Historically, the federal government provides between 8% to 11% of K12 education funds. The balance comes from state and local taxes, and with the recession being felt in state capitals across the country, this has meant historic reductions and seismic shifts in education systems.
This month, the Rockefeller Institute released a report on state and local funding: https://www.rockinst.org/pdf/government_finance/state_revenue_report/2011-04-19-SRR_83%20rev.pdf.
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By the 3rd Quarter of 2009, state property and income were down almost 30%, sales taxes down almost 10%, and total tax revenue down over 16% from the previous year. These declines were much more severe than those of the 2002 recession, and it is no wonder that education budgets have been feeling the pain.
But, we may be about to turn the corner, and it may pay to look at trends and forecasts to help predict which regions will likely experience the fastest or largest state and local revenue upswings, and as a measure of which states are more likely to ease education purse strings.
As of the 4th Quarter of 2010, state taxes revenues had increased 4 quarters in a row, although, on an inflation-adjusted basis, they are still 4.3% lower than they were in 2007. Local taxes, which are primarily based on real estate, have continued to decline, though.
Fastest tax revenue growth was achieved in California, New York, North Dakota, and Wyoming, with double digit declines in Alaska and Louisiana. Forty two states reported increases last quarter, with continuing growth in 45 states in the first two months of 2011. Of course, some of this increase was due to tax rate increases, with the largest ones reported in California, Massachusetts, New Jersey, North Carolina, and New York.
The states with economies increasing faster than 1% in the 4th quarter of 2010 were (from East to West), Maine, New Hampshire, Vermont, Pennsylvania, South Carolina, Ohio, Michigan, Indiana, Illinois, North Dakota, Idaho, Nevada, Washington, Oregon, and California. Two states showed declines: Kansas and New Mexico.
What does this all add up to?
Don't look for expanding education budgets for the next few months. By the next spending cycles, there should be some easing on state budgets, especially states that are experience the fastest growth. This will not return education budgets to 2007 levels (especially in inflation adjusted terms), but the 2012-13 budgets should have lower uncertainty and none of the devastating cuts of the last few years. Then, look for education budget increases in the 2013-14 budgets.
