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The Great Recession’s impact on school district finances in New York State

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Abstract

A slowly emerging literature explores the effects of the Great Recession on different parts of the economy; however, very little research examines the impact of the Great Recession (or any other recession) on schools. Given the fundamental role of education in human capital formation and growth, understanding the effect of recessions on schools is essential. This article contributes to filling this gap. Exploiting detailed panel data on a multitude of school finance indicators and a trend shift analysis, it examines how the Great Recession affected school finances in New York State. While it finds no evidence of effects on either total funding or expenditures, both funding and expenditures experienced important compositional changes. There is strong evidence of substitution of funds on the funding side: the infusion of funds with the federal stimulus occurred simultaneously with statistically and economically significant cuts in state and local financing, especially the former. On the expenditure side, instructional expenditure was maintained, while several noninstructional categories such as transportation, student activities, and utilities suffered. Important heterogeneities in experience are also observed by poverty level, metropolitan area, and urban status (urban, suburban, or rural). Affluent districts were hurt the most, while analysis by metro area reveals that the New York City metropolitan area, especially Nassau County, sustained the largest reductions in most expenditure categories. The findings of this study promise to enhance our understanding of how recessions affect schools and the role policy can play in mitigating the consequences.

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  • Rajashri Chakrabarti & Max Livingston & Elizabeth Setren, 2015. "The Great Recession’s impact on school district finances in New York State," Economic Policy Review, Federal Reserve Bank of New York, issue 12-1, pages 45-66.
  • Handle: RePEc:fip:fednep:00021
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    1. Rajashri Chakrabarti & Sarah Sutherland, 2013. "Precarious slopes? The Great Recession, federal stimulus, and New Jersey schools," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 41-65.
    2. Rubenstein, Ross & Schwartz, Amy Ellen & Stiefel, Leanna & Amor, Hella Bel Hadj, 2007. "From districts to schools: The distribution of resources across schools in big city school districts," Economics of Education Review, Elsevier, vol. 26(5), pages 532-545, October.
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    1. Nora Gordon & Sarah Reber, 2020. "Federal Aid to School Districts during the COVID-19 Recession," National Tax Journal, National Tax Association;National Tax Journal, vol. 73(3), pages 781-804, September.
    2. William N. Evans & Robert M. Schwab & Kathryn L. Wagner, 2019. "The Great Recession and Public Education," Education Finance and Policy, MIT Press, vol. 14(2), pages 298-326, Spring.
    3. Rajashri Chakrabarti & Max Livingston, 2021. "Tough Choices: New Jersey Schools during the Great Recession and Beyond," Economic Policy Review, Federal Reserve Bank of New York, vol. 27(1), pages 1-34, July.
    4. Ravi Bhalla & Rajashri Chakrabarti & Max Livingston, 2017. "A tale of two states: the recession’s impact on N.Y. and N.J. school finances," Economic Policy Review, Federal Reserve Bank of New York, issue 23-1, pages 30-42.
    5. Rajashri Chakrabarti & Max Livingston, 2019. "The Long Road to Recovery: New York Schools in the Aftermath of the Great Recession," Economic Policy Review, Federal Reserve Bank of New York, vol. 25(Dec).
    6. Nora E. Gordon & Sarah J. Reber, 2020. "Federal Aid to School Districts During the COVID-19 Recession," NBER Working Papers 27550, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    School finance; federal stimulus;

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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