The Great Recession's Impact on School Funding and Expenditures in New York State
October 13, 2015
A new report from the Federal Reserve Bank of New York finds that while total funding and expenditures at schools in New York State remained on trend during the Great Recession, the composition of both changed. School districts became more reliant on federal assistance, as compared with state and local funding, especially the former. Meanwhile, for expenditures, instructional spending was maintained on trend while noninstructional spending suffered. Additionally, affluent districts were more affected by lower expenditures than medium- or high-poverty districts, and urban districts suffered larger declines than suburban or rural districts.

In “The Great Recession's Impact on School District Finances in New York State,” authors Rajashri Chakrabarti, Max Livingston, and Elizabeth Setren quantify how the Great Recession impacted local governments’ ability to fund school districts. Using data on New York State schools from 2004-2010, they find no evidence of any statistically significant shift—relative to trend—in either total funding per pupil or total expenditure per pupil after the recession. However, the authors do find robust evidence of compositional shifts within both funding and expenditures.  Largely as a result of the American Recovery and Reinvestment Act, the share of federal funding increased dramatically starting in 2009, while shares of state and local funding fell. Instructional expenditures, the key category that most directly affects student learning, remained on trend. In contrast, noninstructional categories—such as activities, transportation, and utilities—experienced cutbacks, relative to trend.

Furthermore, the report finds considerable variation within the state. Affluent districts were the worst hit in terms of expenditures. Noninstructional expenditures fell the most in these districts, and unlike high- and medium-poverty districts, affluent districts exhibited a fall in instructional expenditures. There were heterogeneities by urban status as well. Urban districts exhibited the largest declines in both instructional and noninstructional expenditures, although these declines were not always statistically significant.

Rajashri Chakrabarti is a senior economist at the Federal Reserve Bank of New York. Max Livingston is a former research analyst and Elizabeth Setren a former assistant economist at the Bank.

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