Whenever our kids return to school, a severely diminished learning experience awaits them unless the federal government learns an important lesson from the past and significantly boosts state aid — and soon.
The last time that states faced a budget crisis, in the wake of the Great Recession of a decade ago, emergency federal aid closed only about one-quarter of state budget shortfalls. Once the aid was gone, states started cutting funding to K-12 schools to help comply with their balanced budget requirements. By 2011, 17 states had cut per-student funding by more than 10 percent. Local school districts responded by cutting teachers, librarians, and other staff; scaling back counseling and other services; and even reducing the number of school days. Even by 2014 — five years after the Great Recession ended — state support for K-12 schools in most states remained below pre-recession levels.
Money matters in education. As my colleague Cortney Sanders recently noted, "Adequate school funding helps raise high school completion rates, close achievement gaps, and make the future workforce more productive by boosting student outcomes, studies show." The Great Recession in particular hurt students' educations, driving down test scores and the rate at which students attend college, Northwestern University economist C. Kirabo Jackson and two colleagues found.
Federal aid to date, plus state rainy day funds, can close about one-fifth of those state gaps, leaving states $590 billion short.
Without significantly more federal aid, these gaps could prompt school districts to make far larger cuts than they did in the wake of the Great Recession, leading to larger class sizes, stagnant teacher pay, and outdated learning materials.
The impact on public education could be severe. Across the country, states provide 47 percent of all K-12 funding (with localities providing 45 percent and the federal government providing the rest). At the same time, education comprises about 26 percent of state budgets, making education a prime target for lawmakers looking to cut at a time of big state budget shortfalls.
Already, several states are announcing large education budget cuts that will harm children and families. Ohio Governor Mike DeWine has announced plans to cut $300 million in K-12 funding and $100 million in college and university funding for the current year. Meanwhile, Georgia's top budget officials told the state's schools to plan for large cuts for next year that will almost certainly force districts to make layoffs.
Additional cuts are likely at the local level, where governments and school districts face enormous budget gaps of their own.
Meanwhile, states face new, unanticipated costs due to COVID-19, including access to devices and connectivity for distance learning, additional food services for students from low-income families, and expanded learning time to offset the learning loss caused by school closures. Expanded learning time alone could cost districts $36 billion, the Learning Policy Institute estimates.
Every classroom in America is at risk; the danger may be greatest for low-income kids and children of color, for whom an excellent K-12 education is particularly important as they seek to overcome historic barriers to opportunity. While state funding typically reduces disparities between wealthy and poor school districts, funding cuts magnify those disparities — and that's what happened with the Great Recession, when state funding fell as a share of total school funding. Today, high-poverty school districts — which face higher costs — receive more state and local funding than low-poverty districts do in only about a third of states.
With so much at stake for students and their families, the President and Congress need to provide significant fiscal relief to states, localities, tribes, and territories to minimize education cuts. The House-passed Heroes Act includes about $1 trillion in additional state, local, and education aid, including these must-haves:
An increase in the federal matching rate for covering Medicaid costs — a highly effective form of aid that quickly delivers direct savings to states, freeing up funds that they can reallocate to protect schools and other fundamental public services.
Direct, flexible funding to states, tribes, and territories to help them offset the loss of tax revenues.
Direct funding to local school districts, via increased state grants distributed according to the funding formula of the existing federal Title I program.
Additional direct funding to local governments, which are facing their own revenue losses.
Now that the House has passed the Heroes Act, giving states aid of this magnitude — and soon — should be a top priority for the Senate and President.
Whatever federal policymakers do, however, states likely will need to draw down their reserves, close tax loopholes, raise new revenues, and find other ways to protect education funding and other programs serving vulnerable children and families. The education of a generation is at stake.
Almost every EPI article, well researched and backed by stand-up, professional economics, ends up being an argument for more socialism, more public goods, for capitalism being better managed, and for fascists being removed from power and its chief gangsters imprisoned. This one is no exception
If policymakers should learn one lesson from the long, sluggish recovery from the Great Recession, it is that cutting public spending, particularly by state and local governments, is a recipe for prolonged economic pain. My colleague Josh Bivens has described in detail how the state and local austerity of the early 2010s was both an unprecedented cutback in public spending following a recession and directly to blame for the slow pace of recovery.
Unfortunately, facing massive projected losses in revenue as the coronavirus has forced them to lock down their economies, many state and local governments are already cutting critical services and laying off staff. The April jobs report showed that nearly 981,000 state and local public-sector jobs have already been lost. To put that in perspective, that's more than all the state and local public-sector jobs lost in the Great Recession and its aftermath.
