The Great Recession and Public Education

Over 90 percent of all funding for primary and secondary public schools in the U.S. comes from state and local government. Therefore, the fiscal crisis now faced by state governments in the wake of the recession, and similar budgetary problems just beginning to surface at the local level, are likely to have profound effects on the nation’s public schools. Authoritative estimates put the aggregate state budget shortfall for the next fiscal year at about $112 billion, or 18 percent of current budgetary levels. Local governments, which depend largely on property taxes, are in better shape, but their revenues seem likely to fall as well given the decline in housing prices over the past five years.

Economists William Evans of Notre Dame and Robert Schwab of the University of Maryland will conduct a comprehensive research project to assess the effects of state and local budgetary problems on K-12 education. They plan to tackle five main questions: How is the recession and its aftermath affecting the overall level of K-12 spending? Have poor school districts been affected more than wealthy districts? When school budgets are cut, what kinds of cuts are made and do they affect important determinants of educational quality, such as teacher/pupil ratios? Have innovative efforts to improve educational efficiency, such as pay for teacher performance, been abandoned in the face of the crisis? And how have teachers’ pensions been affected?

To track spending cuts and their consequences, Evans and Schwab will use the U.S. Census Bureau’s annual School Finance Survey (SFS). To measure the impact of the recession on revenues and expenditures, they plan to link the SFS to information on the local economy from the Bureau of Economic Analysis’ Regional Economic Information (REIS). Results will be published in a series of journal articles.