State spending on public education declined markedly in the dozen years prior to the COVID-19 pandemic. This decline in funding was a response to the Great Recession since many state governments prioritized spending austerity in the wake of global economic decline. They paired tax cuts with cuts in public services, including education spending, causing a huge contraction in the amount public schools received to educate kids.

While some states managed to expand education spending in the ensuing recovery, many states did not, and in some cases, their education spending relative to their capacity to spend on education, is actually lower than it was before the Great Recession. This is especially the case in the South, where public education spending is declining in real terms (adjusted for inflation), even as Southern states grow more prosperous.

One way to get a sense of how effectively states are investing in education is to examine the ratio of per-pupil education expenditures to GDP per capita. We use per-pupil spending and per capita GDP to reflect the fact that public education spending depends on the growth of the share of school-age children (ages 5–18), but also on broader economic growth. Essentially, as the broader economy grows (particularly through productivity growth), public education spending must match this growth to continue to attract resources of consistent quality and quantity.

The clearest example to illustrate this dynamic is teacher salaries. To keep a high-quality pool of potential teachers, it is not enough for teacher salaries to rise with inflation, they must also rise enough to keep pace with other highly educated workers. If teachers’ pay does lag relative to that of other professions of highly educated workers, the supply of willing, high-quality teachers will shrink, and children’s education will suffer. If the ratio of per-pupil spending to per capita GDP is falling over time, then society’s educational investment effort can be said to be lagging, and we are not spending enough to keep a consistent quality and quantity of resources available for educating kids. 

Figure A shows the change in the ratio of per-pupil spending to per capita GDP between 2007 and 2019. We end in 2019 to avoid changes related to the pandemic. A positive change means that education spending grew as a share of GDP, indicating that states are spending a larger share of their economic capacity on education funding.

A majority of states have seen declining education expenditures relative to their state capacity. Many of those are in the South and Midwest, while many of the states with increasing expenditures relative to state capacity are in the Northwest and West. Moreover, the range of state spending on expenditures increased over time. In 2007, the difference between the state that spent the most on education and the state that spent the least, relative to GDP, was 0.24 percentage points. In 2019, the difference was up to 0.27 percentage points.

Eight states—Alabama, Arizona, Florida, Georgia, Idaho, Indiana, Nevada. and North Carolina—saw their real per-pupil education expenditures decline even while their per capita GDP went up. These eight states had the capacity to expand educational opportunities for their state’s children but have gone in the opposite direction instead.

It should not be a surprise that five of those eight states are in the South. As EPI has documented extensively in its Rooted in Racism series, Southern states have drastically disinvested in public services across the board, so that even while those states are seeing growing prosperity on paper, that prosperity is not being used to make life better for working families.

As states adjust to the end of the pandemic-era boost in federal education funding, which masked declines in state funding, they should evaluate their education spending and ensure that it is keeping up with their prosperity. States that invest in education not only support their students, who will be future workers, but are also likely to be states with higher productivity. States with falling rates of investment effort (spending as a share of GDP) should devote more resources to ensure that all children have access to an excellent public education.