The Heterogeneous and Longer-Term Effects of the Great Recession on Public School District Finances

June 2023

During the Great Recession and in the years that immediately followed, previous research has well-documented that U.S. public school districts receiving larger shares of their funding from state governments experienced larger declines in expenditures per student, as the GR impacted state tax bases more than it impacted local tax bases. Using detailed financial data from the academic years 2004 to 2020, we analyze the longer-term effects of the GR on a broader array of U.S. public school district finances. Employing both difference-in-differences and event study approaches, our results indicate that public school expenditures and unspent end-of-year fund balances recovered and eventually exceeded pre-GR levels on an inflation-adjusted and per-student basis. However, the funding increases were heterogeneous such that districts receiving larger shares of funding from states were less successful at increasing spending and fund balances through 2020—more than ten years after the GR officially ended. Our empirical strategy survives a host of robustness checks. This pattern is concerning as more state-dependent districts tend to have higher proportions of disadvantaged students.

Keywords

School finance, great recession

Education level

K-12 Education

Topics

Staffing, Finance, and Operations