This study examines the medium-term effects of the Great Recession on school finances in New Jersey using detailed school district panel data and an interrupted time series analysis. The authors find that the recession led to sharp cuts in school funding and expenditure, in spite of the federal stimulus. These cuts deepened as the stimulus abated. An analysis of variations by metropolitan area reveals that the Camden metro area, the highest poverty area reviewed, experienced considerably larger cuts in expenditures when the stimulus receded compared with other areas. The findings are important for understanding how recessions and fiscal policy affect school finances. They show particular relevance for the current pandemic-driven recession as state and local funding shortages threaten education financing despite a federal relief package. Two key implications are that funding cuts can widen inequalities in school spending and that adverse effects may deepen as the relief dissipates.

Although schools play a crucial role in human capital formation and economic growth, relatively few studies consider the effect of recessions (and in particular the Great Recession) on schools. This article helps fill this gap by comparing and contrasting the effects of the Great Recession on school districts in New York and New Jersey. In fact, it is the first article to compare the impacts of the Great Recession on schools in different states. The authors find that the two states had very different experiences in the two years following the recession. While total school funding in New York did not shift from its pre-recession trend, New Jersey funding experienced economically and statistically significant downward shifts from its trend. Both states received increased federal funding from the stimulus package but New York school districts saw a much larger boost from the stimulus than did New Jersey school districts. On the expenditure side, New York maintained instructional expenditures (the expenditure category most relevant to student learning) while New Jersey sustained cuts in this category. New York districts cut transportation, student activities, and utilities more than New Jersey districts, while New Jersey districts made cuts to instruction, instructional support, and pupil services, which were kept on trend in New York. The findings from this comparison promise to further our understanding of the effects of recessions on schools and the role that policy can play in shaping these effects.

Although schools play a crucial role in human capital formation and economic growth, relatively few studies consider the effect of recessions (and in particular the Great Recession) on schools. This article helps fill this gap by comparing and contrasting the effects of the Great Recession on school districts in New York and New Jersey. In fact, it is the first article to compare the impacts of the Great Recession on schools in different states. The authors find that the two states had very different experiences in the two years following the recession. While total school funding in New York did not shift from its pre-recession trend, New Jersey funding experienced economically and statistically significant downward shifts from its trend. Both states received increased federal funding from the stimulus package but New York school districts saw a much larger boost from the stimulus than did New Jersey school districts. On the expenditure side, New York maintained instructional expenditures (the expenditure category most relevant to student learning) while New Jersey sustained cuts in this category. New York districts cut transportation, student activities, and utilities more than New Jersey districts, while New Jersey districts made cuts to instruction, instructional support, and pupil services, which were kept on trend in New York. The findings from this comparison promise to further our understanding of the effects of recessions on schools and the role that policy can play in shaping these effects.

(ProQuest: ... denotes formulae omitted.)1.IntroductionIt is important, from both a scholarly and a policy perspective, to understand the impact of the Great Recession and the subsequent federal stimulus program on school finances. To this end, previous articles in the Economic Policy Review have studied the effects of these developments on school district finances in New York (Chakrabarti, Livingston, and Setren 2015) and New Jersey (Chakrabarti and Sutherland 2013) and uncovered some important patterns. While both states faced declining revenues and widening budget gaps, their education finance experiences exhibited meaningful differences. These differences were evident both on the funding side and in the spending decisions of the states' school districts. The objective of this article is to present and study these differences, drawing from the two articles mentioned above. Such a comparative analysis promises to deepen our understanding of the experiences of school districts across our region, and may also help inform policymakers about appropriate responses to fiscal duress. To the best of our knowledge, this is the first article that seeks to understand how the impact of the Great Recession on school finances varied across states.1Our study reveals some interesting contrasts between districts in New York and New Jersey. In the two postrecession years we consider (2009 and 2010), New Jersey's total per pupil funding sustained deep cuts relative to trend, while New York's remained on trend. The composition of district funding also changed in different ways in the two states. Although both states experienced large increases in federal funding as a result of the stimulus, New York saw its per pupil federal aid more than double-a substantially larger increase than that in New Jersey. Additionally, while both states saw reductions in state funding, New Jersey districts experienced markedly larger cuts in state aid relative to their counterparts in New York. Total expenditures, meanwhile, followed a pattern similar to that of total funding, remaining on trend in New York and falling significantly in New Jersey.2To further understand the differences in school finance patterns between the two states, we take a detailed look at factors influencing the components of aid. Our analysis reveals that differences in demographic composition, in how state tax revenues fared, and in budget laws were important factors behind the patterns noted above. New Jersey's declines in state tax revenue and its strict budget laws combined to create particularly tough fiscal circumstances.We begin our analysis by exploring the funding differences between New York and New Jersey in detail.2.Contrasting School Funding Impacts: New York and New JerseyIn this section, we use trend shift analysis to identify the changes in education financing in New York and New Jersey brought about by the Great Recession and the federal stimulus program (see the box on the next page for details on our methodology and data). In Charts 1 through 8, the green bar represents the 2009 shift for each state and the gray bar represents the 2010 shift. Each of the charts shows values for both New York and New Jersey. We refer to school years by the year corresponding to the spring semester (for example, 2009 refers to the 2008-09 school year).Chart 1 shows the shifts in per pupil funding for both states, relative to the corresponding pre-recession trends. While per pupil funding remained on trend in New York, funding in New Jersey fell sharply. New York disrticts experienced only small declines, and they were not statistically significant. New Jersey experienced large declines of around 12 percent in both years, and each shift was statistically significant.In addition to differences in how overall funding changed, there were also important variations in how the composition of that funding changed. Most public school funding comes from three government sources: the federal government, the state government, and local government. …

