The Impact of the Great Recession and the Housing Crisis on the Financing of America's Largest CitiesThe housing crisis and the recession have placed tremendous fiscal pressure on the nation's central cities. Cuts in state government fiscal assistance to their local governments, plus shrinking property tax bases are challenging the ability of local governments to continue their current levels of public services.In this paper, we use data on the financing of the nation's largest central cities from 1997 to 2008 to forecast the impact of the recession and the housing crisis on central city expenditures between 2009 and 2013. Because expenditure responsibilities vary among city governments and because overlying governments play different roles, we develop the concept of constructed governments in order to allow us to compare the revenue-raising and spending policies of large central cities. We predict that real per capita spending in the average central city will be reduced by about seven percent during the forecast period, and that spending cuts will be substantially greater in cities hit hardest by the economic recession and the housing market collapse.

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Many states experienced fiscal crises at the beginning of this decade. Some responded by cutting state aid to local governments. This paper explores the extent to which local governments responded to these aid cuts by raising property taxes. The authors hypothesize that changes in aid help explain the observed differences in per capita property tax revenue changes across states. They find that on average school districts increased property taxes by 23 cents for each dollar cut in state aid. These results highlight the important role that the property tax plays in maintaining the stability of the state and local sector.

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The No Child Left Behind Act of 2001 requires states to establish goals for all students and for groups of students characterized by race, ethnicity, poverty, disability, and limited English proficiency, and requires schools to make annual progress in meeting these goals. In a number of states, officials have argued that increased federal education funding is not sufficient to cover the costs imposed by the new legislation. In this paper, we use data from Texas to estimate the additional costs of meeting the new student performance standards. We find that these costs substantially exceed the additional federal funding.