federal, state & local education finances · federal, state & local education finances ....

Federal, State & Local Education

Finances

Nomura Global Media New York Field Trip 2012

New York City, New York

Thomas Gais & Lucy Dadayan

May 22, 2012

State revenue crisis is easing, but state-local fiscal crisis continues

Rockefeller Institute of Government 2

Worst state government tax declines in 5+ decades - worse than 2001 recession


-18%

-15%

-12%

-9%

-6%

-3%

0%

3%

6%

9%

12%

15%

18% Percentage Change in Real State Government Taxes & Real GDP vs. Year Ago

Real GDP Real state tax revenue

Sources: U. S. Census Bureau (Quarterly tax collections); Bureau of Economic Analysis (real GDP). Notes: (1) % changes averaged over 2 quarters; (2) No legislative adjustments; (3) Recession periods are shaded.

State Taxes are Improving While Local Taxes Continue to Decline


-13%

-11%

-9%

-7%

-5%

-3%

-1%

1%

3%

5%

7%

9% Year-Over-Year Change in Real State Taxes and Local Taxes

State Local

Sources: U.S. Census Bureau (tax revenue) and Bureau of Economic Analysis (GDP price index). Notes: (1) 4-quarter average of percent change in real tax revenue; (2) No adjustments for legislative changes.

State income and sales taxes are recovering Local property taxes are weakening


(30)

(25)

(20)

(15)

(10)

(5)

0

5

10 Real Tax revenue changes since start of recession

Sales tax (state) Income tax (state) Corporate income tax (state) Property tax (local)

Notes: Income, sales, & corporate taxes for state governments, property taxes for local governments. Rolling annual totals. Source: Rockefeller Institute analysis of data from Census Bureau and Bureau of Economic Analysis.

Property Taxes Trending Downward and Are Likely to Fall Further


(6)

(3)

0

3

6

9

12

15

18

21

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Real Percent Change in State-Local Property Taxes Since the Start of Recession

1973-Nov 1980-Jan 1990-July 2001-March 2007-Dec

Notes: Four quarter moving averages. Source: Rockefeller Institute analysis of U. S. Census Bureau quarterly tax survey.

K-12 Education Enrollment and Financing


K-12 Enrollment as Share of Total Population: Great Variation Across States


K-12 Enrollment: Percent Change, 2005-2010


NCES Projects Large Pupil Enrollment Growth in West; Declines in Northeast


Real Per Pupil Expenditures


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000 Total exp. Instructional exp.

Sources: Rockefeller Institute Analysis of NCES and BEA data.

Great Variation in Average Per-Pupil Total Spending, 2009


0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 WY NY NJ AK CT VT MA MD DE RI PA HI

ME NH MN

IL NE VA WI

OH LA

NM WA OR SC GA KS TX IA

MI WV MT MO CA CO FL

ND NV SD IN AL AR KY NC AZ UT ID MS OK TN

Median State Spending by Region Northeast $15,591 Midwest $12,017 South $10,168 West $11,033

Notes: Spending adjusted to inflation. Sources: Rockefeller Institute analysis of NCES and BEA data.

Sources of K-12 Education Revenues, 2009 US Total = $591.4 billion


State 46.9%

Federal 9.6%

Local 43.6%

Source: NCES.

State Revenue as Share of Total K-12 Revenues in 2009: Wide Variations


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% VT HI

NM ID

MN AK NC DE WA WV KS AL CA KY WY MI AR MS OK UT OR MT SC

OH AZ US LA IA

TN NY WI CO ME MD GA TX VA NJ

MA IN CT PA

ND NH

RI NE FL

MO SD NV IL

Source: Rockefeller Institute analysis of NCES data.

Median State Share of Total Revenues, by Region Northeast 40% Midwest 42% South 50% West 56%

Per-Pupil Federal, State, and Local Real Revenues, 1989-2009


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000 Federal Revenue State Revenue Local Revenue

Sources: Rockefeller Institute Analysis of NCES and BEA data.

Real Per Pupil Local Revenues: Growing Divergence b/n Northeast & West States


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000 Northeast Midwest South West

Notes: States classified based on average real per pupil total expenditures from 1989 to 2009. Sources: Rockefeller Institute Analysis of BEA and NCES data.

