Shrinking Budgets, Fewer Students

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Public school districts nationwide are navigating compounding challenges that are forcing hard decisions and placing growing pressure on leaders to adapt. In our spring 2026 American School District Panel (ASDP) survey data, we observe major shifts in the top challenges district leaders are facing, compared with 2025 survey results. Specifically, budget shortfalls and declining enrollment have risen to the top of district leaders’ concerns, even as other long-standing challenges remain pressing issues.

In this report, we examine how these challenges are affecting districts nationwide, drawing on survey findings from a nationally representative sample of public school district leaders and follow-on interviews with 38 district leaders across the United States to learn more about how they are responding to these challenges. This work is intended to provide national, state, and local policymakers—as well as the general public—timely information regarding the condition of public school systems nationwide and help inform decisions related to school funding, instructional improvement, and community engagement.

Budget Shortfalls and Declining Enrollment Emerge as Top Concerns in 2026

As shown in Figure 1, the most frequently cited challenge in the spring 2026 ASDP data is addressing budget shortages, selected by 54 percent of district leaders. This represents a large increase—21 percentage points more than the 33 percent of district leaders who ranked this as one of their three most pressing challenges in spring 2025. Addressing declining enrollment was another major concern in 2026, cited by 36 percent of respondents—up from 25 percent in spring 2025.

Meanwhile, other long-running issues remain prominent in 2026: Raising math achievement and raising reading achievement were chosen by 34 and 32 percent of survey respondents, respectively, although both appear to have declined somewhat in importance as pressures related to budget shortfalls and declining enrollment grew. Similarly, recruiting and keeping effective teachers and reducing chronic absenteeism among students were commonly cited concerns (by 35 and 31 percent, respectively), each of which is slightly less pressing than it was in spring 2025.

Context Shapes the Challenges That Districts Face

While some of the top district challenges are common nationwide, others differ by locale. As shown in Figure 2, concerns about budget shortfalls are widespread across rural, suburban, and urban districts. Declining enrollment, in contrast, is of greater concern in rural communities than in suburban ones—a difference that may partly reflect shifting demographic trends before and around the coronavirus disease 2019 (COVID-19) pandemic (Ramani and Bloom, 2022; Fry, 2020).⁠^[1] Concerns about declining enrollment may also be higher in urban districts, although here the apparent difference is not statistically significant. This variation across district contexts underscores that budgetary and enrollment challenges are related but not interchangeable.

What This Looks Like for Schools: Rising Costs, Declining Revenues

District Leaders Say That Budget Shortfalls Have Risen to the Top Because of Rising Costs, Constrained Revenues, and the Ways in Which Cost-Cutting Can Intensify Other Challenges

In spring 2026, we interviewed district leaders from 38 districts (35 superintendents and three leaders in other roles) to understand why budget shortfalls and declining enrollment had become their top concerns.⁠^[2] While some researchers have characterized the end of COVID-19 era relief funds as pushing district finances toward a budgetary “cliff” (LeFebvre and Master, 2024), nearly all of the district leaders we spoke with described the challenge in broader terms: rising costs that now outstrip the revenue coming in. We also heard that budget shortfalls are especially difficult for district leaders because cutting costs often means cutting services or staff, which worsens other persistent challenges.

Inflation, Staffing Costs, and Meeting Student Needs Are All Driving Up District Costs

One district leader summarized the interrelatedness of pressures as follows: “Everything else has gotten more expensive. I mean, keeping the lights on, salary increases, all those things.” Ten of the leaders we spoke with pointed to inflation in everyday operating costs, such as utilities, transportation, facilities, and the goods and services districts rely on. One superintendent noted that the cost of school buses had doubled from $80,000 to $160,000 over his six-year tenure; another noted that aging district facilities “start to hemorrhage cash.”

