Five Years On from Recession, States Still Lag on Education Funding

Education funding at the state level has not yet recovered from the constraints imposed by the 2008 economic recession. A report published by Budget and Policy Priorities shows K-12 education is receiving less money than it did 6 years ago, with cuts in some cases exceeding 20%.

Even with the country nominally treading a path towards recovery, at least 15 states have passed budgets with education spending reduced from one year ago. And even in cases where K-12 education got a boost, this boost is usually not enough to offset the cuts made in the last 5 years.

In total, 34 states still have not returned to the funding levels of 6 years ago, with 13 of the states still more than 10% off from their height. Oklahoma lags the most, with the current funding level, in inflation adjusted dollars, nearly 23% lower than it was in 2008. Alabama and Arizona follow with 20.1% and 17.2%, respectively.

The consequences of such funding deficits are significant enough that authors are calling on making the replenishment of education funding a priority for the states.

State-level K-12 cuts have large consequences for local school districts.  Some 44 percent of total education spending in the United States comes from state funds (the share varies by state).[2]   Cuts at the state level mean that local school districts have to either scale back the educational services they provide, raise more local tax revenue to cover the gap, or both.

Local school districts typically have little ability to replace lost state aid on their own. Given the still-weak state of many of the nation’s real estate markets, many school districts struggle to raise more money from the property tax without raising rates, and rate increases are often politically very difficult.  Localities collected 2.1 percent less in property tax revenue in the 12-month period ending in March 2013 than in the previous year, after adjusting for inflation.

North Dakota represents one of very few exceptions to the trend. Since 2008, the state’s education spending has gone up by more than 25% or $1,116 per student.

Authors attribute the cuts to the declines in tax revenues brought on by a tougher economic climates both in the states themselves and nationwide.

States cut funding for K-12 education — and a range of other areas of spending including higher education, health care, and human services — as a result of the 2007-09 recession, which caused state revenue to fall sharply.  Emergency fiscal aid from the federal government initially helped prevent even deeper cuts but it ran out before the economy had recovered, and states have disproportionately chosen to address their budget shortfalls through spending reductions rather than a more balanced mix of service cuts and revenue increases.  Cuts are particularly deep when inflation and other cost pressures are considered.