State Investments in Education and Other Children's Services: The Fiscal Challenges Ahead

The impending devolution of program responsibility from the federal government to states and localities will probably increase their responsibility for designing and funding strategies for services to children and families. This paper presents state-by-state profiles of patterns of spending for education and other key health, welfare, and social services. The paper identifies factors that appear to drive spending costs: the need for education and other children's services in the state; the ability to pay (fiscal capacity); and the willingness to pay (fiscal effort). This context is then used to draw implications with regard to state spending for education and non-education children's services in the near future and beyond. The report looks at changes in state spending over time, as well as recent cross-sectional state data. In summary, the salience of indicators of need and ability to pay indicates that most states will be greatly challenged in financing these programs in the years ahead. Furthermore, the strong negative relationship between willingness to pay and noneducation children's spending--especially among the low-spending states--implies that finding the funds to support noneducation children's services in the absence of federal fiscal incentives and service mandates may prove especially difficult in these states. In general, a combination of increased needs, slower growth in fiscal capacity, and a reduced federal role in setting standards and providing financial support will make it extremely unlikely that the vast majority of states can sustain the per-child spending patterns of the previous two decades. Three figures and 16 tables are included. Information on the Finance Project and its available resources is included. (LMI)