A Century of Education Spending

Education spending increased rapidly during most of the 20th century.

Chart 2.51: Education Spending in 20th Century

Education Spending started out at the beginning of the 20th century at one percent of Gross Domestic Product (GDP). It increased rapidly during the first three decades, reaching a peak of 4 percent of GDP in the depths of the Great Depression, but then steadying at 3 percent till the advent of World War II.

During World War II, education expenditures declined to 1.28 percent of GDP in 1944, and then recovered after the war to over 3 percent of GDP before declining in the early 1950s.

In the mid 1950s education spending began a rapid increase, from a low of 2.7 percent in 1953. Education spending peaked at 5.9 percent in 1976 before declining for the next decade to 4.8 percent of GDP in 1984.

In the mid 1980s education spending began to increase again. It flatlined at about 5.5 percent of GDP in the 1990s, but resumed its growth in the 2000s, reaching nearly 6.2 percent in 2010 before beginning a decline in the aftermath of the Great Recession.

Education Spending by Government Level

Education started out as a program of local governments.

Chart 2.52: Education Spending by Government Level

Education spending has always been dominated by local government. Local government spending started at about one percent of GDP at the start of the 20th century and then steadily expanded, with departures caused by the Great Depression and World War II, reaching 4 percent of GDP in the mid 1970s. From the mid 1970s to the mid 1980s education spending at the local level declined to about 3.25 percent of GDP by the mid 1980s. Then education began a steady rise, breaching 4 percent of GDP by 2001 and cresting at about 4.25 percent of GDP by 2008.

Education spending at the state level was minimal at the start of the 20th century, but grew to 0.2 percent of GDP by the mid 1920s. In the 1930s state education spending increased to about 0.4 percent of GDP before shrinking during World War II. After World War II state education increased to about 0.4 percent of GDP before surging to nearly 1.5 percent of GDP in 1976. State education spending declined to 1.24 percent of GDP in 1984 and then began a slow increase, reaching 1.5 percent of GDP in the late 2000s.

Chart Key:
- Transfer to state and local
- Federal direct spending
- State direct spending
- Local direct spending

The federal government had little involvement in education in the early 20th century. This changed in the 1930s when federal education spending increased from less than 0.05 percent of GDP to over 0.3 percent of GDP. Federal education spending decreased during World War II but then increased to a peak of 1.05 percent of GDP in 1949 as it funded education for veterans in the GI Bill. Federal education spending declined in the 1950s to 0.33 percent of GDP, but began an increase in the mid 1960s reaching a peak of 1.23 percent of GDP in 1979. Thereafter federal education spending declined to about 0.6 to 0.7 percent of GDP in the 1980s and 1990s before increasing modestly to 0.8 percent of GDP in the 2000s.

Education Spending by Education Type

At the start of the 20th Century, education spending was almost exclusively for K-12 spending.

Chart 2.53: 20th Century Education Spending by Type

Government education spending in the first half of the 20th century was almost exclusively for childhood education, K thru 12. In 1950, spending was 2.01 percent on K-12 and 0.38 percent of GDP on higher education. But then the higher education share began to grow. At the peak of education spending in the 1970s, K-12 spending was 4.01 percent of GDP and higher education was 1.49 percent of GDP. Thus K-12 spending had doubled as a percent of GDP and higher education spending had just about quadrupled in 25 years.

Since the 1970s higher education has increased its share a little. K-12 education spending ended up at 3.5 to 3.8 percent in the 2000s and higher education spending rose to 1.6 to 1.8 percent of GDP.