3/16/2017 0 Comments
The Federal Reserve Bank of New York published an interesting research article, A Tale of Two States: The Recession's Impact on N.Y. and N.J. School Finances, by Bhalla, Chakrabarti, and Livingston. As the title suggests, the researchers examine K-12 funding and expenditure changes in N.Y. and N.J. schools following the Great Recession. The article details the effect of the federal stimulus program, the American Recovery and Reinvestment Act (ARRA) of 2009, on school funding. Finally, the article looks at state budgets, and how those impacted school funding.
The change in total funding per pupil is summed up by this graph:
N.Y. had a marginal decline in funding while N.J. had steep cuts of greater than 12% in each school year, 2008-09 and 2009-10. Most public school funding comes from three government sources: federal, state (sales & income tax), and local (property tax). Pre-recession in 2008, school funding in N.Y. and N.J was pretty similar:
After the Great Recession, school funding in both states experienced significant shifts. N.Y. received a much larger increase in federal funding, and N.J. suffered a larger cut in state funding. These charts signify the change in school funding by source.
The two funding channels that showed the greatest change were federal and state.
Federal allocation of ARRA funds to education was $97.8B. N.Y. received $4.4 billion more federal funding than N.J.. Some of this difference can be explained by demographics. First, N.Y. was eligible for more aid through the State Fiscal Stabilization Funds ($53.6B) simply because it was a larger state. N.Y. ($3.8B) had 6.2% of the nation's population in age group 5-24, while N.J. ($1.3B) had 2.7%. Second, Title I funding ($10B) was for low-income schools. N.Y. ($0.9B) had a greater proportion of students from low-income families, 46% vs 31% in N.J. ($0.2B). Third, IDEA Grants ($12.2B) were for special education students. The number of special education students in N.Y. ($0.8B) was greater than N.J. ($0.4B). Finally, N.Y. ($0.7B) qualified second in Race to the Top (RTT), a program designed to reward states with high-performing schools and educational improvements. RTT funding was dispersed to the top 10 states, while N.J. placed eleventh.
State funding also showed major differences. The first major difference is N.J.'s state law which requires the state budget to balance every year. A state budget deficit cannot be carried forward to the next fiscal year like it can be in N.Y.. In addition, N.J. state tax revenues declined much more than state tax revenue in N.Y. following the Great Recession.
In January 2010, Governor Chris Christie, facing a budget deficit, cut $475 million in state aid to N.J. schools.
I find this study interesting for several reasons. First, it quantifies part of the impact of the last federal stimulus package (total ARRA bill was $787B). Today, the federal government is again considering a stimulus program which would look starkly different due to its reliance on tax cuts rather than increased spending. Second, it quantifies the impact the recession had on two state budgets which one might assume at the outset to be quite similarly. Finally, the article shows how school budgets react to severe budgetary change.
A Tale of Two States: The Recession's Impact on N.Y. and N.J. School Finances by New York Federal Reserve Bank
Michael Grove, CFA