What coach is going to go out and cut 10/20 players to move down a class? You do that you better win, because you are going to cause a **** storm of people in the community after you.
Using rosters would be over a 4/5 year span to determine the classification number, so you are going to have to cut players for multiple years to get down low enough to drop a class.
It's pretty easy to weed kids out or put them in a bind without cutting. Example my kid experienced - FB coach says they want multi-sport kids. Then schedules summer workouts in a way that they almost all conflict with in-season baseball activities, and says they aren't required but if you see yourself playing varsity you need to make at least 3 per week.
I'm biased because my coach in HS is my FIL, but we had ridiculous participation rates because it was a great and positive environment for kids. Kids were built up. Bullying, hazing, intimidation of younger/smaller kids was actively addressed and was squashed before it ever became a problem. Coaches never berated kids. Coaches were almost never yelled or were negative at all. If kids worked hard and stuck with it by the time they were Srs almost no matter what they found some role for them on the field. Doing the right thing led to roster sizes that were way above what they should've been in terms of enrollment.
Even if few would do it, creating a disincentive to encouraging participation is a bad thing. Sometimes it's socioeconomics. They are trying to at least somewhat address this reason. Sometimes it's just years of losing. But a lot of times schools have lower participation rates than their peer schools because it's a bad environment. It seems like there's a potential for rewarding the wrong behavior.