Friday, January 18, 2013

The Fiscal Cliff Postponed – The Impact on EdTech

Going over the cliff

In the last two weeks, it’s been pretty much impossible to ignore the looming Fiscal Cliff. Going over the cliff was discussed as funding Armageddon, which would have negatively impacted schools in a very meaningful way. Now, with a short term solution in place, we’re left without the clarity we’d all like to have for the long term. However, given what has happened, we can make some general observations that will serve us well for at least the remainder of this school year.

With the current bill that has just been signed into law, there is a tremendous lack of clarity on how spending cuts in this legislation will actually impact education. Further, there is no completed deal and the same issues will once again be raised before this temporary reprieve ends on March 30th. The good news is that with this timing, we are likely to get through this educational year (2012-2013) without any major impacts. It is a good idea to complete any technology purchases or additions prior to March 30 if at all possible given the pending recurrence of the fiscal cliff. I wouldn’t be surprised if many school systems “push through” technology purchases this year. It just makes sense.

Listening to the rhetoric and evaluating how key politicians are discussing changes in domestic spending, it appears that there are some trends emerging that may not be wholly positive for technology spending in primary education. One of the key trends may be a focus on loans and grants for college education that could take a larger part of Federal education spending, and may be exacerbated if the total amount of discretionary spending for education is cut. In addition, spending for student centric programs such as Head Start are unlikely to be reduced, creating further pressure on budgets for EdTech.

If the final resolution to the current budget situation results in real cuts to education spending at the Federal level, cities, towns, and school districts may look to state governments to help make up the shortfall that occurs from a reduction of Federal programs. This is problematic on many fronts. First, the majority of state budgets were not in strong shape even prior to the Fiscal Cliff. States such as California, New Jersey, Illinois, Florida and Massachusetts are already struggling with large shortfalls and some are looking to cut reimbursements for education expenses in the coming year. The second problem is that cuts from Fiscal Cliff spending reductions are also likely to impact the states as well due to a reduction in the amount of overall aid to individual states. This only exacerbates the problem of looking for state funding. Based on what we know today, increases in state funding for K-12 technology purchases are not likely and may possibly decrease.

The Fiscal Cliff issue has not been solved, just kicked down the road to March 30th, and making firm plans for the future is quite difficult. With the likelihood of some cuts, making technology purchases now can be an important tactic to insure that you don’t end up with IT issues or needs that might not be funded in the future. We will know more going forward, but until there is a long term solution to the Fiscal Cliff in place, it’s best to act tactically, and get what you need while you can.

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