On the edge: Are states and school districts facing a funding cliff?

1. On the edge: Are states and school districts facing a funding cliff? Annual Meeting of the Education Writers Association Intercontinental Hotel, New Orleans, LA April 8, 2011 Donald J. Boyd Senior Fellow boydd@rockinst.org

2. Yes

3. Revenue Crisis Easing ButFiscal Crisis Continues States are so far down it will be a long slow way back Crisis hits school districts with a lag Longer-term pressures loom after the cycle is behind us

4. It’s a long way back State tax revenue has grown for 4 quarters But inflation-adjusted revenue is 9.7% below start of recession Below recession start in 47 states Down > 20%: LA, SC, GA, ID Down 15 to 20%: UT, FL, AZ, AK, NM, OK, NJ (Table in appendix)

5. Most states face significant 2012 gaps • Per CBPP, at least 42 states face budget gaps for 2012 • $112b in total • 18% of budgets

6. Crisis hits school districts with a lag Budget politics favor school aid -- hit later and lighter. But it’s where the $ is… ARRA cushioned states, delaying state gov’t cuts. But states lose over $50b in 2012. ARRA cushioned impact of state cuts on school districts Property tax often takes 3-5 years to respond to housing price declines

7. Education employment cuts already are historically deep Down 205k jobs from Sep 2008 peak (-2.5%) Over last 2 years, down in 20 of 35 states with data Down more than 5% in: CA, MI, GA, IN, SC Down 3-5% in NC, OR, NJ, AZ Up more than 3% in TX, AK, WY, ND

8. Education cuts deeper than most past recessions and (slightly) deeper than tax revolt of the 1980s

9. Crisis hitting schools, will continue At least 34 states have cut some aid to education (CBPP) At least 21 states proposing K-12 cuts for 2012 (CBPP) Property tax: 77% of school district local revenue. Starting to weaken: declining in many parts of CA, FL, and VA growth slowing in other states

10. Longer-term pressures loom Pensions – required contributions will increase rapidly Retiree health care – also will increase rapidly. More controllable Medicaid – pressure on states Federal budget cuts

11. Rockefeller Institute The Public Policy Institute of theState University of New York 411 State Street Albany, NY 12203-1003 www.rockinst.org Donald J. Boyd,Senior Fellow boydd@rockinst.org

12. Appendix

13. Tax revenue still below start of recession in 47 states

14. Great variation in home-price changes