Staff Report, Federal Reserve Bank of New York 573
In the State of New Jersey, any child between the age of five and eighteen has the constitutional right to a thorough and efficient education. The State of New Jersey also has one of the country's most rigid policies regarding a balanced budget come fiscal end. When state and local revenues took a big hit in the most recent recession, officials had to make tough decisions about education spending. This paper exploits rich panel data and trend-shift analysis to analyze how school finances in the Abbott and Bacon School Districts, as well as the high-poverty districts in general, were affected during the Great Recession and the American Recovery and Reinvestment Act (ARRA) federal stimulus period. For these groups of districts, the debate over the meaning of thorough and efficient has become a perennial courtroom discussion. Our analysis shows downward shifts in revenue and expenditure per pupil during the post-recession era in all three groups of districts. However, the Abbott Districts showed the sharpest declines in both revenue and expenditure relative to preexisting trends. Of importance, the Abbott Districts were the only group in our analysis to show statistically significant negative shifts in instructional expenditure (the expenditure category most closely related to student learning), even with the federal stimulus. Declines in noninstructional categories were also the most prominent in the Abbott Districts. With comparably less declines in state and federal aid, the Bacon Districts maintained spending across the board at higher levels than the other groups. Given the unique role of the Abbott and Bacon Districts in the history of New Jersey education policy, the findings of this paper contribute valuable insight regarding the experience of these high-poverty districts during recessions.
school finance recession ARRA federal stimulus Abbott Districts