The Differential Effect of the No Child Left Behind Act (NCLB) on States’ Contributions to Education Funding in States with Binding School District Tax and Expenditure Limitations

Abstract

I examine the effects of state‐imposed binding school district tax and expenditure limitations (TELs) on states’ shares of total education funding after the passage of the No Child Left Behind Act (NCLB). Binding TELs restrict school districts’ abilities to raise additional revenue and increase expenditures. Using a state‐level panel dataset from 1992 to 2009, I find states that imposed binding school district TELs have at least 4.3 percent point higher state shares of total education funding relative to states without binding school district TELs after the passage of NCLB. This suggests state governments intervened by increasing funding assistance to school districts. NCLB was a fiscal shock to state governments’ finances and this shock was an unintended consequence of the interaction between binding school district TELs and an underfunded federal mandate. As a result, there was an expansion in the role and influence of states in the provision of public education after the passage of NCLB.