K-12 School Funding Up in Most 2018 Teacher-Protest States, But Still Well Below Decade Ago

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Protests by teachers and others last year helped lead to substantial increases in school funding in Arizona, North Carolina, Oklahoma, and West Virginia, four of the 12 states that had cut school “formula” funding — the primary state revenue source for schools — most deeply over the last decade.^[1] Despite last year’s improvements, however, formula funding remains well below 2008 levels in these states. Further, three of these four states boosted school funding using revenue sources that will be difficult to maintain over time, likely making their progress short lived unless they raise revenue in more sustainable ways. Kentucky, another deep-cutting state where teachers protested in 2017, held state formula funding for schools roughly flat last year.

Despite last year’s improvements, however, formula funding remains well below 2008 levels in these states.Several other deep-cutting states that did not see major teacher protests last year also remain well behind their previous formula funding levels. For instance, per-student formula funding in Texas is now a full 20 percent below 2008 levels adjusted for inflation after lawmakers in that state further cut formula funding last year.

At the same time, more than half of the states have now increased total per-student funding compared to a decade ago. As of 2016, the latest year for which comprehensive data are available, 26 states were providing more total state and local funding per student than before the recession, after adjusting for inflation. Since state and local revenues generally have continued to improve since 2016, the number of states whose school funding finally has recovered from the Great Recession has likely continued to grow.

Further, some states have made new investments that research suggests are likely to boost student outcomes, an approach that likely will strengthen those state economies over time relative to their neighbors. States where funding remains depressed may fall behind their peers unless they raise sustainable additional revenue and invest it wisely in their schools.

Most Teacher-Protest States Significantly Boosted School Formula Funding

In the spring of 2018, teachers and other school employees in several states walked out of their classrooms to protest low pay and other funding shortages. Most of the states where these protests occurred are among those that had cut their school formula funding most deeply since the 2007-08 school year, when the last recession hit. Last year, teachers struck or engaged in other protests in five of the 12 states that cut formula funding particularly deeply after the last recession — Arizona, Kentucky, North Carolina, Oklahoma, and West Virginia.

Lawmakers in four of those five states — all but Kentucky — boosted school formula funding last year, at least partially in response to the protests. The funding boosts were substantial, especially in Oklahoma, where lawmakers increased formula funding per student by 19 percent, after adjusting for inflation. Arizona, North Carolina, and West Virginia also increased funding substantially, with the hikes ranging from 3 percent to 9 percent per student, after inflation. But in Kentucky, where teacher protests focused primarily on opposing legislation that cut teacher pensions, per-student formula funding remained about flat relative to inflation.

Most of the other seven states that cut their school formula funding especially deeply over the last decade also boosted their school funding last year (though typically these funding hikes were smaller than in most of the states with protests). Alabama, Idaho, Kansas, and Utah all increased per-student formula funding for schools last year by between 1 and 3 percent after adjusting for inflation. Another deep-cutting state, Michigan, provided per-student funding that was nearly equivalent to the previous year adjusted for inflation. Two states, Mississippi and Texas, cut their funding further, with Texas cutting especially deeply (in part because in Texas state formula funding automatically declines when local funding grows). (See Figure 2.)

Figure 2

Funding in Deep-Cutting States Remains Well Below Pre-Recession Levels

Most of the teacher-protest states had cut their formula funding so deeply over the last decade that even last year’s sizeable funding boosts weren’t enough to restore funding to pre-recession levels. For example, in Oklahoma, per-student formula funding remains 15 percent below 2008 levels, including inflation adjustments. And per-student formula funding in Arizona, North Carolina, and West Virginia, as well, is still well below pre-recession levels. (See Figure 3.)
Formula funding also remains well below pre-recession levels in several other states that did not see teacher protests last year. Formula funding per student in Texas is now 20 percent below where it stood in 2008, after adjusting for inflation. The cuts in a number of other states, including Alabama, Kansas, Michigan, and Utah, also have been quite deep.

Figure 3

Teacher-Strike States Failed to Provide Sustainable Funding

While the funding hikes enacted in teacher-protest states last year allowed for teacher pay increases and other improvements, those gains may be reversed in coming years unless the states take additional steps to boost their school funding. Three of the four teacher-protest states that increased formula funding last year used revenue sources that may prove unsustainable, leaving them vulnerable to back-tracking in coming years. More specifically:

• Arizona teachers ended their strike after Governor Doug Ducey signed a budget giving them a 20 percent salary increase over three years. But the budget doesn’t include the new revenue required to finance the planned spending, relying instead on optimistic predictions of economic growth, continued cuts in the Medicaid rolls, and one-time funding shifts. Meanwhile, the new revenue sources the budget does include — like a new car-registration fee — would fall disproportionately on low- and middle-income families as a share of their income.
• North Carolina’s legislature increased funding for schools without raising new revenue to do so, even though the state faces a revenue shortfall next year for covering ongoing needs, primarily due to unsustainable income tax cuts that began to take effect in 2014. Those tax cuts did not fully phase in until January 1, 2019, masking their cost until now. North Carolina’s legislative budget experts have projected that the state will face a structural shortfall of $1.2 billion in 2020, rising to $1.4 billion in 2022.^[4] Because the state constitution requires a balanced budget, lawmakers will need to raise new revenue, cut spending deeply, or both, jeopardizing the sustainability of last year’s K-12 funding increases.
• Oklahoma funded pay increases for teachers and other public employees with a revenue package that included a hike in cigarette taxes, a boost in gasoline taxes, and an increase in the tax rate on oil extraction. While these revenue sources were adequate to cover the pay hikes, they may not be in the future. Cigarette tax revenue typically fails to keep pace with state revenue needs over time, in part because the higher taxes tend to reduce cigarette consumption. And gasoline tax revenue also is not a particularly sustainable source, since revenues may be depressed in coming years by consumers continuing to purchase more efficient gasoline-powered cars and more cars fueled by less-polluting forms of energy.

The fourth deep-cutting state that raised teacher pay, West Virginia, funded a 5 percent pay raise for teachers and other public employees without raising new revenue, by cutting funding in other areas.^[5] This approach appears to be relatively sustainable, particularly since revenue has been exceeding expectations recently in West Virginia, though a decline in demand for the state’s natural resources could reverse the state’s good fortunes.^[6]
Thus far in 2019, leading policymakers in these states have not proposed raising new revenue for school investments. Oklahoma’s governor proposed an additional pay raise for teachers but no new revenue (and no boost in revenue to reduce class sizes or support general classroom operations).^[7] In West Virginia, it appears likely that lawmakers will further boost teacher pay without raising new revenue.^[8] And Arizona’s governor has proposed to stay on track with the teacher pay hikes, also without raising new revenue.^[9]