Mandatory, contracted cost-of-living salary increases for educators are among the most significant contributors to budget shortfalls described by more than half of the leaders with whom we spoke, because salaries and benefits make up the majority of most district budgets. Staffing levels have grown too: Some districts used COVID-19 relief funds to add positions to support student well-being and have found those roles difficult to give up, even as that funding has ended. As one leader put it, “We just couldn’t let them go.”

Other cost pressures stem from new and growing obligations: more students qualifying for special services, the need to sustain mental health supports, and state-mandated adoption of high-quality instructional materials (HQIM). For example, one district leader said that “[HQIM cost] lots of six-digit-number money. So when [state mandates for HQIM] happen, those are increased expenditures that we weren’t previously paying for.” Taken together, these pressures leave many districts needing to, as one leader put it, “continue to strategize how we will maintain a robust array of services while also trying to do that with less revenue.”

Revenues Have Not Kept Pace with Costs

Most superintendents who flagged inflationary or cost pressures told us that their per-pupil funding allotments from their states have not kept pace. One leader explained that “special education costs, transportation, and utilities—they’re outpacing what the state can give us.” In districts that rely more heavily on local funding, some leaders described community resistance to raising local taxes, often because residents are facing their own higher costs of living. In some cases, even where there is a local appetite to raise more revenue for schools, statutory limits on annual tax increases have not kept pace with inflation.

Declining enrollment adds to these budgetary pressures. Districts with fewer students year over year face shrinking budgets because state and local funding formulas tie revenue to per-pupil enrollment levels. But even leaders in districts with stable enrollment reported experiencing the financial pinch from rising costs and constrained state and local funding.

Cutting Costs Often Means Cutting Services or Staff, Which Affects Student Learning

Part of what makes budget shortfalls such a difficult challenge to address is how entangled it is with other pressures that district leaders are facing. For example, several superintendents pointed out that student achievement concerns have not gone away; rather, they have been compounded by budget pressures. With less money coming in, district leaders reported having fewer resources to support student learning or having to pick substandard options. One leader described adopting a “canned curriculum” that requires less skill from teachers because the district had previously cut central office positions meant to support teacher development. Teacher hiring and retention is similarly challenging: When districts cannot offer competitive salaries, they risk losing experienced teachers and struggle to attract new talent, directly affecting the quality of instruction students receive.⁠^[3] One superintendent described staff cuts as “absolutely brutal.”

Most superintendents told us that they have begun with cost-saving measures that do not directly touch staff or services, such as drawing down reserve funds, asking every department to cut spending by a set percentage, or trimming smaller expenses wherever possible. As one leader put it, “It’s just little things like that do add up.” A few superintendents described considering more-extreme measures, such as closing schools or merging with neighboring districts, if conditions continued to worsen.

Districts Face Demographic Headwinds and Increased Competition Across Schooling Options

While enrollment declines are contributing to districts’ recent budget crunches, they represent a longer-running challenge for districts. Public school enrollment was still rising as recently as 2019, when the COVID-19 pandemic precipitated a substantial drop, and many students transitioned to homeschool or private school options in response to disruptions at public schools. At the same time, decreasing birth rates, aging populations, and recently reduced numbers of immigrant students are likely to contribute to sustained declines in enrollment for years to come (Council, Goulas, and Monachou, 2025; Dee and Murphy, 2020). Districts grappling with enrollment decline are therefore facing not only the immediate budget pressures described above but also the prospect of continued declines in enrollment and funding.

Districts Are Promoting Public Schools, Expanding Programs, and Adding Services in Response to Enrollment Declines

Many districts nationwide are exploring ways to boost enrollment. As summarized in Figure 3, 40 percent of districts are considering marketing campaigns to families to promote the benefits of attending public schools. One-third (33 percent) of districts are considering expanding their pre-kindergarten (pre-K) services to engage families with young children earlier. Others are exploring offering additional specialized programs and extracurricular activities (e.g., sports, out-of-school programming) as a way of competing to attract and retain students. Another one-third (33 percent) of respondents indicated that they were not planning or enacting any steps to boost enrollment.

