

dichotomypresentsbuthaven’tyetworkedouta

solution.Onedistrictleadersaid,“Thatistheproblem

weareactivelysolvingrightnow:howtofundincreasedspendingneedsinthefaceofflatordecliningfunding.”

Spendingpriorities:Districtsareprioritizing‘fundamentals’

Inanincreasinglyconstrainedfinancial

environment,districtswillhavetobethoughtful

abouttheirpriorities.Oursurveyaskeddistrict

leaderstoidentifythespendingcategoriestheyarelikelytoprioritizeoverthenextthreeyears.Answerswerefairlyconsistentwithlastyear’sK–12survey,26withafewnotableshifts.

Districts’shiftingpriorities

In2025,districtsweremorelikelytoprioritize

capitalprojects(suchasimprovingschoolbuildingsandcafeterias),studentsupportservices(includingfoodandtransportation),postsecondaryreadiness,andon-campussafetyandsecurity.Theywerelesslikelytoprioritizechallengesinstudentbehavior,

social-emotionallearning,andhiringmoreteachersorinstructionalstaff(Exhibit6).

Exhibit5

Manydistrictsaredippingorexpectingtodipintorainydayfundstomakebudgetsbalance.

Currentandexpectedusageofdistrictrainydayfunds,1%ofrespondents(n=312)

<1%1–5%6–10%11–15%16–25%26–50%51–75%76–100%

Schoolyear2024–25

Schoolyear2025–26

69%

32

24

21

11

3

4

3

3

75%

25

26

20

14

7

3

3

4

Weightedaverage,%

~9.8

~11.5

Note:Figuresdonotsumto100%,becauseofrounding.

1Question:Whatportionofyourdistrict’s“rainyday”or“reserve”fundswasutilizedduringthemostrecentschoolyear(2024–25),andhowmuchdoyouexpecttouseintheupcomingschoolyear(2025–26)ofwhat’sremaining?

Source:McKinsey2025K–12DistrictSurvey(n=386)

McKinsey&Company

25“Exploreresultsforthe2024NAEPReadingAssessment”and“Exploreresultsforthe2024NAEPMathematicsAssessment,”TheNation’sReportCard,accessedSeptember9,2025.

26WayneRedmond,EmmaDorn,NeilShelat,andStephanieMcBride,“Whenthemoneyrunsout:K–12schoolsbraceforstimulus-freebudgets,”McKinsey,September18,2024.

Exhibit6

Fromsurplustoscarcity:K–12districtsbraceforleaneryears10

Districtprioritieshaveshiftedoverthepastyear.

Top5

Schooldistrictprioritiesexpectedoverthenext3years1

Priority

Shareofleaders,%ofrespondentsrankedintop72

Changefrom2024ranking

Retainingourexistingteachers

64

+1

Investinginmaintainingcapitalprojects

50

+11

Addressingchallengesinstudentmentalhealth

46

+1

Addressingtheneedsofspecialeducationstudents

46

+1

Combatingstudentabsenteeism

40

–2

Ensuringequit