As shown in Figure A, the peak for state and local government employment occurred in July 2008. As state and local budgets deteriorated throughout that year, governments began cutting services and staff. When the recession officially ended in June 2009, lawmakers in many states were already cutting services and staff, choosing to slash budgets rather than pursuing new revenues. These cuts accelerated in 2010 as relief funding from the federal recovery act dried up, and continued for several years, particularly in many states where conservative lawmakers took control following the 2010 elections. The result was a loss of nearly 800,000 state and local public sector jobs by July 2013.
It's critical to note, however, that not every state was cutting staff and services during this time. From July 2008 to July 2013, 18 states either preserved or grew their state and local public-sector workforces—keeping teachers, police, firefighters, nurses, and other critical service providers on the job. As shown in Figure B, the 18 states that did not make cuts tended, on average, to grow their public-sector workforce by 3.3%, while 32 states and the District of Columbia cut their state and local public-sector workforce (S&L) by an average of 4.1%. States that preserved or grew their public-sector workforce fared much better coming out of the recession, with fewer job losses overall, fewer private-sector job cuts, less growth in unemployment, and faster job growth as the recovery took hold.
From July 2008 to July 2013, total nonfarm employment shrunk by 1.7% in states that cut their state and local workforce, yet grew slightly (0.6%) in states that preserved or grew their state and local public sector. Of course, total nonfarm employment includes state and local government workers, so it's important to consider the employment changes strictly in the private sector. The pattern is the same: On average, states that kept teachers, nurses, firefighters, and other public-sector workers on the job essentially maintained the same level of private-sector employment over this period. In contrast, states that cut state and local government employment lost, on average, 1.3% of jobs outside of state and local government.i
This loss in nongovernment jobs isn't all that surprising given that for every dollar spent by state and local governments, more than half of the resulting economic activity occurs in the private sector. States and local governments that lay people off are not only adding those workers to the unemployment rolls, they are also threatening private-sector jobs that depend upon the spending of public-sector staff.
Analyzing differences in unemployment rate changes is a little less straightforward than job numbers since workers giving up looking for work can lower unemployment. Still, states that cut state and local public-sector jobs did experience larger increases in unemployment, on average, than states that preserved their public sectors. From July 2008 to July 2013, the unemployment rate rose by an average of 1.6 percentage points in states that cut state and local public-sector jobs, while only growing 1.2 percentage points in states that preserved those jobs.
Federal aid to states in the wake of the recession was woefully inadequate, yet state lawmakers' decisions on how to respond to budget shortfalls—cutting staff and services or seeking new revenues— contributed to two fairly distinct trajectories of state recovery. Figure Cshows the different job growth trajectories for states that cut their state and local government services and staff versus states that preserved or grew their state and local workforce. From June 2009 to June 2015, states that preserved or grew their state and local public workforce averaged total nonfarm job growth of 8.8% and 10.5% growth in the private sector. In contrast, states that cut their public sectors averaged total nonfarm growth of only 6.2%, with 8.2% growth in the private sector.
We can see the same trend looking at individual states, illustrated in Figure D. The more a state cut their state and local public-sector workforce, the fewer private-sector jobs they tended to add in the first six years of the recovery.ii
In fact, states that maintained their public-sector workforce recovered more than a year and a half faster than states that made cuts. Public-sector-preserving states went from their total nonfarm job trough back to their pre-recession level of employment in 49 months, on average. For public-sector-cutting states, it took an average of 68 months.
i. All the values in these calculations exclude data for North Dakota. During this period, North Dakota experienced a boom in natural gas production that caused an enormous, atypical increase in jobs. Over this period, North Dakota grew their state and local public sector workforce; including it skews the averages significantly upward.
ii. There is undoubtedly some two-way causality here. Just as cuts to the public sector lead to less private-sector consumption, declining private-sector jobs lead to lower tax revenues which lead to cuts to the state and local public sector. Yet looking at lagged changes during the period of large state and local public-sector cuts does show the same overall trend. For example, examining private-sector job changes from June 2011 to June 2012 relative to state and local job changes from June 2010 to June 2011 presents a similar picture. Moreover, if private-sector job loss were driving cuts to the public sector, policymakers would need to take action to break that cycle, and stabilizing demand through expanded public spending is typically the simplest way to do just that.
The first installment of this three-part series on the impact of the coronavirus in the Midwest describes how weak labor protections have put Midwestern food processing workers at risk for coronavirus. Here we describe how incarceration puts people in the Midwest at risk during the pandemic and what state and local policymakers can do to protect the health and safety of people and families impacted by incarceration.
During a public health crisis, we're reminded that our communities are only really safe when everyone is safe. Across the nation—and throughout the Midwest—our communities include jails, prisons, and detention centers. And now, people who are incarcerated face an urgent problem: greater health risks from COVID-19. Overcrowding inhibits physical distancing and isolation of people who've contracted the virus, and inadequate medical care and supplies in these facilities prevents necessary testing, treatment, and sanitation. Decades of so-called "tough on crime" laws have overcrowded Midwestern jails and prisons and put the people who are incarcerated and the surrounding communities at risk.
