1. 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

2. State revenue crisis is easing,
but state-local fiscal crisis continues
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3. Worst state government tax declines in 5+
decades - worse than 2001 recession
Percentage Change in Real State Government Taxes & Real GDP vs. Year Ago
18%
Real GDP
15%
Real state tax revenue
12%
9%
6%
3%
0%
-3%
-6%
-9%
-12%
-15%
-18%
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.
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4. State Taxes are Improving While Local
Taxes Continue to Decline
Year-Over-Year Change in Real State Taxes and Local Taxes
9%
State Local
7%
5%
3%
1%
-1%
-3%
-5%
-7%
-9%
-11%
-13%
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.
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5. State income and sales taxes are recovering
Local property taxes are weakening
Real Tax revenue changes since start of recession
10
5
0
(5)
(10)
(15)
(20)
Sales tax (state)
Income tax (state)
(25)
Corporate income tax (state)
Property tax (local)
(30)
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.
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6. Property Taxes Trending Downward and
Are Likely to Fall Further
Real Percent Change in State-Local Property Taxes Since the Start of Recession
21
1973-Nov 1980-Jan 1990-July 2001-March 2007-Dec
18
15
12
9
6
3
0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
(3)
(6)
Notes: Four quarter moving averages.
Source: Rockefeller Institute analysis of U. S. Census Bureau quarterly tax survey.
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7. K-12 Education Enrollment and Financing
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8. K-12 Enrollment as Share of Total
Population: Great Variation Across States
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9. K-12 Enrollment: Percent Change, 2005-2010
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10. NCES Projects Large Pupil Enrollment
Growth in West; Declines in Northeast
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11. Real Per Pupil Expenditures
14,000
Total exp. Instructional exp.
12,000
10,000
8,000
6,000
4,000
2,000
0
Sources: Rockefeller Institute Analysis of NCES and BEA data.
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12. Great Variation in Average Per-Pupil Total
Spending, 2009
TN
OK
MS
ID
UT
AZ Median State Spending
NC
KY
AR
AL
by Region
IN
SD
NV
ND
FL
Northeast $15,591
CO Midwest $12,017
CA
MO
MT
WV
South $10,168
MI West $11,033
IA
TX
KS
GA
SC
OR
WA
NM
LA
OH
WI
VA
NE
IL
MN
NH
ME
HI
PA
RI
DE
MD
MA
VT
CT
AK
NJ
NY
WY
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000
Notes: Spending adjusted to inflation.
Sources: Rockefeller Institute analysis of NCES and BEA data.
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13. Sources of K-12 Education Revenues, 2009
US Total = $591.4 billion
Local
43.6% State
46.9%
Federal
9.6%
Source: NCES.
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14. State Revenue as Share of Total K-12
Revenues in 2009: Wide Variations
IL
NV Median State Share of
SD
MO
FL Total Revenues, by
NE
RI
NH
Region
ND
PA
CT
IN
MA Northeast 40%
NJ
VA
TX
Midwest 42%
GA South 50%
MD
ME
CO
WI
West 56%
NY
TN
IA
LA
US
AZ
OH
SC
MT
OR
UT
OK
MS
AR
MI
WY
KY
CA
AL
KS
WV
WA
DE
NC
AK
MN
ID
NM
HI
VT
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Source: Rockefeller Institute analysis of NCES data.
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15. Per-Pupil Federal, State, and Local Real
Revenues, 1989-2009
7,000
Federal Revenue State Revenue Local Revenue
6,000
5,000
4,000
3,000
2,000
1,000
0
Sources: Rockefeller Institute Analysis of NCES and BEA data.
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16. Real Per Pupil Local Revenues: Growing
Divergence b/n Northeast & West States
18,000
Northeast Midwest South West
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Notes: States classified based on average real per pupil total expenditures from 1989 to 2009.
Sources: Rockefeller Institute Analysis of BEA and NCES data.
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17. Real Per Pupil State Revenues, by Region
16,000
Northeast Midwest South West
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Notes: States classified based on average real per pupil total expenditures from 1989 to 2009.
Sources: Rockefeller Institute Analysis of BEA and NCES data.
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18. Real Per Pupil Federal Revenues, by Region
3,300
Northeast Midwest South West
3,000
2,700
2,400
2,100
1,800
1,500
1,200
900
600
300
0
Notes: States classified based on average real per pupil total expenditures from 1989 to 2009.
Sources: Rockefeller Institute Analysis of BEA and NCES data.
