Why is purchasing power so important?
A school district can lose purchasing power when the money it has to spend doesn’t go as far as it used to.
This usually happens for a mix of reasons:
Inflation
When the costs of goods and services (supplies, fuel, utilities, construction, food, salaries) rise faster than the district’s revenue, each dollar buys less. Example: If the cost of student meals goes up 10%, but the district’s budget for food only increases 2%, they can buy fewer meals with the same money.
Flat or Slow-Growing Revenue
If funding sources like state allocations, federal aid, or local levy dollars don’t keep pace with inflation, the district’s budget stays the same while costs rise. Many school funding formulas lag behind actual cost-of-living increases.
Fixed Costs Growing Faster than Revenue
Salaries, healthcare, retirement contributions, and insurance often rise more quickly than new funding. Since staffing is the largest portion of school budgets, increases here can squeeze out spending power elsewhere.
Declining Enrollment
In many states, funding is tied to student headcount. Fewer students mean less revenue, even though many costs (buildings, utilities, buses, staff ratios) don’t decrease at the same rate.
Unfunded Mandates
States or the federal government sometimes require new programs, technology, or services without providing matching funding, forcing districts to stretch their dollars thinner.
Debt Service and Long-Term Obligations
Payments on bonds, loans, or pension obligations may rise over time, reducing the share of the budget available for daily operations.
In short: A district loses purchasing power when rising costs outpace revenue growth. Even if the budget looks stable “on paper,” it can afford fewer teachers, supplies, and services than before.
