School Funding in 2011-12 Compared with 2010-11
Some of the deepest reductions to K-12 formula funding since the onset of the recession have occurred in the past year, as federal aid intended to sustain state education spending has expired, rainy day funds have been exhausted, and states have resisted raising additional taxes to offset the need for cuts. After adjusting for inflation between last year (fiscal year 2011) and the current 2012 fiscal year:
- Almost all states for which data are available — 21 of the 24 states — have cut per student education funding.
- Seventeen of the 24 states have cut per student funding by more than two percent.
- Eleven of the 24 states have cut per student funding by more than five percent.
- Of the states surveyed, the three states that reduced per student funding the most since last year are Illinois, Texas, and Wisconsin. Illinois cut per student spending by 13 percent, while Ohio and Texas imposed cuts of about 10 percent.
These cuts are occurring at a time when schools face demands from parents, employers and civic leaders to bring more and more students to higher levels of academic proficiency, in large part because workers will increasingly need higher levels of educational attainment to thrive in the workforce.
Why This Happened
It is not just K-12 education that is being cut. States are cutting funding for higher education, for health care, for human services, and a range of other areas of spending. States have enacted these cuts primarily because the recession caused state revenue to decline sharply as costs increased. In addition, the federal government has not offered additional emergency fiscal aid and few states raised new revenue this year.
- Revenues remain depressed. With unemployment still high and housing values still depressed, people have both less income and purchasing power. As a result, income and sales tax revenue — the main sources of revenue states use to fund education and other services — is still low. Of the 44 states that have released the necessary data, 36 project that they will have less state revenue in 2012 (after adjusting for inflation) than they did in fiscal year 2008, when the recession began. These states on average balanced their budgets based on fiscal year 2012 revenue projections that were seven percent lower than before the recession, after adjusting for inflation. While state revenues are starting to improve across the country, the rate of growth is generally slow.
- Costs are rising. The cost of meeting people’s needs has increased since the recession began, due both to demographic changes and to the recession. In the upcoming 2011-12 school year, the U.S. Department of Education projects that there will be about 260,000 more K-12 students and another 1.5 million more public college and university students than in 2007-08, for example. Some 5.6 million more people are projected to be eligible for subsidized health insurance through Medicaid in 2012 than were enrolled in 2008, as employers have cancelled their coverage and people have lost jobs and wages.
- Emergency federal aid is mostly depleted.States used emergency fiscal relief from the federal government (including both education aid and other forms of state fiscal relief) to cover about one-third of their budget shortfalls through the 2011 fiscal year, which ended on June 30 in most states. Only about $6.7 billion in fiscal relief remains for the current 2012 fiscal year, a year in which states faced shortfalls totaling at least $103 billion. That is, the remaining fiscal relief covers less than seven percent of state budget shortfalls for the fiscal year that just began.Nearly all the aid remaining is explicitly targeted to education, but it is mostly depleted. For the current 2012 fiscal year only about $2 billion of the $39 billion in education aid under ARRA’s State Fiscal Stabilization Fund remains, and only about $4 billion of the $10 billion from the Education Jobs Fund remains. In total, then, only about $6 billion or roughly 13 percent of the federal aid targeted explicitly to supporting general state education funding remains. Since this education aid is intended to help states sustain both their K-12 systems and their higher education institutions, not all of the remaining education funds will go to K-12 schools.
Not only is emergency federal aid largely depleted, federal policymakers are making state budget problems worse by deeply cutting the amount of ongoing federal funding to states. The recent debt limit deal likely will lead to well over half a trillion dollars in cuts in “non-security discretionary” funding over the next decade. Fully one-third of this category of federal spending flows through state governments in the form of funding for education, health care, human services, law enforcement, infrastructure, and other services that states and localities administer. Large cuts in federal funding to states would force states to make still-deeper cuts in their budgets. The cuts to state aid could start as soon as federal fiscal year 2012, which begins October 1, 2011.
Congress could spare aid to states while taking all the required savings from purely federal areas of spending, like the FBI and the National Institutes for Health. But that’s extremely unlikely, since the resulting cuts in those areas would be prohibitively large.
In addition, if the committee charged with recommending further deficit-reduction measures reaches agreement, the additional cuts likely will further reduce federal funding for states. If the committee fails to reach agreement, the automatic, across-the-board cuts that will occur will mean even deeper cuts to non-security discretionary funding.
- Few states raised new revenue this year. While more than 30 states raised revenue to help close their budget shortfalls earlier in the recession, this year few states raised new revenue; most depended entirely on spending cuts.