Deficits are especially troubling during a recession, because the actions states must take to balance budgets in the face of falling revenues–including cutting services, laying off workers, and raising taxes–further weaken the economy.
The report estimates that financial assistance from the American Recovery and Reinvestment Act (ARRA) helped states close 30 to 40 percent of budget gaps this year.
But that funding, including ARRA’s historic $100 billion investment in education, is expected to be depleted by Dec. 31, 2010, and market analysts anticipate large state deficits to persist for another two or three years.
State budget projections “suggest that states will face total deficits for state fiscal years 2011 and 2012 of as much as $260 billion beyond what can be covered by the limited ARRA funding that will remain available,” the report said.
These projections only reflect budget cuts and tax increases at the state level, and the report notes that local governments will institute their own budget cuts and tax increases to close their own deficits on top of state actions.
“In both of the past two recessions, state budget deficits remained very large for several years after the recession officially ended,” the report said. “The current recession, in which there have been unprecedented drops in state revenue, could have an even longer recovery period.”
Typically, Sims said, public education has been more or less protected during a recession, because government leaders have been loathe to make cuts to education budgets. Now, however, most states have had to cut public education funding, and some have made very deep cuts.
Nevada has “decimated its higher-education system,” he said, and California’s education funding struggles make almost daily news headlines.
“That’s going to take a lifetime, it seems like, to get back on track, even if the recession turns around today, because we’ve cut so much in education,” Sims said. “Reductions in general investments, teacher layoffs–all the things you need to really grow the economy, we’ve cut, and that’s not going to come back any time soon.”
States have to fill a nearly $180 billion budget gap, AFT’s Muir said, citing Illinois’ $11 billion budget deficit.
“These are ridiculously large numbers,” he said.
Muir said an often-overlooked side of the equation is the recession’s impact on the child poverty rate, and how that increasing rate affects schools.
“Right now, the child poverty rate is rising dramatically, more kids are being born on the wrong side of the achievement gap, [and] we need to supply services to those kids … if we’re to have [a competitive] society and workforce,” Muir said.
That rising poverty rate puts a demand on schools, he added, with the majority of U.S. teachers reporting students coming to school hungry. At the beginning of 2007, the child poverty rate–children in families living below the federal poverty level–was 17 percent, and it rose to 19 percent in 2008.
The Economic Policy Institute predicts that with unemployment levels at 10 percent, the child poverty rate could jump to close to 30 percent.
Using federal stimulus money to avoid layoffs at schools is going to create a shortfall even more difficult for states and schools to contend with when that money runs out, according to a Government Accountability Office report. The report found that 63 percent of states in a representative sample planned to use 50 percent of their school stimulus money to retain jobs.
Fewer tax revenues, more budget cuts
Education receives 38.5 percent of its funding from real estate property taxes, and declining property taxes mean less funding for much-needed education initiatives.
“The disturbing thing about property tax is that it grew extraordinarily fast over the past decades as property values went up 9.8 percent a year–that’s unsustainable growth,” Sims said. “Housing values started declining in the summer of 2006, and last quarter was the first quarter when property taxes started to decline.”
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