Does School District Board Type Affect Fiscal Conditions? Examining Debt Positions

Abstract

In the United States, the question of which is a better form of governance and leadership – elected or appointed – is considered to be a relevant issue in public administration. Many studies have advocated the appointed form in terms of professional management and fiscal performance. However, there is limited knowledge about the application of this form of government to school districts that are the main issuers in the municipal bond market, but financially rely on state governments. We discuss whether the type of education board in the school district (i.e. appointed or elected boards) affect debt positions. We expect school districts with citizen-elected boards to be more likely to reduce debt positions due to the reelection concerns of board members. Using a panel dataset of New Jersey school districts from 1997 to 2016, we are able to estimate the impact of board type on the cumulative debt of a board. The findings offer evidence that, when compared to appointed school boards, elected school boards are more likely to reduce their long-term debt and interest payments, as well as long-term debt as a percentage of own-source revenue.