Economic Downturn & the State of the States

Both the global economy and the American standard of living are based on the availability of credit. We’re in the middle of a serious economic downturn, and the heart of the problem is decreasing funds for individuals and business to borrow, creating a “credit crunch.”

The economy is facing both short term and long term threats. The short-term is market panic caused by tightening credit lines. The longer-term is a general slowing of the economy due to the high reliance on credit that the U.S consumer economy now demands - resulting in higher unemployment, and budget crunches for localities and states.

The economic downturn affects the states disproportionately, because unlike citizens or the federal government, they are required to run balanced budgets by their constitutions. When tax revenues decrease, the programs they are responsible for, such as education, suffer directly as a result.

Schools are an especially relevant example since education and jobs are interconnected. And schools were struggling before the economy went south because many couldn’t afford No Child Left Behind.

How the economy is affecting states:

About half of the states are going to have to deal with shortfalls due to job losses and sluggish sales taxes. State revenues also drop as real estate values decline, generating less in local property taxes for school budgets.

These deficits in state budgets and grim predictions about local revenues are forcing school boards to look for ways to cut next year's budgets.

The possible cuts? Rolling back benefits to school employees, cutting extracurricular activities, and reducing staff and tutoring.

State spotlight:

In California, Governor Arnold Schwarzenegger has proposed $4 billion in education cuts.

Minnesota-school districts are likely to try to persuade voters to approve increased taxes for school funding, but those kinds of ballot initiatives don’t pass easily, especially when voters are having trouble paying their bills.

In Virginia, even wealthy school districts are feeling the pinch. For example, in Fairfax, school officials are contemplating cuts such as requiring students to pick up their own tabs for Advanced Placement tests.

No Child Left Behind

In 2001, the Bush administration proposed and Congress enacted a plan to overhaul the education system with a program called No Child Left Behind. No Child Left Behind tracks student progress through standardized testing and penalizes schools where students fail exams.

Proponents of No Child Left Behind believe that an effective public education system should begin with identical expectations and consequences for all students. This philosophy is based on the belief that increased regulation will improve the school system by bringing about greater equality. From this point of view, schools fall behind due to a lack of legal standards.

Opponents say that No Child Left Behind does not account for the various learning styles and specific needs of individual students. Further, lack of funding has made it difficult for schools to keep up with the mandate, causing some schools to be penalized and fall further behind.

What about the future?

In the midst of a financial crunch, the debate about schooling tends to become muffled because there isn’t enough money to fund existing programs.

Education and the economy, however, continue to be closely connected – and not just in terms of securing funding for state education programs, already a critical issue.

Cuts to education now could mean economic hardship in the future. The less educated the workforce, the more difficult it is to compete in the world market, especially with countries like India and China putting so much emphasis on education.

For more on education, click here.

What do you think?

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Posted on: 02/19/08