Real Per Pupil State Revenues, by Region


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000



Real Per Pupil Federal Revenues, by Region


0

300

600

900

1,200

1,500

1,800

2,100

2,400

2,700

3,000



Real Per Pupil Total Revenues, by Region


0

5,000

10,000

15,000

20,000

25,000

30,000



Higher Education Enrollment and Financing

Instability and Long-Run Shifts in Sources of Funding


Higher Education FTE Enrollment as Share of Total Population: 2011


Higher Education FTE Enrollment: Percent Change, 2006-2011


Sources of Higher Education Revenues, 2011 US = $143.8 billion


Net Tuition, 39.2%

Local Taxes, 6.4%

All State Support, 52.5%

ARRA Funds, 1.9%

Source: State Higher Education Executive Officers.

Total Educational Revenue Per FTE, FY 2011


0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 WY AK DE CT RI

ME MD NJ MI VT PA AL KY TX ND NC MN NY OK IL

MS VA AR TN US IA

MA MO NV WV SC

NE WI

NH SD HI

NM IN LA OR AZ GA

OH ID KS CA UT CO MT FL

WA

Source: Rockefeller Institute analysis of State Higher Education Executive Officers data.

Median Higher Education Revenue per FTE Northeast $13,120 Midwest $10,545 South $11,664 West $ 9,869

Higher education as “balance wheel” in state budgets: Volatility in state/local appropriations and growth of net tuition


$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

1986 1991 1996 2001 2006 2011

State/local appropriations per FTE Net tuition revenue per FTE

Public universities in South and West still rely heavily on S/L govts—despite trends toward convergence


-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2000

20

01

2002

20

03

2004

20

05

2006

20

07

2008

20

09

2010

20

11

Net tuition

State/local governments

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2000

20

01

2002

20

03

2004

20

05

2006

20

07

2008

20

09

2010

20

11

Net tuition


South West

Public higher education in Northeast & Midwest now splits costs between tuition & SLG appropriations


-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2000

20

01

2002

20

03

2004

20

05

2006

20

07

2008

20

09

2010

20

11

Net tuition


Northeast

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2000

20

01

2002

20

03

2004

20

05

2006

20

07

2008

20

09

2010

20

11

Net tuition


Midwest

Significant cuts in local government education employment

Continued growth in state government education employment (largely higher

education institutions)


State & Local Government vs. Private Sector Employment During The Great Recession


-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

Cum

ulat

ive

perc

ent

chan

ge s

ince

sta

rt o

f re

cess

ion

Private State gov. Local gov.

Source: U.S. Bureau of Labor Statistics (CES, seasonally adjusted).

Local Government Employment Has Declined Sharply Since the Great Recession


-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

Cum

ulat

ive

perc

ent c

hang

e si

nce

star

t of

rece

ssio

n

Local education Local non-education


Local Government Education Employment Hit Much Harder Than Past Recessions


-4%

-2%

0%

2%

4%

6%

8%

10%

12%

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60

Cum

ulat

ive

perc

ent c

hang

e si

nce

star

t of

rece

ssio

n

Months since start of recession

1973 1980 1990 2001 2007


State Government Education Jobs Continued to Increase in The Great Recession


-8%

-6%

-4%

-2%

0%

2%

4%

6%

Cum

ulat

ive

perc

ent c

hang

e si

nce

star

t of

rece

ssio

n

State education State non-education


State Government Education Employment Grew 4%, Weaker Than Past Recessions


-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60

Cum

ulat

ive

perc

ent c

hang

e si

nce

star

t of

rece

ssio

n

Months since start of recession

1973 1980 1990 2001 2007


Looking forward

K-12 education financing is strained in several ways: weakness of local revenues—property tax no longer a cushion for schools

seeing drops in state assistance volatility in state revenues—less predictability, with implications for workforce population of school age children increasing in states with lower fiscal capacity,

smaller state budgets, economies harder hit by recession

Higher ed spending is growing but not through govt appropriations; funded increasingly through tuition and thus affected by many factors, e.g., changes in federal loans/grants, interest rates, jobs, personal income

Federal funds/policies may become more important as state differences grow in K-12 financing and as higher education revenues are privatized

Yet federal support for all levels of education is, at best, vulnerable—to sequestration process, political immobilism, focus of budget balancing efforts on discretionary programs (fed education programs except some student loans are non-defense discretionary and thus subject to caps)

Biggest problem, however, is state fiscal systems: shrinking and volatile revenue base, competition for resources from health care programs, etc.; and persistent regional patterns, which raise hard issues for federalism


Rockefeller Institute The Public Policy Institute of the State University of New York 411 State Street Albany, NY 12203-1003 www.rockinst.org Thomas L. Gais Director [email protected] (518) 443-5831 Lucy Dadayan Senior Policy Analyst [email protected] (518) 443-5828

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