April 15, 2020

Rewriting the Great Recession Playbook

Yesterday, the International Monetary Fund released its estimate that the world economy has entered the worst recession since the Great Depression. The IMF estimates that in the best case scenario, economic growth will recover to pre-virus levels by the end of 2021. The reality depends on the unpredictable interaction of vaccine development, the public health actions of individual countries, and economic intervention to preserve businesses and jobs.

We all remember the Great Recession and its catastrophic impact on public schools. During this lingering uncertainty, we are fortunate to be able to draw on lessons from that time as a framework for what may come – and what we can do avoid the dire consequences from the choices made then.

What were the consequences of the Great Recession on public education in the United States?

The Great Recession caused unprecedented declines in public education spending and programs:

   • Spending declined: Per-pupil expenditures fell by 7% nationally.

   • Layoffs: Nearly 300,000 teachers and other school employees lost their jobs – around 4% of all people working for school districts. This erased all gains in decreasing class size that had been made in the previous decade.

   • Declines in student achievement: Student test scores and rates of college enrollment have suffered since the Great Recession. Some studies have tied this decline directly to lower education spending.

Of course, the effects varied across states and school districts.

What caused different effects in states and school districts?

Researchers have identified at least two factors:

1. The level of reliance of school districts on state funding

The percentage of funding that school districts received from state sources versus local ones correlates directly with the amount that total education spending declined during the Great Recession.  The greater the percentage of revenue that came from the state, the more likely a school district was to experience budget shortfalls.

Here’s why: state revenues come mostly from income and sales taxes, which declined significantly during the Great Recession. At the same, states faced mounting demand for other programs, such as unemployment claims, Medicaid/Medicare enrollment, and local property tax relief.  Research suggest that growing competition for dwindling funding often “crowded out” spending on public education.

Property taxes are the main source of local funding for school districts. Despite major declines in local property values during the Great Recession, property tax revenues remained surprisingly stable for numerous reasons, such as the infrequency of property reassessments and the willingness of local decision makers to increase tax rates to compensate for lost revenues. School districts that received a great percentage of their revenues from local sources often experienced lower declines in revenues.

Want to know how your state stacks up to others? Check out Table 2 of this 2018 report by the Congressional Research Service for a basic comparison of revenue sources for your state to other states.

2. The strength of education unions in each state

One study found that states with strong education unions experienced smaller declines in school funding during the Great Recession. The study found that these education unions didn’t just protect teacher salaries – they curbed declines in non-teacher expenditures, as well.

The study considered a variety of factors to determine the strength of education unions, including the right for educators to collectively bargain, the issues that unions were permitted to bargain over, the union revenue per educator, and the reputation of education unions among legislators, policy makers, and local school boards and superintendents.

This research underscores what we already knew: your union can make a difference in how your state and district executives respond to this crisis.

What did the federal government do to support public education? Was it effective?

The American Recovery and Reinvestment Act of 2009 (ARRA) provide major financial support to keystone programs in states, such as health care, unemployment, and education. As discussed above, these were programs that experienced record demand, with fewer income and tax revenues to support them. The ARRA provided nearly $100 billion for education to fill the gap in state tax revenue for the 2009-10 and 2010-11 school years. Combined with later funding bills, such as the Education Job Funds bill of 2010, the federal government contributed an unprecedented amount to public education during this time.

Research on the impact of ARRA funds for education suggests that it effectively filled the funding gap for the 2009-10 school year and prevented major cuts in most states for the 2010-11 school year, as well. Unfortunately, Congress provided this money on a one-time basis, meaning that many of the effects of lower state revenues were only delayed, not prevented. Even with ARRA funding, many districts began layoffs before the 2010-11 school year.

My Takeaways

   • The more a school district relied on state funds, the more likely it was to experience shortfalls during the Great Recession. Again, you can find a comparison of funding sources by state in Table 2 of this 2018 report by the Congressional Research Service.

   • Strong education unions made a difference in preserving education funding at both the state and local levels.

   • Federal efforts to supplement state funding shortfalls were effective in the short-term, but ineffective after one year in the crisis due to the one-time nature of the funds.

The #RedForEd movement shows that the stakes are high for funding choices made during this current crisis. The state education associations organized the protests in Arizona, North Carolina, Oklahoma, and West Virginia were mindful of the fact that they were four of the twelve states that had yet to return school funding to pre-Great Recession levels after a decade. We may feel the effects of decisions made during the next few years for the rest of the decade.

Unfortunately, decision makers will likely use the same playbook from the Great Recession to respond to future revenue challenges. The opportunity we have to is to rewrite the script and push for different outcomes this time. My next post will focus on how school board members and superintendents think about funding shortfalls, to anticipate and possibly mitigate the same dire choices made during the last crisis.

Sources

“Do School Spending Cuts Matter? Evidence from The Great Recession.” C. Kirabo Jackson, Cora Wigger, Heyu Xiong. National Bureau of Economic Research. Revised August 2019.

“The Great Lockdown: Worst Economic Downturn Since the Great Depression.” Gita Gopinath. IMFBlog. April 14, 2020.

“The Great Recession and Public Education.” William N. Evans, Robert M. Schwab, and Kathryn L. Wagner. October 2014.

“K-12 School Funding Up in Most 2018 Teacher-Protest States, But Still Well Below Decade Ago.” Michael Leachman and Eric Figuroa. Center on Budget and Policy Priorities. March 6, 2019.

“Teachers’ Union Power in a Budget Crunch: Lasting Ramifications of Differential Spending Responses to the Great Recession.” Walker A. Swain and Christopher Redding. Educational Policy. October 14, 2019.

May 21, 2020
Charter Schools On Ice

A new path to freeze charter school growth right now

read more

SUBSCRIBE TO OUR BLOG

Get our latest posts and news in your Inbox
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
© 2020 - EDUCATION UNION LAB