Inflation and the labor market – interconnected and significant pressures facing school districts

School districts are facing historic pressures related to their current and future expenditures – both in terms of inflationary increases related to commodities and market demand related to compensation for all staff. These cost pressures are further complicated by the looming expiration of the Elementary and Secondary School Emergency Relief (ESSER) funds provided to assist with the impacts of the pandemic. While the funds are certainly welcome relief, new programs and staff added with ESSER funds may place even more budgetary pressures on districts as the impacts of inflation and increased labor costs continue to grow.

Price increase impacts
Inflationary increases in commodity prices are impacting budgets across a number of areas from fuel to food and construction materials. With food prices continuing to increase, districts will need to keep a close watch on their food service budgets, particularly with the end of the universal free breakfast and lunch that was enacted during the pandemic. Districts may have to re-examine how meals are priced and strike a balance with passing along costs versus trying to absorb costs to the best extent possible. Fuel costs will also be a key area of focus for the upcoming school year. Diesel prices are at historic highs, which may place significant pressures on districts with larger fleets and extended routes. Additionally, construction and maintenance projects may be facing two-fold pressures with increases in the cost of building materials and labor costs. Districts need to be particularly aware of increased construction costs if there is potential to impact completion of project and project budget – regardless of whether the project was debt financed or paid from cash on hand.

Key factors to understand in relation to your district’s exposure to inflation include:

• Examine contracts related to possible pain points. In particular, pay attention to building maintenance, nutrition and transportation to understand how inflationary costs may be passed on to the district (or not).
• Analyze potential impact of the end of universal free breakfast and lunch. Any realized benefits of free meals for all students – is it easier to administer? Reduction of stigma associated with providing free meals to some students?
• Consider plans to reduce inflationary impacts exposure such as switching bus fleet to an alternative energy source, etc.