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Did Cuts in State Aid During the Great Recession Lead to Changes in Local Property Taxes?

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Listed:
  • Rajashri Chakrabarti

    (Federal Reserve Bank of New York)

  • Max Livingston

    (Federal Reserve Bank of New York)

  • Joydeep Roy

    (Teachers College, Columbia University)

Abstract

The Great Recession led to marked declines in state revenue. In this paper we investigate whether (and how) local school districts modified their funding and taxing decisions in response to state aid declines in the post-recession period. Our results reveal school districts responded to state aid cuts in the post-recession period by countering these cuts. Relative to the pre-recession period, a unit decrease in state aid was associated with a relative increase in local funding. To further probe the school district role, we explore whether the property tax rate, which reflects decisions of districts facing budgetary needs, responded to state aid cuts. We find, relative to the pre-recession period, the post-recession period was characterized by a strong negative relationship between property tax rate and state aid per pupil. We also find important heterogeneities in these responses by region, property wealth, and importance of School Tax Relief Program revenue in district budgets. © 2014 Federal Reserve Bank of New York

Suggested Citation

  • Rajashri Chakrabarti & Max Livingston & Joydeep Roy, 2014. "Did Cuts in State Aid During the Great Recession Lead to Changes in Local Property Taxes?," Education Finance and Policy, MIT Press, vol. 9(4), pages 383-416, October.
    • Handle: RePEc:tpr:edfpol:v:9:y:2014:i:4:p:383-416
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    Cited by:

    1. Rajashri Chakrabarti & Max Livingston, 2021. "Tough Choices: New Jersey Schools during the Great Recession and Beyond," Economic Policy Review, Federal Reserve Bank of New York, vol. 27(1), pages 1-34, July.
    2. Rajashri Chakrabarti & Max Livingston, 2019. "The Long Road to Recovery: New York Schools in the Aftermath of the Great Recession," Economic Policy Review, Federal Reserve Bank of New York, vol. 25(Dec).
    3. William N. Evans & Robert M. Schwab & Kathryn L. Wagner, 2019. "The Great Recession and Public Education," Education Finance and Policy, MIT Press, vol. 14(2), pages 298-326, Spring.
    4. Rajashri Chakrabarti & Nicole Gorton & Joydeep Roy, 2018. "Getting ahead by spending more? Local community response to state merit aid programs," Staff Reports 872, Federal Reserve Bank of New York.
    5. Lavertu, Stéphane & Clair, Travis St., 2018. "Beyond spending levels: Revenue uncertainty and the performance of local governments," Journal of Urban Economics, Elsevier, vol. 106(C), pages 59-80.

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    More about this item

    Keywords

    The Great Recession; local; post-recession; school districts;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • I20 - Health, Education, and Welfare - - Education - - - General
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • N92 - Economic History - - Regional and Urban History - - - U.S.; Canada: 1913-
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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