How budget cuts affect schools: Challenges and solutions for financial management

Budget reductions have a significant impact on school operations. In this section, we explore how budget cuts affect schools in various ways, limiting their ability to provide effective learning environments and support for students.

1. Large class sizes

One of the biggest expenses a school has is its staff, and when schools face funding reductions, hiring new teachers becomes difficult. This results in an increase in student-to-teacher ratios, leading to overcrowded classrooms. When classrooms are overcrowded, students suffer – with teachers and assistants not able to support diverse learning needs.

2. Reduction in student support services

Budget cuts can lead to the reduction of essential support services, such as:

• Special education services (SEND) – Limited resources for students requiring additional learning support.
• Counseling & mental health support – Fewer trained professionals available to help students facing emotional or behavioural challenges.
• Extracurricular activities – A lack of funding could lead to a reduction in after-school programs, arts, music and sports. 

3. Outdated learning materials & technology

Many schools rely on funding to update learning materials like textbooks, software and classroom tech. When the budget isn’t there, students are forced to use outdated materials – which can hinder academic progress and put them at a disadvantage when compared to their peers in better-funded institutions.

4. Increased teacher workloads and job cuts

With fewer staff members and extracurricular support, teachers and support staff are often forced to take on additional responsibilities (without the extra pay), leading to burnout and decreased job satisfaction. In more severe cases, schools may need to lay off certain members of staff, reducing the quality of support available to students.

5. Cuts to curriculum and subject offerings

In secondary schools, schools may be forced to cut courses in subjects like arts, music and MFL. According to a National Governance Association survey, 59% of respondents reported having to cut certain subjects or reduce teaching hours due to budget constraints.

6. Delayed or cancelled building maintenance

Budget cuts also often mean schools must delay necessary building repairs or upgrades. Poor infrastructure can negatively impact student safety and lower overall morale, leading to a lack of respect for surroundings. 

Budget constraints

One of the key challenges in understanding how budget cuts affect schools is the reality of working with limited budgets. 60% of governing boards now consider balancing the budget to be their top challenge, up from 40% since 2020. Top budgetary concerns include falling pupil numbers, curriculum breadth and support for pupils with special educational needs and disabilities (SEND).  

Government funding, the primary source of income for maintained schools and academies, is fixed and largely outside of the institution’s control. This fixed funding must stretch across everything from staff salaries to building maintenance and learning resources. To add to the burden, rising operational costs – particularly energy and utility bills – have put immense pressure on school budgets, making it even harder to navigate how budget cuts affect schools.

Economic pressures

Schools face the same economic pressures as businesses and individuals – inflation has hit the education sector hard in recent years as the cost of energy, food and bills has skyrocketed. In 2022/23, schools across all phases saw energy costs per pupil increase by almost 60%. Other large increases included non-ICT learning resources, supply staff and catering.

Furthermore, how budget cuts affect schools can also be seen through the impact on students. Over 84% of senior leaders reported that cost-of-living pressures have resulted in a need for increased pupil support. These pupils may require additional financial, welfare and mental health support to ensure they have equal access to learning and extra-curricular activities – in response, many schools have had to provide additional financial, welfare, and mental health assistance, ensuring equal access to learning and extracurricular activities. To manage these mounting pressures, many schools have reduced spending in other areas, highlighting the financial strain caused by how budget cuts affect schools.

In our conversation with David Pitchfork, Senior Finance Manager at Delta Academies Trust, he spoke candidly about the economic pressures the trust has faced recently, and how Access Education’s budgeting software has been a vital resource. Offering flexibility and the ability to run different financial scenarios, the software has helped the trust stay ahead of uncertainties and make informed decisions as they navigate these challenges. Read the full customer story »

Funding allocation

In times of financial strain, funding allocation becomes even more crucial, as schools are forced to make difficult decisions. 59% of respondents to the National Governance Association’s annual survey had to cut certain subjects or reduce teaching due to how budget cuts affect schools.

General best practice is to allocate funding to the most essential resources first, but this is not always clear cut. Many schools are finding themselves in a position where they need to cover the costs of rising wages, essential building work, support for SEND pupils, initiatives to improve attendance and so much more. In addition, schools and academies must submit three-year budget forecasts to their local authority or the Education and Skills Funding Agency (ESFA) – while this is a healthy financial habit to adopt, it’s extra work for finance teams.

Compliance and reporting

Compliance responsibilities ultimately lie with governing bodies and headteachers, but the finance teams who own the budget must know and follow the correct procedures. Local authority maintained schools use the consistent financial reporting (CFR) framework as a template to collate income and expenditure information for financial statements. Academy trusts must comply with the academies financial handbook, which provides an overarching framework for effective financial management and controls. Schools also need to follow the principles of “best value” when purchasing products and services. 

