Education Finance Reform, Education Spending, and Student Performance

Abstract

The disparities in achievement among income and racial-ethnic groups of students have long been a major concern of educational policies. Among several identified factors that help explain the student performance gap, this paper focuses on inequity in funding for education among school districts, which resulted from heavy reliance of school districts’ revenue on local wealth. In 2004, the State of Maryland witnessed a significant change in financing methods for educational services by providing more resources for school districts with larger share of disadvantaged students. This is the first study to examine the effects of Maryland education finance reform on school spending and student performance. The findings show that reform has improved spending equity by providing more aid to school districts with larger share of disadvantaged students, but found little evidence that reform closed the student performance gap. This study holds policy implications for the current debate on reducing gaps of spending and student performance across school districts by using education finance reforms.