Do School Spending Cuts Matter? Evidence from the Great Recession

Audits of public school budgets routinely find evidence of waste. Also, recent evidence finds that when school budgets are strained, public schools can employ cost-saving measures with no ill-effect on students. 

Consistent with the theory, this study finds that districts that faced large revenue cuts disproportionately reduced spending on non-core operations. However, they still reduced core operational spending to some extent.  

A 10 percent school spending cut reduced test scores by about 7.8 percent of a standard deviation. Moreover, a 10 percent spending reduction during all four high-school years was associated with 2.6 percentage points lower graduation rates. While these estimates are smaller than some in the literature, spending cuts do matter.