Global Economic Intersection
Advertisement
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
Global Economic Intersection
No Result
View All Result

Stimulus Grants And Schools: How Was The Money Spent?

admin by admin
April 25, 2015
in Uncategorized
0
0
SHARES
5
VIEWS
Share on FacebookShare on Twitter

by Bill Dupor – The Regional Economist, Federal Reserve Bank of St. Louis

The ability of the Federal Reserve to stimulate the economy through monetary policy has been hampered in recent years because the federal funds rate, the Fed’s primary policy instrument, has been effectively “stuck” at zero. Once reached, the “zero lower bound” limits a central bank’s ability to provide additional monetary stimulus. In this situation, fiscal policy takes center stage as a potential tool to combat an economic downturn.


Stimulative fiscal policy consists of lowering taxes, increasing transfers to individuals, increasing government purchases, or some combination of the three. The federal government pursued all three of these strategies as part of the American Recovery and Reinvestment Act of 2009 (ARRA). The law’s total price tag was $840 billion, making it the largest countercyclical fiscal intervention in the U.S. since FDR’s New Deal.

Figure

A large share of the ARRA’s funding was made as grants to state, local and other governments below the federal level, as well as to public institutions. Public school districts were one of the largest groups of these recipients, receiving over $64 billion in Department of Education ARRA dollars. This injection of funds translated into greater spending at the district level. The figure displays the median value of total expenditures relative to enrollment for public school districts by school year. As the figure indicates, expenditures per pupil rose substantially following the act’s passage.

Moreover, the ARRA’s education component has been touted as one of the success stories by supporters of the law. For example, according to the Executive Office of the President in 2009, “The rapid distribution of SFSF [State Fiscal Stabilization Fund] funding helped fill the gaps and avert layoffs of essential personnel in school districts and universities across the nation.”

The three immediate goals of the act were:

• to create new jobs and save existing ones,

• to spur economic activity and invest in long-term growth, and

• to foster unprecedented levels of accountability and transparency in government spending.

As a bonus for researchers, the ARRA provided a great deal of detailed data to analyze the effectiveness of countercyclical fiscal policy.

A Research Challenge

From a public policy perspective, it is important to quantify the effects of the ARRA’s components, including education. To answer this question for the act’s education component, one must address the counterfactual: What would school districts have done with spending and hiring decisions in absence of the act’s funds? M. Saif Mehkari, a University of Richmond economics professor, and I answered this question in a study this year by exploiting the heterogeneity in how these ARRA grant dollars were allocated across school districts, that is, how did districts that were receiving relatively little grant money adjust their spending choices relative to districts receiving plenty of grant money? From this comparison, Mehkari and I inferred how all districts would have performed had ARRA funds not been available.

To conduct this study, we used data on expenditures, both ARRA and non-ARRA revenue, and staffing levels for over 6,700 school districts from both before and during the ARRA period. We found that, during the first two years following the act’s passage, each $1 million of grants to a district increased education employment by 1.5 persons relative to a no-stimulus baseline.[1] Moreover, all of this increase came in the form of nonteaching staff. The jobs effect was also not statistically different from zero.

One potential explanation for not changing the number of teachers may be the districts’ own preference for maintaining student-teacher ratios in the classroom. If this was a top priority for district administrators, then even districts with relatively small ARRA grants and large budget gaps may have found ways to meet budget shortfalls other than laying off teachers. In fact, surveys of school administrators found that, in response to the recession, administrators took exactly these types of steps, including furloughing personnel, eliminating or delaying instructional improvement initiatives, deferring textbook purchases and reducing high-cost course offerings.[2] The positive, but seemingly small, effect on nonteaching staff may be similarly due to a desire to maintain student-staff ratios at close to their pre-act levels.

Moreover, districts that received relatively generous ARRA grants may have been less willing to hire new staff for risk that, once the short-lived grants were spent, the new staff would need to be let go.

We also found that each $1 million of grants increased expenditures at the district by $570,000 relative to a no-ARRA baseline. Approximately 70 percent of the expenditures took the form of capital outlays, such as construction, land purchases and equipment acquisition. The gap between the two numbers, $430,000, might be accounted for by states’ cutting their own contributions to school districts upon the districts’ receipt of ARRA grants.[3]

Explaining a Puzzle

At first pass, it may seem puzzling that school districts used a substantial part of their grant dollars for capital outlays at a time when the economy was in a deep downturn. To address whether this behavior would be rational on the part of the districts, we developed a model of the dynamic budgeting problem faced by a school district. In the model, a district uses revenue to hire workers and purchase capital, that is, equipment and structures, to provide a flow of educational services over time. The district chooses its inputs to maximize the expected flow of educational services, both now and in the future, that it can generate. The model also assumes that the district can make rational predictions of how much revenue, on average, it will receive in the future, despite considerable levels of uncertainty.

Next, suppose the district receives a one-time injection of funds, such as the ARRA money. The district could choose either to increase employment substantially, causing a temporary improvement in teacher-student and staff-student ratios, or make investments in capital. Interestingly, and perhaps intuitively, the model implies that most of the revenue increase is spent on capital investment because it allows the district to smooth the benefits of additional educational services provided by the capital over many years, benefiting not only today’s students but those in the future. Only a small amount of revenue is used to increase the number of employees in the district.

