The Long Road to Recovery: New York Schools in the Aftermath of the Great Recession

Abstract

Using rich panel data and an interrupted time-series analysis, the authors examine how the funding and expenditure dynamics of New York school districts changed in the four years after the Great Recession. Extending prior work on the immediate effects of the recession on school finances in 2009-10 in Chakrabarti, Livingston, and Setren (2015), they take a longer-term view through 2012, to document what happened when support from federal stimulus funding began to dwindle and then ended. The analysis finds that the more than $6 billion in support from the American Recovery and Reinvestment Act and other sources for New York initially helped schools offset a loss in state and local support, and maintain total funding and expenditure per student in line with pre-recession trends. The stimulus, however, receded before the state and local economies fully recovered, forcing school districts to make widespread cuts in expenditures, including those supporting classroom instruction, the category most fundamental to student learning. The relative composition of funding sources changed as well, with the share of local government support for schools increasing steeply after 2010 as federal and state funding declined. The study includes an examination of the heterogeneities in effects by metropolitan area. For example, Nassau sustained the largest cuts in total funding and expenditure and Buffalo the smallest. These findings underscore the role that federal support can play in softening the impact of fiscal crises on schools when other forms of public funding are tight.

Keywords: school finance, recession, ARRA, American Recovery and Reinvestment Act, federal stimulus

JEL Classification: H4, I2, R1, R5