On the edge: Are states and school districts facing a

funding cliff?Annual Meeting of the

Education Writers Association

Intercontinental Hotel, New Orleans, LAApril 8, 2011

Donald J. BoydSenior Fellow

boydd@rockinst.org

2Rockefeller Institute of Government

Yes

3Rockefeller Institute of Government

Revenue Crisis Easing ButFiscal Crisis Continues

1. States are so far down it will be a long slow way back

2. Crisis hits school districts with a lag

3. Longer-term pressures loom after the cycle is behind us

4Rockefeller Institute of Government

It’s a long way back• State tax revenue has grown for 4

quarters• But inflation-adjusted revenue is

9.7% below start of recession• Below recession start in 47 states• Down > 20%: LA, SC, GA, ID• Down 15 to 20%: UT, FL, AZ, AK,

NM, OK, NJ• (Table in appendix)

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Most states face significant 2012 gaps

• Per CBPP, at least 42 states face budget gaps for 2012

• $112b in total• 18% of budgets

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Crisis hits school districts with a lag• Budget politics favor school aid -- hit

later and lighter. But it’s where the $ is…

• ARRA cushioned states, delaying state gov’t cuts. But states lose over $50b in 2012.

• ARRA cushioned impact of state cuts on school districts

• Property tax often takes 3-5 years to respond to housing price declines

7Rockefeller Institute of Government

Education employment cuts already are historically

deep• Down 205k jobs from Sep 2008 peak

(-2.5%)• Over last 2 years, down in 20 of 35

states with data• Down more than 5% in: CA, MI, GA,

IN, SC• Down 3-5% in NC, OR, NJ, AZ• Up more than 3% in TX, AK, WY, ND

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Education cuts deeper than most past recessions

and (slightly) deeper than tax revolt of the 1980s

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Crisis hitting schools, will continue• At least 34 states have cut some aid

to education (CBPP)• At least 21 states proposing K-12

cuts for 2012 (CBPP)• Property tax: 77% of school district

local revenue. Starting to weaken:–declining in many parts of CA, FL, and

VA–growth slowing in other states

10Rockefeller Institute of Government

Longer-term pressures loom • Pensions – required

contributions will increase rapidly

• Retiree health care – also will increase rapidly. More controllable

• Medicaid – pressure on states• Federal budget cuts

RockefellerInstituteThe Public Policy Institute of theState University of New York

411 State StreetAlbany, NY 12203-1003www.rockinst.org

Donald J. Boyd,Senior Fellow

boydd@rockinst.org

12Rockefeller Institute of Government

Appendix

13Rockefeller Institute of Government

Tax revenue still below start of recession in 47 states

United States (9.7)

Louisiana (26.5) Kansas (9.2) South Carolina (24.2) Texas (9.1) Georgia (21.4) North Carolina (9.1) Idaho (21.4) California (8.5) Utah (18.8) Indiana (8.2) Florida (17.4) Maryland (7.9) Arizona (17.1) Connecticut (7.1) Alaska (16.6) Mississippi (6.7) New Mexico (15.8) New Hampshire (6.1) Oklahoma (15.6) Massachusetts (5.3) New Jersey (15.4) Pennsylvania (5.1) Virginia (14.5) Arkansas (4.7) Nebraska (13.8) South Dakota (4.1) Colorado (13.8) Kentucky (3.6) Illinois (13.5) New York (3.3) Montana (12.6) Minnesota (3.3) Missouri (12.5) Wyoming (2.9) Ohio (12.4) West Virginia (1.8) Washington (11.3) Maine (1.5) Hawaii (11.2) Wisconsin (1.4) Alabama (10.6) Vermont (1.0) Michigan (10.5) Iowa (0.1) Tennessee (10.2) Oregon 6.0 Rhode Island (10.0) Delaware 12.3 Nevada (9.6) North Dakota 48.8

Notes: State tax revenue in calendar year 2010 compared with calendar year 2007, adjusted for inflation using GDP price index.

Percent change in inflation-adjusted state tax revenue from 2007 to 2010

Sources: Rockefeller Institute analysis of data from Census Bureau (taxes) and Bureau of Economic Analysis (price index)

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Great variation in home-price changes

Sum of states -11.2%

Nevada -44.2% Wisconsin -5.5%Florida -35.6% Missouri -4.5%Arizona -35.0% Pennsylvania -4.3%California -31.1% Colorado -4.3%Michigan -20.4% South Carolina -3.7%Rhode Island -19.0% Mississippi -3.2%Maryland -18.7% Indiana -2.7%Oregon -14.8% North Carolina -2.6%Hawaii -14.6% Montana -2.3%New Jersey -14.3% Vermont -2.1%Minnesota -14.2% Arkansas -1.5%Idaho -14.2% Tennessee -1.4%New Hampshire -13.8% Alabama -1.2%Washington -13.2% West Virginia -0.5%Illinois -12.9% Nebraska -0.2%Connecticut -12.7% Alaska 0.1%Virginia -11.7% Kentucky 0.1%Utah -11.2% Kansas 0.4%Massachusetts -11.1% Louisiana 0.6%Delaware -10.2% Wyoming 2.0%Georgia -10.0% Iowa 2.0%New York -9.5% South Dakota 4.1%Maine -8.2% Texas 4.6%Ohio -6.5% Oklahoma 4.8%New Mexico -5.9% North Dakota 6.9%

Source: Federal Housing Finance Agency All-Transactions Index

Percent change in single-family home prices2007q1 to 2010q2