Even though declining enrollment is a greater challenge for leaders in rural districts than in suburban districts, rural district leaders are less likely to be planning specific responses to attempt to boost student enrollment. This may largely be driven by differences in average district size across urban, suburban, and rural locales and their corresponding capacity to implement additional activities.⁠^[4] In addition to differences in district size, districts may also face varying degrees of competition with other schooling options. For example, while increases in homeschooling likely affect districts in all locales, rural districts might face less competition for students because fewer nearby private or public school alternatives are available to families.

In Interviews, District Leaders Detailed Their Efforts to Attract and Retain as Many Students as Possible amid Increased Competition

Fourteen of the district leaders we spoke with cited declining birth rates as the main cause of enrollment decline in their districts, but other reasons given varied based on local context, such as the labor market or out-migration. Many leaders were also increasingly aware of the impact that diverse forms of school choice have on public school enrollment. As one superintendent summed up, “We have so many new charter schools popping up. And then . . . [lower] birth rates, and just naturally, our economic growth is more minimal than we would like. . . . all the things that also contribute to [declining enrollment].” District leaders acknowledged that there was little they could do to increase birth rates, but many were taking steps to retain current students and attract as many new ones as possible.

In districts facing heavy competition from homeschooling, private schools, open enrollment, and charter schools, leaders noted a shift in parents’ perceptions of the value of public schools. Some leaders told us that parents in their district believe, rightly or wrongly, that the quality and reputation of public schools have declined and that this perception is driving student departures. Leaders often connected parents’ perceptions to their experiences during the COVID-19 pandemic. As one put it, “People started to really question the schools when they were home because of COVID.” Consistent with our survey findings about district plans to boost enrollment, these leaders described undertaking a variety of marketing activities, such as social media campaigns, website redesigns, radio advertising, and what one leader called “reputation management” (i.e., sharing good news about district schools and the breadth of services offered).

Relatedly, other leaders described families—often more affluent ones—taking a more “à la carte” approach to education altogether, moving students between private schools, charter schools, and traditional public schools, sometimes even mid–school year. One superintendent relayed what she hears from families: “We want to do education à la carte. So we’ll have a little bit of private school, we’ll have a little bit of public school. Yeah, I want to play baseball this year, so I’m going to sign up [for public school].” Another district leader noted that students return from private or home schools often in the older grades, drawn back by the chance to play sports. In response, these districts have added academic and extracurricular offerings: new sports and activities, career and technical education programs, and Advanced Placement or college-credit courses, among others.

Beyond school choice and birth rates, other factors were more localized. Some leaders described slower local economic growth and higher costs of living, which have made their communities less likely to attract new families. Others noted declining numbers of immigrant students, which some attributed to increased federal immigration enforcement: As one superintendent described, “ICE [Immigration and Customs Enforcement] has had a tremendous impact. . . . we noticed that we have a lot of families self-deporting . . . people feel like they have no [other options].” In districts where local industry had shifted to bring in younger workers, leaders reported adding day care and pre-K services to attract new families. Where leaders worried that members of their communities did not feel safe or welcomed, some added social supports, such as food banks (in partnership with community-based organizations), or introduced family engagement events aimed at building a stronger sense of belonging.

Conclusion

Our findings highlight that many districts are operating in a more competitive and financially precarious landscape than in the past, with potential implications for student learning. Declining enrollment is not only reducing revenue in some communities; it is also prompting leadership in public school districts to behave differently—to market their schools to families, expand signature programs, and think more strategically about how to retain students in the face of school choices and changing family expectations. At the same time, budget shortfalls will likely constrain districts’ ability to invest in those very strategies, creating a difficult environment in which the need to compete grows just as district resources tighten.