State and local policymakers must do more to protect the health and safety of people impacted by incarceration and the workers coming in and out of these facilities as well. Proper medical care; prioritizing people for release from jails, prisons, and detention centers; eliminating unnecessary fees and fines; protecting people on parole and probation; and ensuring incarcerated people are able to communicate with their family and friends without creating additional economic hardship are all steps that should be prioritized during the coronavirus pandemic and further highlight reforms necessary even when we are not facing a global health emergency.
Reduce admissions and the number of people currently in jails and prisons
The Prison Policy Initiative recommends reducing admissions into jails and state and federal prisons and also releasing people who are currently incarcerated. For example, at the end of March, Gov. Pritzker issued an executive order to prevent new admissions to Illinois state prisons. In Michigan, Gov. Whitmer issued an executive order allowing local officials to prioritize release for people who are elderly, have chronic health conditions or other serious medical issues, pregnant women, people nearing their release date, and people with drug or alcohol addictions or mental health issues that could be treated elsewhere. In Ohio, advocates have been calling for state officials to reduce prison populations, by at least 10,000, to bring the number of incarcerated people in the system closer to its design capacity of 38,500. At least partly in response to this advocacy, Gov. DeWine's administration has taken steps to reduce the number of people incarcerated in state prisons by about 1,300 to just over 47,500, down from nearly 49,000 in March.
Prevent unnecessary pre-trial detention and economic hardship by waiving fees, fines, and court debt
Throughout the Midwest, pre-trial policies have driven an increase in incarceration as people are locked up without a conviction and await trial or deportation. This includes people who are incarcerated because they simply cannot afford to pay bail or other court-related fines and fees. The Fees and Fines Justice Center recommends waiving fees, fines, and court debt and not issuing warrants for unpaid fees and fines or for failing to appear in a related hearing. The Michigan executive order referenced above also allows local officials to prioritize releasing anyone incarcerated for failure to appear in court or failure to pay court-related fees and fines, as well as people incarcerated for a traffic violation. As another example, Nebraska's Supreme Court suspended the execution of warrants for unpaid fees and fines between March 30 and June 30, 2020.
Protect the health and safety of people who are on parole and probation
The economic, health, and social crises created by incarceration were well-documented long before the onset of the coronavirus. The solutions highlighted here also point to the need for long-term, permanent reforms for thriving healthy communities in the Midwest and around the country, not just in times of the extreme crisis.
The economic impact of the COVID-19 pandemic threatens the health and well-being of families across the nation and is particularly consequential for the nation's 77 million children ages 18 and under. Using data from the Urban Institute's Health Reform Monitoring Survey collected in late March and early April 2020, we assess how the pandemic is affecting family employment and caregiving, financial decisions, and material hardship among parents living with children under age 19. We find the following: More than 4 in 10 parents reported that they or someone in their family lost work or work-related income because of the coronavirus outbreak. This proportion rises to about 5 in 10 for non-Hispanic black parents and low-income parents and to more than 6 in 10 for Hispanic parents. Low-income parents were less likely to be able to work from home and more likely to have had difficulty arranging child care than higher-income parents. The same holds true for Hispanic parents, who were less likely to be able to work from home and more likely to have had difficulty arranging child care than non-Hispanic white parents. Parents reported coping with the pandemic's economic impacts by cutting back spending on food, reducing savings, and going into debt. More than one-third of parents reported problems paying for housing, utility, food, or medical costs in the past month, including roughly half of low-income parents and black and Hispanic parents.
Equitable Growth last week launched a new lecture series. The first installment is with Claudia Sahm, who is saying something very worthy of your attention. Watch her Fighting the coronavirus and the way forward video, in which she discusses promising research ideas that support a robust response to fight the coronavirus recession, as well as longer-term efforts to ensure a more resilient U.S. economy in the years to come.
Claudia Sahm sees the freight train bearing down on us, in the form of a very deep and long depression. She watches ideologues and partisans try to tie us to the railroad tracks. Why? Some because they do not understand the importance of ensuring a rapid and complete bounce back from the coronavirus depression. Some because they cynically dismiss the importance of ensuring a rapid and complete bounce back from the coronavirus depression. We have seen this story before, as tragedy. A decade ago ideologues, partisans, and centrists declared victory in late 2009 over the then Great Recession. They shifted their attention away from boosting recovery to austerity. Sahm is terrified that they are doing it again. And she is right to be scared. Read her "The coronavirus recession is severe, and the damage to the U.S. economy will last years," in which she writes: "The U.S. economy is in a severe recession, at least twice as severe as 2007–2009…Today's national unemployment rate is rivaled only by the heights of the Great Depression, when 30 percent of workers were unemployed. Lost income leads to less spending, which leads to business closures and more layoffs …People and businesses are living with overwhelming anxiety. Policymakers need to do more than contain the coronavirus and allow stores to reopen. They need to get money in the pockets of people and calm their fears. If Americans have money to spend, they will spend. Many have no choice. Their low wages make it impossible to support their families in good times, let alone now … Even with relief from Washington, immense damage is happening across country right now. This is not a drill. The Great Recession showed how long it can take to get us back on our feet."