Using rich panel data and an interrupted time-series analysis, the authors examine how the funding and expenditure dynamics of New York school districts changed in the four years after the Great Recession. Extending prior work on the immediate effects of the recession on school finances in 2009-10 in Chakrabarti, Livingston, and Setren (2015), they take a longer-term view through 2012, to document what happened when support from federal stimulus funding began to dwindle and then ended. The analysis finds that the more than $6 billion in support from the American Recovery and Reinvestment Act and other sources for New York initially helped schools offset a loss in state and local support, and maintain total funding and expenditure per student in line with pre-recession trends. The stimulus, however, receded before the state and local economies fully recovered, forcing school districts to make widespread cuts in expenditures, including those supporting classroom instruction, the category most fundamental to student learning. The relative composition of funding sources changed as well, with the share of local government support for schools increasing steeply after 2010 as federal and state funding declined. The study includes an examination of the heterogeneities in effects by metropolitan area. For example, Nassau sustained the largest cuts in total funding and expenditure and Buffalo the smallest. These findings underscore the role that federal support can play in softening the impact of fiscal crises on schools when other forms of public funding are tight.

Schools are essential in forming human capital and in improving the long-term health of the economy. They are also heavily reliant on state and local funds, which were severely depleted during the Great Recession. To alleviate some of the strain on local budgets, the federal government passed and implemented a large stimulus package, which included funds for school districts. However, the stimulus funds were drawn down beginning in 2011, at a time when state and local revenues were still under pressure. In this paper, we use a detailed panel data set of all school districts in New Jersey for the period 1999 through 2012 and analyze the impact of this series of events on New Jersey school finances using a trend-shift analysis. We find that the recession led to cuts in funding and expenditure. While the stimulus served as an effective stopgap against major cuts, the picture was very different once the stimulus funds were depleted, with significantly deeper cuts in both funding and spending. With cutbacks in state aid and the withdrawal of the stimulus funding, local funding played a larger role, despite the fact that local funding was also decreasing relative to trend. Examining the components of expenditure, we find that instructional categories were prioritized over non-instructional, so instructional expenditure only sustained small cuts in the initial years after recession. But when the stimulus dried up and the economy was still stagnating, instructional expenditure received severe cuts. We analyze variations by metropolitan area, and find that Camden experienced the largest cuts while Wayne experienced the smallest (although the declines in funding and expenditure were still significant). Our findings are an important step in understanding how recessions and fiscal policy affect school finances and inform future policy decisions relating to school finances during fiscal crises.

Today’s post, which complements Monday’s on New York State and a set of interactive graphics released by the New York Fed earlier, assesses the effect of the Great Recession on educational finances in New Jersey. The Great Recession severely restricted state and local funds, which are the main sources of funding for schools. To help avoid steep budget cuts to schools, the federal government allocated $100 billion for education as part of the American Recovery and Reinvestment Act of 2009 (ARRA), also known as the stimulus. The stimulus money was meant to provide temporary relief to strained state and local budgets. However, after the stimulus funds were exhausted, the economy was still weak and school districts were faced with large budget shortfalls.

Schools play a crucial role in human capital development, and were one of the many elements of government adversely affected by the Great Recession. Using a rich panel data set of New York State school districts and a trend-shift analysis, we examine how the funding and expenditure dynamics of districts have changed in the four years since the recession hit. We find that although the stimulus prevented major cuts to expenditures while it was in place, once the stimulus funding was used up districts faced strong budget constraints and made deep cuts to their expenditures. While state and local funding continue to be below trend, the role of funding schools has shifted more to local governments because of a cutback in state and federal aid. Breaking up expenditure into its primary categories, we see that instructional spending was preserved with the help of the stimulus money in 2010, but by 2012 instructional expenditure experienced a statistically and economically significant downward shift. We also examine heterogeneities in the effects by metropolitan area, looking at the major MSAs of New York. We find that Nassau sustained the largest cuts, while Buffalo sustained the smallest. These findings are instructive in that they shed light on how recessions and fiscal policy can affect school finance dynamics, and provide important lessons/insight for future policy and experiences of schools in financial distress.

The Great Recession led to marked declines in state revenue. In this paper we investigate whether (and how) local school districts modified their funding and taxing decisions in response to state aid declines in the post-recession period. Our results reveal school districts responded to state aid cuts in the post-recession period by countering these cuts. Relative to the pre-recession period, a unit decrease in state aid was associated with a relative increase in local funding. To further probe the school district role, we explore whether the property tax rate, which reflects decisions of districts facing budgetary needs, responded to state aid cuts. We find, relative to the pre-recession period, the post-recession period was characterized by a strong negative relationship between property tax rate and state aid per pupil. We also find important heterogeneities in these responses by region, property wealth, and importance of School Tax Relief Program revenue in district budgets.

On October 29, superstorm Sandy hit the tri-state area, flooding streets, highways, tunnels, buildings, and homes, and crippling the region?s public transit system. At least ninety-four people in New York and New Jersey were killed. Downed power lines and damaged transformers plunged downtown Manhattan and coastal areas into days and weeks of darkness. The damage is still being assessed, but costs are sure to be in the tens of billions. Schools were no exception to this devastation, both in infrastructural damage and in disruptions to students? education. The storm shut down all 1,750 New York City public schools for a full week, and many remained closed, damaged, or were relocated in the following week. A few schools will not return to their normal locations until 2013. In this post, we analyze the impact of Sandy on New York City schools and assess how the storm might affect students? educational outcomes.