Press Release
Recession Hits New Jersey’s Abbott Districts Disproportionately Hard
June 5, 2013
Note To Editors

Funding for New Jersey’s low-income school districts declined sharply during the Great Recession, according to a recent New York Fed study. Moreover, the Abbott districts—a group of poor urban districts that once received special appropriations from the state—were hit especially hard.

The recent recession, the passage of the federal stimulus bill, and the decision to eliminate special Abbott district funding all converged to reshape education finance during the 2008-09 and 2009-10 school years.  In their study “New Jersey’s Abbott Districts: Education Finances during the Great Recession,” economists Rajashri Chakrabarti and Sarah Sutherland examine how these developments affected the level of school funding in New Jersey’s low-income districts and how these districts adjusted their instructional and non-instructional expenditures in response. 

The authors pay particular attention to the Abbott districts, noting that they represent 20 percent of all students enrolled in public schools but receive 50 percent of the state’s funds. For context, they use two benchmark groups: the rural, low-income “Bacon districts” and districts from across the state whose income profile almost exactly matches that of the Abbott districts.

The authors’ analysis shows that shifts in both federal and state aid were less favorable for the Abbott districts than for the two benchmark groups. The Abbott districts experienced the smallest increase in federal funding relative to existing trends, and they faced larger reductions in state aid than New Jersey’s other low-income districts in both the 2008-09 and 2009-10 school years. However, local aid for the Abbott districts showed an upturn in 2008-09, which was likely due to the districts’ reliance on higher property taxes in the face of fiscal constraints.

The most striking differences, however, related to the composition of school expenditures. The two comparison groups were able to maintain spending relative to pre-recession trends in the instructional expenditure category—the category considered to be most directly related to student learning. The Abbott districts, however, showed both economically and statistically significant declines in instructional spending in both 2008-09 and 2009-10, despite the influx of stimulus funds in 2009-10. While all groups of districts experienced a decline in non-instructional expenditures, the drop was the most severe in the Abbott districts.

Rajashri Chakrabarti is an economist and Sarah Sutherland a senior research analyst in the New York Fed’s Research and Statistics Group.  Their report can be read in full in the latest Current Issues in Economics and Finance.

New Jersey’s Abbott Districts: Education Finances during the Great Recession »

Contact:
Kevin Sajdak
212-720-6143
kevin.sajdak@ny.frb.org