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Tough Choices: New Jersey Schools during the Great Recession and Beyond

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Abstract

This study examines the medium-term effects of the Great Recession on school finances in New Jersey using detailed school district panel data and an interrupted time series analysis. The authors find that the recession led to sharp cuts in school funding and expenditure, in spite of the federal stimulus. These cuts deepened as the stimulus abated. An analysis of variations by metropolitan area reveals that the Camden metro area, the highest poverty area reviewed, experienced considerably larger cuts in expenditures when the stimulus receded compared with other areas. The findings are important for understanding how recessions and fiscal policy affect school finances. They show particular relevance for the current pandemic-driven recession as state and local funding shortages threaten education financing despite a federal relief package. Two key implications are that funding cuts can widen inequalities in school spending and that adverse effects may deepen as the relief dissipates.

Suggested Citation

  • 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.
    • Handle: RePEc:fip:fednep:92869
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    References listed on IDEAS

    as
    1. 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).
    2. 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.
    3. 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.
    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 & Joydeep Roy, 2014. "Did Cuts in State Aid During the Great Recession Lead to Changes in Local Property Taxes?," Education Finance and Policy, MIT Press, vol. 9(4), pages 383-416, October.
    6. 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.
    7. C. Kirabo Jackson & Rucker C. Johnson & Claudia Persico, 2016. "The Effects of School Spending on Educational and Economic Outcomes: Evidence from School Finance Reforms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(1), pages 157-218.
    8. 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.
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    More about this item

    Keywords

    school finance; expenditures; funding; recession; ARRA; federal stimulus;
    All these keywords.

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • I2 - Health, Education, and Welfare - - Education
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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