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

36 Pages Posted: 14 Jul 2021

See all articles by Rajashri Chakrabarti

Rajashri Chakrabarti

Federal Reserve Bank of New York

Max Livingston

Federal Reserve Bank of New York

Date Written: July 2021

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.

Keywords: school finance; expenditure; funding; recession; ARRA; federal stimulus

JEL Classification: H4, I2, R1, R51

Suggested Citation

Chakrabarti, Rajashri and Livingston, Max, Tough Choices: New Jersey Schools during the Great Recession and Beyond (July 2021). Economic Policy Review, Vol. 27, No. 1, Available at SSRN: https://ssrn.com/abstract=3885159 or http://dx.doi.org/10.2139/ssrn.3885159

Rajashri Chakrabarti (Contact Author)

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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