School Finance Reform Research Articles

Are Court Orders Sticky? Evidence from School Finance Litigation

Whether welfare analysis of legal rule changes should evaluate distributional outcomes as well as efficiency depends crucially on how much their distributional impacts stick. That is, do court mandates ultimately affect the distribution of taxes and spending or do legislatures offset the distributional consequences of those court orders with other changes? Little is known about this question. To offer insight into it, I use an event study methodology to show how state revenues and expenditures respond to court orders to increase funding for schools. I find that the court orders’ distributional impacts do stick. The education spending is financed by tax increases that do not target the largest beneficiaries of the increased education spending, the poor and those with children. Thus, since the main beneficiaries of the school spending do not pay a disproportionate share of the costs, advocates for school finance reform are effective at transferring resources to poor families. The results suggest that welfare analysis of these legal rules should take into account not only efficiency but also distribution, in a departure from traditional economic analysis of legal rules.

The Effect of the Centralization of School Finance on School Revenue and Spending: Evidence from Reform in Michigan

In 1995, the Michigan state government centralized a school finance system by removing local discretion on school revenue. The theoretical framework says that centralization has the price and income effects on the pivotal voter’s demand for school spending, probably reducing overall spending levels. Using the district-level panel data on school finance in Michigan and neighboring states for the period of fiscal year 1990-2004, this paper provides evidence for the effect of the Michigan school finance reform on the level of school revenue and spending. The study finds that the reform decreases the level of school revenue and spending with a time lag at the state level. The results also suggest that the reform equalizes revenue and spending among school districts at the expense of high-revenue district’s resources without a large increase in low-revenue district’s resources.

A Constrained Bureaucratic Model of Behavioral Responses to School Finance Reform

A Constrained Bureaucratic Model of Behavioral Responses to School Finance Reform

Does Public School Spending Raise Intergenerational Mobility? Evidence from U.S. School Finance Reforms

This study examines whether investment in public schools can enhance equality of opportunity as measured by intergenerational income mobility (IGM). To estimate the causal effect of public school spending, I exploit the plausibly exogenous variation in school spending induced by the U.S. court-mandated school finance reforms. I use county-level college attendance rate and IGM constructed based on administrative tax records. Students are more likely to attend college due to additional resources in public schools. An increase in school spending raises IGM of children from high-income families. However, public school spending has little impact on IGM of low-income children. The school spending effects are concentrated among low-poverty counties. In particular, I find a significant increase in IGM of low-income children in low-poverty counties, which implies that the positive effect of school spending might be mitigated by negative environments in high poverty areas.

Effect of constraints on Tiebout competition: evidence from a school finance reform

ABSTRACTEffect of constraints on Tiebout competition: evidence from a school finance reform. Regional Studies. Michigan's school finance reform significantly increased state aid to low-spending districts and placed restraints on the growth of spending in high-spending districts. It is noteworthy that there is no literature yet on the impact of such reforms on resource allocation by school districts. This study begins to fill this gap. It finds that the reform led the high-spending districts to allocate a lower share of their total expenditure to support services and a higher share to instruction (relative to the low-spending districts). To the extent that instructional expenditures are more productive and contribute to student achievement more than support services expenditures, these results suggest that the reform led to a relative increase in productivity in the high-spending districts.

Mind the Gap: 20 Years of Progress and Retrenchment in School Funding and Achievement Gaps

AbstractAlthough there has been significant progress in the long term, achievement gaps among the nation's students persist. Many factors have contributed to the disparities in outcomes, and societal changes can explain progress, or lack thereof, over the past few decades. This is well documented in the 2010 Educational Testing Service (ETS) report Black–White Achievement Gaps: When Progress Stopped, which explored achievement gap trends and identified the changing conditions that may have influenced those trends. In this report, we extend that work by focusing on the relationship between school funding, resource allocation, and achievement among students from low‐income families. We tackle the assumption that greater resources, delivered through fair and equitable school funding systems, could help raise academic outcomes and reduce the achievement gap. The goal is to provide convincing evidence that state finance policies have consequences in terms of the level and distribution of resources, here limited to staffing characteristics, and that the resulting allocation of resources is also associated with changes in both the level of academic achievement and achievement gaps between low‐income children and their peers. Using more than 20 years of revenue and expenditure data for schools, we empirically test the idea that increasing investments in schools generally is associated with greater access to resources as measured by staffing ratios, class sizes, and the competitiveness of teacher wages. When the findings presented here are considered with the strong body of academic literature on the positive relationship between substantive and sustained state school finance reforms and improved student outcomes, a strong case can be made that state and federal policy focused on improving state finance systems to ensure equitable funding and improving access to resources for children from low‐income families is a key strategy to improve outcomes and close achievement gaps.

Impact of Alternative Property and Sales Tax Policies on Texas Representative Farms

The call for school finance reform has threatened to modify or possibly remove the current property and sales and use tax exemptions currently benefiting Texas agricultural producers. This study utilizes a whole farm simulation model to evaluate the economic and financial impact of three alternative sales and/or property tax policy changes on Texas farms, dairies, and ranches along with their respective landowners. Results indicate that removing sales tax exemptions would most adversely impact producers, while removing property tax exemptions has a more negative effect on landowners.

