Education Jobs Fund Maintenance of Effort Data Raises Some Red Flags

In August of 2010, Congress passed and the president signed into law the Education Jobs Fund, a $10 billion program meant to fill gaps in state funding for K-12 education salaries and benefits. The funds, which were intended for use in the 2010-11 school year, are available through September 30^th, 2012. Much like the State Fiscal Stabilization Fund, a similar program created in the American Recovery and Reinvestment Act of 2009, Congress required that the Department of Education distribute the funds among states based on population. Lawmakers also included a maintenance of effort (MOE) provision that essentially required states to maintain certain levels of funding for both K-12 and higher education. The data gathered through this maintenance of effort provision, which each state must submit annually on spending levels, provide an interesting picture of state spending for K-12 and higher education and tax revenues since 2006. Below, we examine that data to gain insight on the degree to which low tax revenues have affected state spending on education during the downturn.  

Unlike the State Fiscal Stabilization Fund, the maintenance of effort provision for the Education Jobs Fund allowed each state to select a different MOE calculation depending on their tax revenue situation. The three options are: (1) maintain K-12 and higher education spending at 2009 spending levels; (2) maintain K-12 and higher education spending levels at the same proportion of state spending as they did in 2010; or (3) if state tax revenues in 2009 were lower than in 2006, maintain K-12 and higher education spending levels at either 2006 levels or in the same proportion of state spending as they did in 2006.

Each method results in very different data, so it is best to analyze fluctuations in state spending for education by each MOE method. Today, we will examine the data on the 31 states that opted to use method 3 – because their tax revenues were lower in 2009 than in 2006, they could keep spending for K-12 and higher education at 2006 levels (we’ll save the discussion of states that kept spending in the same proportion of total spending as 2006 for another day).

Unsurprisingly, the degree to which total tax revenues in these 31 states dropped from 2006 to 2009 varied greatly. New Mexico saw the greatest drop in revenues at 23.2 percent, while Georgia saw a 16.7 percent drop and Arizona saw a 15.6 percent drop. West Virginia experienced the smallest drop at 0.1 percent (about $4 million).

Despite the revenue drops these state reported, their MOE submissions show that they increased education spending significantly from 2006 to 2011, particularly for K-12 education. For example, Utah’s submission shows a 28.4 percent increase in funding for K-12 education from $1.8 billion to $2.3 billion. Oregon shows an increase of 19.2 percent and Illinois shows an increase of 19.8 percent. Increases in Indiana and Nevada are both over 65 percent.  Only three states – Arizona, Minnesota, and Mississippi – showed increases below 3.0 percent.

Of course, it wouldn’t be unusual for states to increase  K-12 education spending over a 5-year period under more normal budget circumstances due to increasing enrollment and costs. What the MOE data could be telling us is that many states protected K-12 spending during the economic downturn that began in 2007.

But these numbers are also curious, if not dubious. Large contractions in state tax revenues and repeated media reports of states cutting education spending make some of these data difficult to believe. 

The MOE data for the 31 states also show growth in higher education spending, though not at as high of rates as K-12 spending. New York State showed an increase of 22.3 percent from $3.3 billion to $4.0 billion from 2006 to 2011 and Connecticut showed an increase of 17.6 percent. But many states showed increases below 3.0 percent – 13, including Arizona, Colorado, Illinois, Pennsylvania, and Virginia. Low growth for higher education in many states is not surprising. States often make cuts (or delay increases) to higher education before K-12 education because it has a smaller constituency and they can rely on tuition increases to make up the difference. However, many public higher education systems have faced dramatic increases in enrollment as a result of the economic downturn, placing greater pressure on their strapped systems.

One can’t help but wonder what to make of the MOE reports. Are state K-12 and higher education systems really better off in terms of state support than media reports would have us believe? It’s hard to know for certain because the numbers may include block programs or additional funding streams that are not included in basic state support. State spending through these specific programs could benefit only certain districts or be earmarked for very specific uses.

What is clear is, however, is that states have been able to use the MOE provision of the Education Jobs Fund to their advantages. All 31 states successfully show that their tax revenues were lower and that they funded K-12 and higher education above 2006 levels in 2011 – thereby meeting the MOE requirement. Whether districts and schools are actually seeing more funding than in 2006, especially per pupil, is entirely another story.   

To download data on all 50 states and the District of Columbia, click here.