State Finance Prospects Mixed As School Enrollments Increase

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Washington--More than one-third of the states face unfavorable prospects for adequately maintaining support for elementary and secondary education in the 1980's, says a new federal study of the school-finance capabilities of the states and the District of Columbia.

Nineteen states, located mostly in the Southeast and in northern New England, have low taxing capacity and low per-pupil expenditures, the study says.

See related storieson pages 8, 9, and 11.

Nevertheless, those states are expected to experience large increases in school enrollments after 1985, and a growing number of children are likely to come from disadvantaged backgrounds, according to the Congressionally mandated document prepared by the Education Department.

The report, "The Prospects For Financing Elementary/Secondary Education in the States," is the first of four volumes to be compiled by the School Finance Project, a comprehensive study ordered by the Congress in 1978.

Future volumes, scheduled for completion later this year, include examinations of: private-school financing, the effects of federal programs and policies on the schools, and alternatives to current federal education policy.

The first volume draws on data from demographic projections compiled by Harvard and Syracuse Universities and by the Massachusetts Institute of Technology. The report analyzes enrollment projections as well as economic trends and recent developments in state and local finance systems.

Aside from the states facing the most serious fiscal problems, 17 other states are projected to maintain per-pupil expenditures within 10 percent of the national average, and 14 states and the District of Columbia enjoy "favorable prospects" for funding education, the study says.

Nationally, the school-age population is expected to increase by approximately 18 percent between 1985 and the year 2000, the study says. By contrast, the school-age population declined by 10 percent between 1970 and 1980, during which time the population as a whole increased by 11.4 percent.

At the same time, a 19-percent increase in the number of Americans over the age of 65 during the years 1985 to 2000 is expected to have financial implications for the schools. The trend suggests "some further weakening in the size of the constituency for public-school funding during this period," the study says.

Other factors that may "reduce the public's willingness to support increased school expenditures" include "declining test scores, increased costs, controversies over social issues such as desegregation and school prayer, the activities of teacher organizations, feelings of loss of control over local schools, concerns about discipline and curriculum content, and a sense of a decline in standards," the report continues.

The demographic and social trends indicate that "not only do fewer people have a direct stake in the public schools, but there is a skepticism that higher expenditures will produce better results," it concludes.

The so-called "baby boomlet" will occur as states attempt to recover from recent fiscal trends that include: a decline in the relative size of the state and local public sector, along with a decline in education spending as a proportion of state and local expenditures; a reversal of the long-term trend toward increasing federal aid to state and local governments; and a growth in the state share of funding for elementary and secondary education, according to the study.

The report also identifies economic factors that may affect the ability of states to raise new revenues.

As the state share of education financing has grown, for example, the proportion of property taxes in state and local tax revenues declined from 45 percent in 1964 to 31 percent in 1981. During that period, property-tax revenue declined and revenue from general sales taxes and individual income taxes increased, a trend the study says is significant in light of the nation's sluggish economy.

"When the economy is growing, income- and sales-tax collections respond faster than property taxes and create a revenue boost, primarily for state governments. During economic downturns, however, income- and sales-tax revenues drop off or fall below revenue forecasts, often prompting mid-year expenditure reductions or tax increases in order to balance state budgets," the study says.

Fiscal and demographic projections vary widely among various states and regions. Although the study projects that 40 states will experience an upturn in school-age populations during the 15-year period, the largest increases are projected to occur in the Rocky Mountain and Southwest regions. Large increases are also expected in North Dakota (38 percent), South Dakota (40 percent), Hawaii (40 percent), Mississippi (57 percent), Nevada (60 percent), New Hampshire (47 percent), and Oregon (56 percent).

Increases in the proportion of children from low-income and minority families will also vary from state to state. Percentages of low-income and minority children are likely to grow in the Northeast and Great Lakes regions. The Sun Belt states will continue to experience a decline in the number and proportion of low-income children that began during the 1970's, but the percentage of minority students attending school there and in the Far West is expected to increase during the 15-year period, according to the study.

In most states, a high or low level of expenditure for education corresponds to the size of state and local public expenditures in general, the report says. Seventeen states and the District of Columbia currently spend 110 percent or more of the national average on education. (The national average per-pupil expenditure is $2,436.) Those states include: Alaska, Connecticut, Delaware, Illinois, Iowa, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New York, Pennsylvania, Oregon, Rhode Island, Washington, and Wisconsin.

Twelve states spend approximately the national average for education, including: Arizona, Colorado, Florida, Hawaii, Kansas, Montana, Nebraska, New Mexico, Ohio, Oklahoma, Virginia, and Wyoming.

Twenty-one states spend 90 percent or less of the national average. Those include: Alabama, Arkansas, California, Idaho, Indiana, Kentucky, Louisiana, Georgia, Maine, Mississippi, Missouri, Nevada, North Carolina, North Dakota, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, and West Virginia.

The spending variations, according to the study, are largely due to three factors:

A decline in the growth of per-capita income in poorer states during the latter part of the 1970's, coupled with above-average increases in income in wealthier states, especially in the Northeast and in energy-producing states.

A recent decline in tax revenues in states that spend lower amounts on education, in part due to tax-limitation measures such as California's Proposition 13.

A slowing in the growth rate of federal aid to education in the 1970's, and a leveling off of the amount of federal aid in the past two years. Although federal aid in the past two decades attempted to "equalize" spending by concentrating funds on poorer states, recent federal funding for such programs as education of the handicapped and block grants has tended to flow to states with above-average incomes, the study says.

In the 1980's, states with relatively high per-pupil expenditures and taxing capacities, and a low reliance on federal aid, will be most able to cope with enrollment increases, according to the report. Conversely, low-income states in which enrollments are expected to increase will be hard-pressed to identify new state and local revenues for education expenditures.

The study identifies a "mismatch" between the future educational requirements of states and their resources. "Low-expenditure states are projected to have high increases in school-age children, and high-expenditure states to have low increases or declines," the study says.

In the 1980's and 1990's, 19 states are expected to have "unfavorable" prospects for coping with increasing enrollments because of five factors, the study projects.

Those states are likely to experience: (1) medium-to-high enrollment increases; (2) increases in the number of special-needs students, such as low-income, minority, and limited-English-speaking students; (3) low fiscal capacity; (4) low per-pupil expenditures for education; and (5) high reliance on declining federal funds for education.

The states most likely to experience problems are: Alabama, Arkansas, Georgia, Idaho, Indiana, Kentucky, Louisiana, Maine, Mississippi, Nevada, New Hampshire, North Carolina, North Dakota, South Carolina, South Dakota, Tennessee, Texas, Utah, and Vermont.

Vol. 02, Issue 16

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