The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
The Outreach and Education function engages, empowers and educates the Second District communities that the Bank serves, especially civic leaders, students, educators, small business owners, policymakers and the general public. It furthers the Bank's commitment to the region by listening to the communities we serve and leveraging our unique attributes to positively impact school and university programs, as well as analysis and research.
While only a sparse literature investigates the impact of the Great Recession on various sectors of the economy, there is virtually no research on the effect on schools. This article starts to fill the void. The authors make use of rich panel data and a trend-shift analysis to study how New Jersey school finances were affected by the onset of the recession and the federal stimulus that followed. Their results show strong evidence of downward shifts in total school funding and expenditures, relative to trend, following the recession. Support of more than $2 billion in American Recovery and Reinvestment Act funding seems to provide a cushion in 2010: While funding and expenditures still fall relative to pre-recession levels, they decline less than in 2009. The infusion of federal funding coincides with significant cuts in state and local support, and the authors mark sharp changes in New Jersey’s relative reliance on the three sources of aid. An examination of the compositional shift in expenditures suggests that the stimulus may have prevented declines in categories linked most closely to instruction. Still, budgetary stress seems to have led to sizable layoffs of nontenured teachers, resulting in an increase in median teacher salary and median experience level. Furthermore, high-poverty and urban school districts were found to sustain larger resource declines than more affluent and less populated districts did in the post-recession era. The study’s findings offer valuable insight into school finances during recessions and can serve as a guide to aid future policy decisions.