The U.S. Bureau of Labor Statistics reports that still more workers, 2.4 million of them, lost their jobs and applied for unemployment benefits in the past week. Relaxing lockdowns looks to have increased the virus caseload. Relaxing lockdowns has not all has not yet boosted production. See Equitable Growth's graphic about the applications for Unemployment Benefits in the week of May 10–16.
Worthy reads not from Equitable Growth:
The extremely thoughtful David Glasner explains why those who analogize the coronavirus supply shock to the monopoly oil price shocks of the 1970s are profoundly mistaken. This is not an inflationary supply shock. This looks overwhelmingly likely be a profoundly deflationary supply shock. Read his "The Idleness of Each Is the Result of the Idleness of All," in which he writes: "Some, perhaps many, seem to think that if the shock is a supply, rather than a demand, shock, then there is no role for a countercyclical policy response designed to increase demand … The problem with that reasoning is that reductions in supply are themselves effectively reductions in demand. The follow-on reductions in demand constitute a secondary contractionary shock on top of the primary supply shock, thereby setting in motion a cumulative process of further reductions in supply and demand … The interconnectedness of the entire economy, and the inability of any individual to avoid the consequences of a social or economic breakdown … was recognized by… Frederick Lavington, in his short book The Trade Cycle published in 1922 in the wake of the horrendous 1921-22 depression … To call unemployment "voluntary" under such circumstances is like calling the reduced speed of drivers in a traffic jam "voluntary." To suppose that the intersection of a supply-demand diagram provides a relevant analysis of the problem of unemployment under circumstances in which there are massive layoffs of workers from their jobs is absurd. Nevertheless, modern macroeconomics for the most part proceeds as if the possibility of an inefficient Nash equilibrium is irrelevant to the problems with which it is concerned … In the face of an adverse supply shock, a spell of inflation lasting as long as the downturn is therefore to be welcomed as benign and salutary, not resisted as evil and destructive. The time for a decline in, or reversal of, inflation ought to be postpone till the recovery is under way."
Great Depression-level unemployment rates are reached not after three years but after two months. Read William M. Rodgers III and Andrew Stettner, "New Data Show That the True March Jobless Rate Could Near 20 Percent," in which they write; "The Century Foundation has revised upwards our projections for the true March unemployment rate nationally to 18.3 percent … Unemployment insurance … data tell only part of the problem, as issues with overwhelmed state UI systems and eligibility restrictions that exclude many gig workers and independent contractors from receiving benefits … The current jobs crisis is unlike anything we've seen before. Past recessions and economic downturns have brought a snowstorm of job losses—a steady fall, spread over many months, if not years, whose impacts we could address in real-time, with existing tools, to mitigate the damage and keep the accumulation manageable. Today, however, we're facing an avalanche."
The political intellectual policy tide from 1975 to 2005 was the neoliberal one: stepping back from even indicative planning and from any form of commitment to equality of result or even of opportunity—the conventional wisdom becoming that there was very little indeed that government was capable of doing efficiently, that sharper and harder incentives were almost always to the social benefit, and that to the extent social democratic ends could be obtained at all they could best be obtained through market means. As of 2005 this neoliberal movement was in intellectual bankruptcy. But in politics and policy it has continued its zombie-like shamble forward to this day. Now my colleagues here at the University of California, Berkeley have decided to see if they can do you some of the intellectual spadework needed to prepare the ground in which to grow a better way of thinking about the political economy. Check out their Network for a New Political Economy: "An interdisciplinary group of faculty and students at the University of California, Berkeley, has launched a Network for a New Political Economy supported by the Hewlett Foundation to rethink political economy and develop a new intellectual paradigm as an alternative to neoliberalism. The roots of the new paradigm reside in ongoing research in social science departments such as Economics, Political Science, Sociology, and History, plus professional schools such as Business, Law, and Public Policy. The Network fosters an intellectual conversation among faculty and students across these units, and encourages them to frame their insights and to package them for public engagement and policy relevance. It facilitates collective deliberation on how political economy should be studied and taught, and how new perspectives on political economy can be applied to broad public debates and pressing policy problems."