“Despite the significance of the Great Recession’s impact on the economy, little research exists on how schools were affected. A new report from the Federal Reserve Bank of New York attempts to fill this information gap by investigating the effect of the downturn and federal stimulus on New Jersey schools. In Precarious Slopes? The Great Recession, Federal Stimulus, and New Jersey Schools, authors Rajashri Chakrabarti and Sarah Sutherland use trend-shift analysis to study how the Great Recession and federal stimulus affected the level and composition of funding and expenditures in New Jersey school districts. They find strong evidence of a decline in both total funding and expenditures, relative to trend, following the recession. The infusion of federal funds from the American Recovery and Reinvestment Act, however, helped offset the decline in state aid. As a result, total school funding and expenditures experience a smaller decline in 2010 than compared to 2009. The authors also found evidence that policymakers chose to focus funding on instructional expenditures following the recession, including teacher salaries and classroom expenses. Meanwhile, support for non-instructional categories, such as transportation and maintenance, declined in both 2009 and 2010. Additionally high-poverty and urban school districts sustained larger resource declines than more affluent and less populated districts did in the post-recession era. Looking ahead, the authors note that the end of the federal stimulus funding and lower-than-trend growth in state and local revenues could lead to more significant downward pressure on funding and expenditures. Consequently, school districts will likely face hard decisions ahead involving cuts to the critical instructional expenditure category that they have so far been successful in preserving.” Rajashri Chakrabarti is an economist at the Federal Reserve Bank of New York; Sarah Sutherland is a research associate at the Bank.
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