Economic Conditions and State and Local Education Revenue

This article uses information on state and local education spending from 1989–1990 through 2005–2006 to examine the impact of economic conditions on the pattern of real revenue per student. We find that typical economic and other observable education demand determinants are significant in explaining the pattern of real revenue per student before and after the 2001 recession. We also find that there is no economically significant change in how governments responded to economic conditions after the 2001 recession. Finally, our results provide strong evidence that local governments attempted to offset state declines in revenues by increases in local revenues.