Federal, State & Local Education Finances Nomura Global Media - - PowerPoint PPT Presentation

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

Rockefeller Institute of Government

3

• 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

Rockefeller Institute of Government

4

• 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

Rockefeller Institute of Government

5

(30) (25) (20) (15) (10) (5) 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

Rockefeller Institute of Government

6

(6) (3) 3 6 9 12 15 18 21 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

Rockefeller Institute of Government

7

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

Rockefeller Institute of Government

8

K-12 Enrollment: Percent Change, 2005-2010

Rockefeller Institute of Government

9

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

Rockefeller Institute of Government

10

Real Per Pupil Expenditures

Rockefeller Institute of Government

11

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

Rockefeller Institute of Government

12

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

Rockefeller Institute of Government

13 State 46.9% Federal 9.6% Local 43.6%

Source: NCES.

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

Rockefeller Institute of Government

14

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

Rockefeller Institute of Government

15

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

Rockefeller Institute of Government

16

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

Rockefeller Institute of Government

17

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 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 Federal Revenues, by Region

Rockefeller Institute of Government

18

300 600 900 1,200 1,500 1,800 2,100 2,400 2,700 3,000 3,300 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 Total Revenues, by Region

Rockefeller Institute of Government

19

5,000 10,000 15,000 20,000 25,000 30,000 35,000 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.

Higher Education Enrollment and Financing Instability and Long-Run Shifts in Sources

• f Funding

Rockefeller Institute of Government

20

Higher Education FTE Enrollment as Share

• f Total Population: 2011

Rockefeller Institute of Government

21

Higher Education FTE Enrollment: Percent Change, 2006-2011

Rockefeller Institute of Government

22

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

Rockefeller Institute of Government

23 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

Rockefeller Institute of Government

24

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

Rockefeller Institute of Government

25

$- $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

• n S/L govts—despite trends toward convergence

Rockefeller Institute of Government

26

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Net tuition State/local governments

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Net tuition State/local governments

South West

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

Rockefeller Institute of Government

27

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Net tuition State/local governments

Northeast

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Net tuition State/local governments

Midwest

Significant cuts in local government education employment Continued growth in state government education employment (largely higher education institutions)

Rockefeller Institute of Government

28

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

Rockefeller Institute of Government

29

• 8%
• 7%
• 6%
• 5%
• 4%
• 3%
• 2%
• 1%

0% 1% 2% Cumulative percent change since start of recession 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

Rockefeller Institute of Government

30

• 3.0%
• 2.5%
• 2.0%
• 1.5%
• 1.0%
• 0.5%

0.0% 0.5% 1.0% 1.5% 2.0% Cumulative percent change since start of recession Local education Local non-education Source: U.S. Bureau of Labor Statistics (CES, seasonally adjusted).

Local Government Education Employment Hit Much Harder Than Past Recessions

Rockefeller Institute of Government

31

• 4%
• 2%

0% 2% 4% 6% 8% 10% 12%

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

Cumulative percent change since start of recession Months since start of recession 1973 1980 1990 2001 2007 Source: U.S. Bureau of Labor Statistics (CES, seasonally adjusted).

State Government Education Jobs Continued to Increase in The Great Recession

Rockefeller Institute of Government

32

• 8%
• 6%
• 4%
• 2%

0% 2% 4% 6% Cumulative percent change since start of recession State education State non-education Source: U.S. Bureau of Labor Statistics (CES, seasonally adjusted).

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

Rockefeller Institute of Government

33

• 2%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 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 Cumulative percent change since start of recession Months since start of recession 1973 1980 1990 2001 2007

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

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 of Government

34

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 tgais@albany.edu (518) 443-5831 Lucy Dadayan Senior Policy Analyst ldadayan@albany.edu (518) 443-5828