This convergence of financial pressure and enrollment competition raises important questions about the future shape of public education systems. If public school districts must increasingly differentiate themselves to maintain enrollment, which communities will have the capacity to do so and which will be left managing decline? If budget stabilization depends on service reductions, what happens to the breadth of opportunities (e.g., summer, afterschool, extracurricular programs) that public schools provide to support students’ academic improvement? Our data suggest that for many district leaders, the challenge ahead is not simply balancing next year’s budget, but navigating a new landscape in which fiscal health, family choice, and educational offerings are becoming more tightly linked.

For state and local policymakers, these findings highlight the need to consider how current fiscal and policy conditions are shaping district decisionmaking. Even if state and local education investments were held steady in nominal terms, inflation and the end of federal COVID-19 relief funding are eroding districts’ capacity to provide services, with potential impacts on staffing and program quality. At the same time, with the expectation of continued enrollment decline, public school districts will need support both to plan for long-term downsizing and to identify and invest in the programs and services that can help them better attract and retain students from families living in their communities.

Acknowledgments

We are extremely grateful to the district leaders who agreed to participate in the ASDP survey and follow-on interviews. Their time and willingness to share their experiences were invaluable for helping us to understand critical challenges facing schools nationwide. We thank Vanessa Miller for helping manage the survey, Gerald Hunter for serving as the data manager for the survey, and Roberto Guevara for programming the survey. Thanks to Claude Messan Setodji for managing the weighting for these analyses. We also thank Jill Cannon and Elaine Wang for helpful feedback that greatly improved this report. Finally, we thank Stephanie Lonsinger for her editorial expertise and Monette Velasco for overseeing the publication process.

Notes

1. While district locale is correlated with district size, differences between large and small districts were less pronounced than differences between rural and nonrural districts. Return to content ⤴
2. Although we conducted interviews with a nonrandom sample of volunteers from among survey completers, the resulting sample consists of a reasonable mix of rural, urban, and suburban districts. Additional details are available in the methodology box at the end of this report. Return to content ⤴
3. Evidence shows that teacher quality is the most significant school-related factor affecting student achievement (Rivkin, Hanushek, and Kain, 2005). Return to content ⤴
4. Subgroup differences were similar when we compared responses across small, medium, and large districts, separate from district locales, which suggests that district size may be a key factor in districts’ ability to address this challenge. Return to content ⤴

References

• Council, Dylan, Sofoklis Goulas, and Faidra Monachou, “Declining Public School Enrollment,” Brookings Institution, August 27, 2025.
• Dee, Thomas S., and Mark Murphy, “Vanished Classmates: The Effects of Local Immigration Enforcement on School Enrollment,” American Educational Research Journal, Vol. 57, No. 2, 2020.
• Fry, Richard, Prior to COVID-19, Urban Core Counties in the U.S. Were Gaining Vitality on Key Measures, Pew Research Center, July 29, 2020.
• LeFebvre, Joanna, and Sonali Master, Expiration of Federal K–12 Emergency Funds Could Pose Challenges for States, Center on Budget and Policy Priorities, February 28, 2024.
• Master, Benjamin K., Claude Messan Setodji, Gerald P. Hunter, Samantha E. DiNicola, and AK Keskin, Technical Documentation for the Thirteenth American School District Panel Survey, RAND Corporation, RR-A4737-3, 2026. As of July 13, 2026: https://www.rand.org/pubs/research_reports/RRA4737-3.html
• Ramani, Arjun, and Nicholas Bloom, “The Donut Effect of COVID-19 on Cities,” National Bureau of Economic Research, NBER Working Paper No. 28876, May 2021, revised December 2022.
• Rivkin, Steven G., Eric A. Hanushek, and John F. Kain, “Teachers, Schools, and Academic Achievement,” Econometrica, Vol. 73, No. 2, March 2005.

Topics

• Communities
• Education Policy
• Educational Institutions
• School Finance
• Students
• Teachers and Teaching