Education Finance in the Time of COVID-19

Daniel G. Thatcher 2/9/2021

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The novel coronavirus (COVID-19) pandemic will have a yet unknown—but most certainly unprecedented—impact on states’ education budgets. As states amend or revise their education budgets and finances to meet current fiscal conditions, this page will be updated to reflect those actions.

Legislatures Face Difficult Decisions with No Right Answers

Facing declines of 5%, 10% or more in tax revenue, legislatures—which bear the constitutional responsibility of enacting budgets for their respective states—must reconcile or rewrite their FYs 2020, 2021 or 2022 budgets based on these unprecedented shortfalls.

As of early August 2020, a scan of enacted state budgets revealed the following trends in education budgets:

  • Categorical programs, rather than base per-student funding, are most at-risk
  • Legislatures are opening their financial toolkits
  • Previously adopted teacher salary increases are under threat

Read more about these trends on NCSL's blog.

States May Face Greater Revenue Shortfalls Than During the Great Recession

An analysis of state tax revenue performance suggests that state revenue shortfalls bottomed out after five quarters (FY 2009 Q4) when total state tax collections hit 12% below their pre-recession levels (in non-adjusted dollars). Net corporate income tax revenues fared worst at nearly 20% below pre-recession levels in FY 2010 Q2, followed by personal income tax revenues at 17.7% below pre-recession levels in FY 2009 Q4.

State revenue for public K-12 education mostly derives from general sales and income taxes, and the hit to state tax revenue impacted what states spent on public K-12 education. During the 2009–10 school year, state revenue for schools dropped 8% below their pre-recession peak (during the 2007–08 school year).

Please visit this data visualization for information on the following:

  • State Revenue Performance During the Great Recession (Selected Revenues)
  • State and Local Revenue Performance During the Great Recession
  • Elementary and Secondary Education Revenue During the Great Recession

For more detailed information on state education finances, please visit this data visualization.

WestEd/NCSL Policy Brief Series

NCSL has partnered with WestEd to publish a series of briefs summarizing the evidence and research on common school finance issues that arise during an economic downturn. Specifically, with the onset of an economic downturn, states face the prospect of reduced tax revenue available to fund public services, including public education. This series of briefs leverages what we know from evidence and research to present approaches that state policymakers may take to address these funding realities while supporting public education.

Contact Dan Thatcher with questions.

Related NCSL Resources

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