October 1993
Spending on education is an important part of the U.S. economy. In
1991, spending for current expenditures in public elementary and
secondary schools alone was approximately 3.6 percent of Gross
National Product. With governments at all levels facing budget
constraints, it is important to consider some possible trends for
education expenditures throughout the 1990s. This is particularly
important with large increases in enrollments expected for the next
ten years.
In this new ISSUE BRIEF, projections for current expenditures in
public elementary and secondary schools are considered. (Current
expenditures are all expenditures excluding capital outlay and
interest on school debt.) Much of the information in this ISSUE
BRIEF is based on the recent National Center for Education
Statistics publication, PROJECTIONS OF EDUCATION STATISTICS TO
2003.
WHAT IS THE HISTORICAL ASSOCIATION BETWEEN THE ECONOMY AND THE
LEVEL OF EXPENDITURES IN PUBLIC ELEMENTARY AND SECONDARY SCHOOLS?
WHAT ARE THE IMPLICATIONS FOR THE 1990s AND BEYOND?
Historically, education expenditures in real terms, (that is, with
the effects of inflation removed) have followed a path similar to
general economic trends. This can be seen by examining the recent
trends in education expenditures per pupil and the economy.
During periods when the economy was largely increasing such as in
the late 1960s and 1970s and also the middle of the 1980s, current
expenditures per pupil in real terms increased steadily. During
periods when the economy was in recession such as in the late 1970s
and early 1980s and also the early 1990s, current expenditures per
pupil in public elementary and secondary schools either increased
slowly or declined. This relationship can be seen from a trend
from 1967-68 to 1991-92 for current expenditures per pupil and one
major indicator of the state of the economy, disposable income per
capita. Because there is uncertainty about the path of future
economic growth, three different sets of projections for current
expenditures per pupil were prepared, each based on an alternative
set of assumptions for the economy (table 1). Three sets of
projections for total current expenditures, which were calculated
by multiplying the projections for current expenditures by those
for enrollment, also appear in table 1. The different assumptions
for the economy and other factors produce quite different growth
paths for both total current expenditures and current expenditures
per pupil (table 1).
TABLE 1.--PERCENT CHANGES IN CONSTANT DOLLARS FROM 1991-92 TO 2002-
2003: MIDDLE, LOW, AND HIGH ALTERNATIVES
ALTERNATIVES
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Middle Low High
Current expenditures 42 27 54
Current expenditures
per pupil 24 10 34
Disposable income per capita 17 16 19
Revenue receipts from state
sources per capita 30 7 45
The amount that local governments spend on education is also
historically associated with the amount of aid for education that
they receive from state governments. In 1990-91, 47.3 percent of
all revenues for local governments came from state governments
(table 2). The importance of state aid does vary considerably by
state. As also can be seen in table 2, the percent varies by
state, with a few states providing more than 70 percent of
elementary and secondary school education revenues and other state
governments providing less than 30 percent. The amount of money
that states send to local government is itself influenced by the
economy: during economic downturns, state expenditures for other
programs such as unemployment, welfare, and Medicare/Medicaid
increase leaving less money for education. Hence, those states
that receive more of their revenues from state sources are more
heavily impacted by economic downturns.
TABLE 2.--REVENUES FOR PUBLIC ELEMENTARY AND SECONDARY SCHOOLS FROM
STATE AND FEDERAL SOURCES AS PERCENTAGES OF ALL EDUCATION REVENUES:
SELECTED STATES, 1990-91
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State State revenue as Federal revenue as
a percent of a percent of
all revenues all revenues
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United States 47.3 6.2
Hawaii 89.9 7.8
Nebraska 31.0 5.9
New Hampshire 7.8 2.8
New Mexico 72.7 12.2
Oregon 25.4 6.1
Washington 72.1 5.7
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NOTE: These states are those in which state revenues are the
highest and lowest percents of all revenues.
The federal government also contributes money to local governments
for education. However, the amount is significantly less than
state aid. This can be seen in table 2. With the federal share
being so small, it is far less important to consider the future
trend of federal education expenditures when considering the future
of current expenditures.
HOW MIGHT THE LARGE INCREASES IN ENROLLMENTS EXPECTED FOR THE NEXT
TEN YEARS AFFECT CURRENT EXPENDITURES?
As is described in ISSUE BRIEF: SCHOOL ENROLLMENT EXPECTED TO
SURPASS HISTORIC ALL-TIME HIGH, which is being released
concurrently with this publication, enrollment is projected to rise
rapidly throughout the rest of the decade and into the next. This
increase may have a major effect on current expenditures. On the
one hand, with more students, there will be a downward effect on
current expenditures per pupil. On the other, total current
expenditures would be expected to increase at least 15 percent in
constant dollars over the next 10 years if enrollments increase
as expected. Hence, while we cannot be certain of the exact level
of total current expenditures over the next ten years because of
uncertainty concerning economic conditions, there will most likely
be a significant upward trend due to the increase in enrollments
expected for the next ten years.
WHAT ARE SOME FACTORS THAT MIGHT AFFECT THE ACCURACY OF PROJECTIONS
FOR CURRENT EXPENDITURES PER PUPIL?
Developing accurate projections in most instances is a difficult
undertaking, and is especially so for an economic statistic such as
current expenditures. There are a number of factors that could
affect the accuracy of these projections. First, each of the three
sets of projections for current expenditures per pupil was produced
using some quite specific assumptions concerning the economy, state
aid for education, enrollments, and the population. The closer a
set of assumptions is to being realized, the more likely the
projections for current expenditures per pupil produced by that set
of assumptions will approximate the values. For example, education
expenditure projections produced before the recent recession tended
to be high as the assumptions did not reflect the recession.
Second, the historical relationship that has existed between
current expenditures per pupil and the economy, state revenues, or
enrollments could change. If this were to happen, then it would
affect the accuracy of the projections.
FOR MORE INFORMATION, SEE THE FOLLOWING REPORTS:
U.S. Department of Education, National Center for Education
Statistics. Common Core of Data surveys.
U.S. Department of Education, National Center for Education
Statistics. PROJECTIONS OF EDUCATIONS STATISTICS TO 2003 (NCES
92-218), by D.E. Gerald and W.J. Hussar, Washington D.C.: 1992.
U.S. Department of Education, National Center for Education
Statistics. POCKET PROJECTIONS: 1980-81 TO 2002-2003 (NCES
93-194), by W.J. Hussar, Washington D.C.: 1993.
U.S. Department of Education, National Center for Education
Statistics. ISSUE BRIEF: SCHOOL ENROLLMENT EXPECTED TO SURPASS
HISTORIC ALL-TIME HIGH (NCES 93-459), by D.E. Gerald and W.J.
Hussar, Washington D.C.: 1993.
SOURCE: All data in this ISSUE BRIEF are from PROJECTIONS OF
EDUCATION STATISTICS TO 2003. National Center for Education
Statistics, NCES 92-218.
ISSUE BRIEFS present information on education topics of current
interest. For methodological details on the assumptions and
methods used to produce the projections presented in this ISSUE
BRIEF, see PROJECTIONS OF EDUCATION STATISTICS TO 2003.
This ISSUE BRIEF was prepared by William J. Hussar. For further
information on expenditures projections, contact William J. Hussar.