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19. Real Per Pupil Total Revenues, by Region
35,000
Northeast Midwest South West
30,000
25,000
20,000
15,000
10,000
5,000
0
Notes: States classified based on average real per pupil total expenditures from 1989 to 2009.
Sources: Rockefeller Institute Analysis of BEA and NCES data.
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20. Higher Education Enrollment and Financing
Instability and Long-Run Shifts in Sources
of Funding
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21. Higher Education FTE Enrollment as Share
of Total Population: 2011
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22. Higher Education FTE Enrollment: Percent
Change, 2006-2011
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23. Sources of Higher Education Revenues, 2011
US = $143.8 billion
ARRA
Funds, 1.9%
Net Tuition,
39.2%
All State
Support, 52.5%
Local Taxes,
6.4%
Source: State Higher Education Executive Officers.
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24. Total Educational Revenue Per FTE, FY 2011
WA
FL
MT
CO
UT
CA
KS
ID Median Higher Education
OH
GA
AZ
Revenue per FTE
OR
LA
IN
NM
HI Northeast $13,120
SD
NH Midwest $10,545
WI
NE
SC South $11,664
WV
NV
MO
West $ 9,869
MA
IA
US
TN
AR
VA
MS
IL
OK
NY
MN
NC
ND
TX
KY
AL
PA
VT
MI
NJ
MD
ME
RI
CT
DE
AK
WY
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000
Source: Rockefeller Institute analysis of State Higher Education Executive Officers data.
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25. Higher education as “balance wheel” in state budgets:
Volatility in state/local appropriations and growth of net tuition
$9,000
$8,000
$7,000
$6,000
$5,000 State/local appropriations per
FTE
$4,000 Net tuition revenue per FTE
$3,000
$2,000
$1,000
$-
1986 1991 1996 2001 2006 2011
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26. Public universities in South and West still rely heavily
on S/L govts—despite trends toward convergence
9,000 9,000
South West
8,000 8,000
7,000 7,000
6,000 6,000
5,000 Net tuition 5,000 Net tuition
4,000 State/local 4,000 State/local
governments governments
3,000 3,000
2,000 2,000
1,000 1,000
- -
2001
2000
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2001
2007
2009
2010
2011
2000
2002
2003
2004
2005
2006
2008
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27. Public higher education in Northeast & Midwest now
splits costs between tuition & SLG appropriations
9,000 9,000
8,000 Northeast 8,000
Midwest
7,000 7,000
6,000 6,000
5,000 5,000
Net tuition Net tuition
4,000 4,000
State/local State/local
governments governments
3,000 3,000
2,000 2,000
1,000 1,000
- -
2001
2003
2000
2002
2004
2005
2006
2007
2008
2009
2010
2011
2005
2000
2002
2003
2004
2006
2007
2008
2009
2001
2010
2011
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28. Significant cuts in local government
education employment
Continued growth in state government
education employment (largely higher
education institutions)
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29. State & Local Government vs. Private Sector
Employment During The Great Recession
2%
Private State gov. Local gov.
1%
Cumulative percent change since start of recession
0%
-1%
-2%
-3%
-4%
-5%
-6%
-7%
-8%
Source: U.S. Bureau of Labor Statistics (CES, seasonally adjusted).
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30. Local Government Employment Has
Declined Sharply Since the Great Recession
2.0%
Local education Local non-education
1.5%
Cumulative percent change since start of recession
1.0%
0.5%
0.0%
-0.5%
-1.0%
-1.5%
-2.0%
-2.5%
-3.0%
Source: U.S. Bureau of Labor Statistics (CES, seasonally adjusted).
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31. Local Government Education Employment
Hit Much Harder Than Past Recessions
12%
1973 1980 1990 2001 2007
10%
Cumulative percent change since start of recession
8%
6%
4%
2%
0%
0 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
-2%
-4%
Months since start of recession
Source: U.S. Bureau of Labor Statistics (CES, seasonally adjusted).
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32. State Government Education Jobs Continued to
Increase in The Great Recession
6%
State education State non-education
Cumulative percent change since start of recession
4%
2%
0%
-2%
-4%
-6%
-8%
Source: U.S. Bureau of Labor Statistics (CES, seasonally adjusted).
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33. State Government Education Employment
Grew 4%, Weaker Than Past Recessions
18%
1973 1980 1990 2001 2007
16%
Cumulative percent change since start of recession
14%
12%
10%
8%
6%
4%
2%
0%
0 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
-2%
Months since start of recession
Source: U.S. Bureau of Labor Statistics (CES, seasonally adjusted).
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34. 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
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35. 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