Schools will need to submit financial documentation for review by local authorities or ESFA by specified dates. This will include their budget, plus other essentials such as the schools financial value standard – a checklist that ensures schools can achieve necessary standards by maintaining good financial health and managing resources effectively. Navigating these compliance requirements further highlights the challenges of financial management in schools, especially when it comes to retaining staff with the expertise needed to handle these responsibilities effectively.

Revenue generation

To mitigate the impact of budget constraints, many schools look to generate additional revenue. This can include grants, donations, renting out facilities, or fundraising within the community. However, managing these revenue-generating activities requires additional staff or an increase in the workload of existing employees.
Grant applications, in particular, can be complex and time-consuming, and schools often rely on dedicated staff for this purpose. For schools already stretched thin, how budget cuts affect schools is evident in this balancing act: schools must decide whether the benefits of generating extra income outweigh the cost of diverting resources from other essential tasks.

1. Understanding your obligations is half the battle. And once professionals are fully familiar with their obligations, they’re in a position to begin bettering their processes. For example, the reports produced for governors based on the CFR could be used to form part of an action plan to enhance controls and procedures. There’s also the schools financial benchmarking website, which can illuminate how others manage their budgets within tight parameters. When you use compliance as an opportunity to learn and improve, it don’t need to be a barrier.
2. Build an ecosystem of support for finance teams and listen to their recommendations. Make sure financial professionals are empowered to do their jobs and have the support of the people around them so they can be as impactful as possible. This was the experience of Liz Nugent, the School Business Manager at St Michael's Primary in Manchester. She spotted the opportunity to modernise outdated financial systems and make processes more straightforward. Find out how Liz managed the switch and gained the trust of the local authority to implement positive change.
3. Use unified finance software that can support your school’s mission. Many schools use disparate software systems that can duplicate workload because platforms aren’t integrated. This can also make data management a challenge, and it can be difficult to have a birds’-eye view of the entire school or trust. Integrated education software for finance departments, budgeting and HR can support your processes and help make budgets go further.
4. Provide support and training for finance staff. One way schools can empower their staff is through training and continuing professional development (CPD). Finance and HR staff need access to quality training they will want to engage with, ensuring they can stay up to date with best practices, regulations, compliance requirements and more.

Planning for the future is a core function of proactive financial management. Employing up to date, user-friendly methods can help prioritise growth and stability, which was a breath of fresh air for Sandra Lightwing from the White Hills Park Trust.

As the trust's Finance Manager, Sandra was seeking a solution that encompassed excellent functionality and support. "We first introduced Access Education Budgets in 2014 and we use it a lot within the trust," said Sandra.

"From budget scenario modelling to income and expenditure reports providing a five-year strategic view, the [Access Education Budgets] gives us everything we need to run our trust on a day-to-day basis while also planning for the future."

When it comes to the most useful features, Sandra noted:

"Any finance manager will know that payroll is the area you definitely don't want to get wrong". "The Payroll Reconciliation reports in the Access Education software are awesome. We use them every month... The salary calculator is also a great tool that allows us to do immediate comparisons. When a headteacher asks about costs, I can quickly and easily do a comparison." 

How budget cuts affect schools: The future outlook for financial management in schools

Financial management in schools poses a whole host of challenges, and how budget cuts affect schools is a major part of that. However, there are some bright spots on the horizon. With lower levels of inflation, costs may begin settle into a more normalised pattern, and teachers have been awarded fully funded pay rises that could help schools retain talent, reducing recruitment and supply teaching overheads. Yet the near-term challenges are still significant and many schools are feeling the effects of trying to balance budgets and support pupils as best they can.

Choosing the right finance software can help schools cut admin costs and balance budgets automatically, providing reliable solutions even in turbulent environments. Take the first step towards financial management freedom and arrange an initial call with one of our specialists – we’re trusted by over 9,000 learning institutions. Find out how we can help.

How do budget cuts affect student learning?

Budget cuts can result in fewer teachers, outdated learning materials, and the reduction of extracurricular activities, all of which negatively impact student engagement and academic performance.

What are schools doing to cope with budget cuts?

Many schools are optimising financial management, exploring alternative funding sources, reducing energy costs, and implementing digital tools to improve efficiency.

How can schools advocate for better funding?

Schools can work with local authorities, participate in educational advocacy groups, and engage with parents and communities to raise awareness about funding shortages.

Conclusion: Navigating budget cuts with strategic financial planning

The financial challenges brought by budget cuts require schools to be more strategic than ever. While how budget cuts affect schools may manifest in larger class sizes, fewer resources, and increased financial pressures, implementing better financial planning, seeking additional funding, and leveraging technology can help mitigate these effects.

By using data-driven decision-making and modern financial solutions, schools can continue to provide quality education despite budget constraints. If you’re looking for a reliable financial management system to help your school navigate these challenges, consider speaking with one of our specialists today.

Final word: Understanding how budget cuts affect schools is crucial for educators, policymakers, and parents alike. By implementing the right financial strategies, schools can continue to support students and staff effectively even in the face of economic difficulties.