Thus, the model is capable of explaining two of our empirical findings: the small, but positive, education jobs effect and the relatively large increase in capital expenditures resulting from ARRA grants. Our model does not address the result that districts used only about one-half of their grants on expenditures. In summary, our research shows that the education component of the Recovery Act was only partly successful at boosting spending on public education in the U.S. The extent to which other intergovernmental grants, such as those for high-speed rail and home weatherization, financed by the act actually translated into greater spending on their intended objectives remains an open question.

Source: https://www.stlouisfed.org/publications/regional-economist/april-2015/stimulus-grants-and-schools-how-was-the-money-spent

Endnotes

  1. In their study, one job refers to one job-year, that is, one year of employment for a person.
  2. See American Association of School Administrators.
  3. If state governments did cut their contributions to districts upon the districts’ receipt of ARRA grants, then an interesting, and more complicated, issue is how state governments might have used these freed-up dollars.

References

American Association of School Administrators. “Weathering the Storm: How the Economic Recession Continues to Impact School Districts.” Report of Findings, March 2012. See http://aasa.org/uploadedFiles/Policy_and_Advocacy/files/ Weathering_the_Storm_Mar_2012_FINAL.pdf.

Council of Economic Advisers. “Estimates of Job Creation from the American Recovery and Reinvestment Act of 2009.” Executive Office of the President of the United States. May 2009. See www.whitehouse.gov/administration/eop/cea/Estimate-of-Job-Creation.

Dupor, Bill; and Mehkari, M. Saif. “Schools and Stimulus.” Federal Reserve Bank of St. Louis Working Paper 2015-004A. See http://research.stlouisfed.org/wp/more/2015-004.

Executive Office of the President of the United States. “Educational Impact of the American Recovery and Reinvestment Act.” A report issued by the Domestic Policy Council in cooperation with the U.S. Department of Education, October 2009. See www.whitehouse.gov/assets/documents/DPC_Education_Report.pdf.

Previous Post

Are Wages Flat Or Falling? Decomposing Recent Changes In The Average Wage Provides An Answer.

Next Post

Investment Enhances Emerging Economies’ Living Standards

Related Posts

10-Year Dormant Bitcoin Whale Resurrects, Transfers $38.1M Worth of Bitcoin
Econ Intersect News

10-Year Dormant Bitcoin Whale Resurrects, Transfers $38.1M Worth of Bitcoin

by John Wanguba
June 10, 2023
Bitcoin Whales Invest Aggressively As Small Holders Divest
Economics

Bitcoin Whales Invest Aggressively As Small Holders Divest

by John Wanguba
June 7, 2023
Why Is The SEC Suing Binance?
Business

Why Is The SEC Suing Binance?

by John Wanguba
June 6, 2023
Bitcoin Has Been ‘Killed’ 474 Times But Its Still Alive And Kicking
Economics

Bitcoin Has Been ‘Killed’ 474 Times But Its Still Alive And Kicking

by John Wanguba
June 5, 2023
Japanese Regulators Issue Stern Warning To OpenAI For Data Collection
Business

Japanese Regulators Issue Stern Warning To OpenAI For Data Collection

by John Wanguba
June 5, 2023
Next Post

Investment Enhances Emerging Economies' Living Standards

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Browse by Category

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Browse by Tags

adoption altcoins bank banking banks Binance Bitcoin Bitcoin adoption Bitcoin market blockchain BTC business China crypto crypto adoption cryptocurrency crypto exchange crypto market crypto regulation decentralized finance DeFi Elon Musk ETH Ethereum Europe Federal Reserve finance FTX inflation investment market analysis Metaverse NFT nonfungible tokens oil market price analysis recession regulation Russia stock market technology Tesla the UK the US Twitter

Archives

  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • August 2010
  • August 2009

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized
Global Economic Intersection

After nearly 11 years of 24/7/365 operation, Global Economic Intersection co-founders Steven Hansen and John Lounsbury are retiring. The new owner, a global media company in London, is in the process of completing the set-up of Global Economic Intersection files in their system and publishing platform. The official website ownership transfer took place on 24 August.

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Recent Posts

  • 10-Year Dormant Bitcoin Whale Resurrects, Transfers $38.1M Worth of Bitcoin
  • Bitcoin Whales Invest Aggressively As Small Holders Divest
  • Why Is The SEC Suing Binance?

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

No Result
View All Result
  • Home
  • Contact Us
  • Bitcoin Robot
    • Bitcoin Profit
    • Bitcoin Code
    • Quantum AI
    • eKrona Cryptocurrency
    • Bitcoin Up
    • Bitcoin Prime
    • Yuan Pay Group
    • Immediate Profit
    • BitIQ
    • Bitcoin Loophole
    • Crypto Boom
    • Bitcoin Era
    • Bitcoin Treasure
    • Bitcoin Lucro
    • Bitcoin System
    • Oil Profit
    • The News Spy
    • British Bitcoin Profit
    • Bitcoin Trader
  • Bitcoin Reddit

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

en English
ar Arabicbg Bulgarianda Danishnl Dutchen Englishfi Finnishfr Frenchde Germanel Greekit Italianja Japaneselv Latvianno Norwegianpl Polishpt Portuguesero Romanianes Spanishsv Swedish