The DeHavilland Blog

Thursday, December 06, 2007

States' wallets get thinner

According to this article from, the fiscal picture is growing darker for state governments:

A slumping housing market and skimpier sales tax collections will force as many as 20 states to go back and patch holes in their budgets in 2008, the nation’s governors reported Wednesday (Dec. 5).

Most states will muddle through the current economic slowdown, but if the country dips into a recession, then even more than 20 states likely will have to make cuts to their current budgets, Raymond C. Scheppach, executive director of the National Governors Association predicted. "Clearly, it’s a little more gloomy than it was once was," Scheppach said as NGA and the National Association of State Budget Officers released the latest state revenue numbers.


Unlike the federal government, which can run a deficit, states must balance their books. That means if tax revenues come in less than what a state had projected, then a state either has to cut programs or find other sources of revenue. The fiscal year begins July 1 for all but four states (Alabama, Michigan, New York and Texas).

Scott D. Pattison, executive director of the National Association of State Budget Officers, said the report shows that “most states are moving from peak fiscal conditions to a period of much slower spending and revenue growth.”

State spending is budgeted to grow a modest 4.7 percent in fiscal 2008. That’s far below the robust 9.3 percent growth states saw in fiscal 2007 and even lower than the 30-year average of 6.4 percent.

Where do states spend their money? The article says:

Spending on Medicaid, the federal-state venture that provides health insurance to the poor, accounted for nearly 22 percent of all state spending in 2007, followed by K-12 education (21 percent); higher education (10.4 percent), transportation (8.1 percent), corrections (3.4 percent); public assistance (1.8 percent) and all other expenditures (33.4 percent).

So budgets are tightening, and education (K-12 plus higher ed) make up almost a third of state expenditures. I think it's safe to say that large-scale movements in education, including universal Pre-K and reducing class sizes, are looking unlikely; what's more, given that some costs in education are rising dramatically (such as health insurance costs), I would expect that schools and districts are going to feel a real pinch in the coming years.

Spending for K-12 education over the past 10-15 years has skyrocketed. Consider these numbers from the US Department of Education:

By the end of the 2004-05 school year, national K-12 education spending will have increased an estimated 105 percent since 1991-92; 58 percent since 1996-97; and 40 percent since 1998-99. On a per-pupil basis and adjusted for inflation, public school funding increased: 24 percent from 1991-92 through 2001-02 (the last year for which such data are available); 19 percent from 1996-97 through 2001-02; and 10 percent from 1998-99 through 2001-02.

This pace is unsustainable even in boom times, and clearly those times are about to become a memory, due both to short-term conditions (like the subprime lending issue) and long-term trends.

The question is, what's going to happen to K-12 education as a result? How will they accommodate this change in the funding climate? Will they reach out to their communities, find more efficient ways to educate, or simply suffer through?


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