Publication Date

Winter 2016


CERPS Working Paper #2016-1

This working paper is now forthcoming in Journal of Education Finance and will be published in the Fall 2018 issue.


The Great Recession caused states around the country to make substantial budget cuts to public education. As a result, districts that rely more heavily on state funding – those with greater concentrations of students in poverty – may be disproportionately impacted by the Great Recession funding cuts; however, little prior research examines this issue. This study examines how state school finance systems responded to recessionary funding cuts on average nationally. The study then draws on state specific data to examine local district taxation patterns in response to state spending cuts. The study finds that (a) on average across states, high-poverty districts experienced an inequitable share of funding and staffing cuts following the Great Recession; (b) changes in the income-based funding gap varied across states; (c) higher-poverty districts increased local tax rates at a faster rate than low-poverty districts in Texas; and (d) the funding gap increased in Texas by more than in 43 other states; (e) lack of subsidies for facilities funding and other idiosyncrasies within the Texas school finance system prevented high-poverty districts from maintaining equitable funding levels, despite increasing tax rates at a faster rate than otherwise similar wealthier districts; and (f) leveling up funding for high-poverty districts in Texas would cost the state $9.1 billion, a 17% increase in education spending. The study provides evidence on how school districts were impacted by recessionary spending cuts and how they responded, and offers alternative strategies for restoring state education budgets.