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Districts in 22 States Still Haven't Recovered From Recession, Study Finds

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More than a decade later, thousands of school districts still have not recovered from the aftermath of the Great Recession, and many remain especially vulnerable should another recession happen soon, according to two recently released studies. 

The economy remains especially strong right now, and states are on track to increase their K-12 budgets by hundreds of millions of dollars this next school year. But even with this year's increases, some still have a long way to go before they're funding schools at the same level they were before the great recession that peaked in 2008, the Center on Budget and Policy Priorities said this week.

The Great Recession, which sparked a steep decline in sales, income and property tax revenue, wreaked havoc on school districts, forcing mass layoffs, hiring freezes and the shuttering of extracurricular programs. 

Despite years of states pumping more money into schools, at least 22 states plus Washington D.C., up through 2017, still had not reached pre-recession funding levels, according to the CBPP. The think tank frequently advocates for more school funding. 

In Alabama, Georgia, Oklahoma, North Carolina, Nevada, Arizona and Florida, funding remains more than 10 percent below pre-recession levels, according to the study.

"It's important that we fund our schools adequately," said Mike Leachman, CBPP's director of state fiscal research.  "Our schools are educating the workforce of the future. There's lots of evidence pointing toward the importance of boosting educational outcomes for economic growth. And the evidence is clear that funding matters for the outcomes for kids."

The threat of another recession has school finance analysts warning districts to judiciously spend any extra money they get this year. Set aside money in an emergency fund, they advise, and think twice before giving teachers permanent raises that might be unsustainable.

Separately, a study by the Public Policy Institute of California released this week arguesCalifornia districts could lose anywhere from $4 billion a year in a mild recession to $15 billion a year in a severe recession. 

California's school districts are disproportionately dependent on sales and income taxes which are more volatile than property taxes, according to the study.

"[Our school districts] are typical in the sense that we're very dependent on the economy," said Patrick Murphy, the policy director and senior fellow at PPIC. "We ride the rollercoaster, but the slopes on our roller coaster are a lot steeper."

California has close to a $22 billion surplus, and the state legislature is in an entrenched debate over whether to spend the money or save it. Many in the state are urging the state to set the money aside in an emergency savings account in the case of another recession, but there have been  teacher strikes throughout the state over stagnant teacher pay and other cost-cutting measures and several district administrators have asked that the governor use the money to pay down districts' pension debt. 

The PPIC warns that the federal government, considering its recent tax cuts and climbing deficit, may not bail school districts out in the next recession the way it did under the American Recovery and Reinvestment Act .

It urges the state to continue setting aside reserves, adding to the $30 billion currently in that account, create "what if" scenarios in case the state falls into another deficit, and look for strategic investments that may be available during a recession.

Murphy said it's widely known that California's school districts would be badly damaged in the case of a recession. "We're just simply trying to put some scale around it and shine some flashlights around at spots that haven't gotten much attention," Murphy said. 

Illinois and New Jersey might actually be worse off than California. A recent analysis from the Moody's Investors Service found that the two states are the least prepared to weather a recession and risk fiscal insolvency. The analysis points out that the state's pension obligations exceed the amount of money it has in reserves. Louisiana, New York and Pennsylvania also have little money in their savings, the report found.  

Image: Getty.


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