A Tale of Two States: The Recession's Impact on N.Y. And N.J. School Finances

12 Pages Posted: 2 Mar 2017 Last revised: 16 Dec 2017

See all articles by Ravi Bhalla

Ravi Bhalla

Federal Reserve Banks - Federal Reserve Bank of New York

Rajashri Chakrabarti

Federal Reserve Bank of New York

Max Livingston

Federal Reserve Bank of New York

Date Written: 2017

Abstract

Although schools play a crucial role in human capital formation and economic growth, relatively few studies consider the effect of recessions (and in particular the Great Recession) on schools. This article helps fill this gap by comparing and contrasting the effects of the Great Recession on school districts in New York and New Jersey. In fact, it is the first article to compare the impacts of the Great Recession on schools in different states. The authors find that the two states had very different experiences in the two years following the recession. While total school funding in New York did not shift from its pre-recession trend, New Jersey funding experienced economically and statistically significant downward shifts from its trend. Both states received increased federal funding from the stimulus package but New York school districts saw a much larger boost from the stimulus than did New Jersey school districts. On the expenditure side, New York maintained instructional expenditures (the expenditure category most relevant to student learning) while New Jersey sustained cuts in this category. New York districts cut transportation, student activities, and utilities more than New Jersey districts, while New Jersey districts made cuts to instruction, instructional support, and pupil services, which were kept on trend in New York. The findings from this comparison promise to further our understanding of the effects of recessions on schools and the role that policy can play in shaping these effects.

Keywords: school finance, recession, ARRA, federal stimulus

JEL Classification: H4, I21, I28

Suggested Citation

Bhalla, Ravi and Chakrabarti, Rajashri and Livingston, Max, A Tale of Two States: The Recession's Impact on N.Y. And N.J. School Finances (2017). Economic Policy Review, Issue 23-1, pp. 30-42, 2017. Available at SSRN: https://ssrn.com/abstract=2925708

Ravi Bhalla (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York

33 Liberty Street
New York, NY 10045
United States

Rajashri Chakrabarti

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

HOME PAGE: http://nyfedeconomists.org/chakrabarti

Max Livingston

Federal Reserve Bank of New York ( email )

Washington, DC
United States

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