Public Education in the Dynamic City: Lessons from New York City

The plight of urban schools and their failure to adequately and efficiently educate their students has occupied the national discussion about public schools in America over the last quarter century. While there is little doubt that failing schools exist in rural and suburban locations, the image of city school systems as under-financed, inefficient, inequitable and burdened by students with overwhelming needs is particularly well entrenched in the modern American psyche. As the largest school district in the country, New York City attracts particular attention to its problems. To some extent, this image reflects realities. New York City school children, like many urban students around the country, are more likely to be poor, non-white and immigrants, with limited English skills, and greater instability in their schooling, and the new waves of immigrants from around the world bring students with a formidable array of backgrounds, language skills, and special needs. The resulting changes in the student body pose particular challenges for schools. At the same time, despite a decade of school finance litigation and reform, New York continues to have trouble affording the class sizes, highly qualified teachers and other resources that suburban neighbors enjoy. Finally, there is evidence of continuing segregation and disparities in performance between students of different races and ethnicities.

The Effects of School Spending on Educational and Economic Outcomes: Evidence from School Finance Reforms *

AbstractSince the Coleman Report, many have questioned whether public school spending affects student outcomes. The school finance reforms that began in the early 1970s and accelerated in the 1980s caused dramatic changes to the structure of K–12 education spending in the United States. To study the effect of these school finance reform–induced changes in public school spending on long-run adult outcomes, we link school spending and school finance reform data to detailed, nationally representative data on children born between 1955 and 1985 and followed through 2011. We use the timing of the passage of court-mandated reforms and their associated type of funding formula change as exogenous shifters of school spending, and we compare the adult outcomes of cohorts that were differentially exposed to school finance reforms, depending on place and year of birth. Event study and instrumental variable models reveal that a 10% increase in per pupil spending each year for all 12 years of public school leads to 0.31 more completed years of education, about 7% higher wages, and a 3.2 percentage point reduction in the annual incidence of adult poverty; effects are much more pronounced for children from low-income families. Exogenous spending increases were associated with notable improvements in measured school inputs, including reductions in student-to-teacher ratios, increases in teacher salaries, and longer school years.

Hacia una distribución más equitativa de las oportunidades educativas: ¿cuál es el impacto de la política de Subvención Preferencial en el desempeño académico de los alumnos más vulnerables en Chile?

In this paper we examine the effects of a school finance reform implemented in Chile in 2008. This reform changed the school funding formula from one based on student enrollment to one that gives between 50 and 60 percent more funding to each student from a lower socioeconomic background. This study presents evidence on the effects of this reform on student academic achievement in math and language. The evidence relies on the use of comparative interrupted time series analysis to identify the impact of this policy. The analysis uses the changes in student test scores from before and after the implementation of the policy between participating, non-participating, and late-entry schools. The results indicate statistically significant differences in math performance gains of 4th graders (0.18 SD) after 4 years of treatment compared to students without treatment, and 0.07 SD in language gains. The results also show a higher achievement increase for vulnerable students compared to non-vulnerable ones. However, this advantage cannot be attributed to the program.

Quasi-Experimental Evidence on the Connection between Property Taxes and Residential Capital Investment

Do low property taxes attract new home construction? This question is answered using a large shock to property tax burdens caused by an unusual school finance reform in the state of New Hampshire. The estimates suggest that, in most of the state, communities with a reduced tax burden experience a substantial increase in residential construction. In the area of the state near the region's primary urban center (Boston), however, the shock clears through a price adjustment—i.e., by capitalizing into property values. The differing responses are attributed to differing housing supply elasticities. (JEL H71, H73, R31)

School Finance Equalization and Intergenerational Income Mobility: Does Equal Spending Lead to Equal Opportunities?

School finance reforms have been implemented across US states in the past 40 years to equalize expenditure across school districts. This paper exploits such changes to examine the effects of inequality in school expenditure on intergenerational income mobility of students. I use the slope coefficient of per-capita income on per-pupil expenditure within each commuting zone as a summary statistic of inequality in expenditure. I address issues of omitted variable bias and endogeneity of expenditure using the parameters of the financing formulas to generate simulated instruments for expenditure. OLS and 2SLS estimates show that school finance equalization substantially improves intergenerational mobility of children born in low-income families, and has no effect on mobility of richer children. The effect of equalization is largest during primary school years, and smallest during middle school years. My results also show that an overall increase in school expenditure improves mobility of poorer children. These results suggest that equalization of expenditure across districts is important to guarantee equal long-run opportunities of children.

Rich Districts, Poor Districts: The Property Tax Equity Impact of Arkansas School Finance Equalization

From 1992 to 2003, the State of Arkansas was immersed in the Lake View case, which led to a ruling that the state funding of schools was unconstitutional. The Lake View School District argued that the state's funding was inequitable and harmed students and taxpayers of poor districts. The ruling was as much about correcting fiscal disparities across districts as it was about correcting disparities in educational outcomes. Subsequently, state education school finance reform required the State to provide districts with equalization funding. This study examines the impact of equalization on inter-district property tax disparity. Specifically, this study seeks to determine if the lower wealth and less advantaged school districts are better off, as measured by their property tax burden and tax effort. We analyze four measures of district level wealth and advantage: assessed value of property, percentage of students enrolled in the federal school lunch program, percentage of African-American students, and the NCES locale codes for rural or non-rural. Our results indicate that state equalization did have an impact on inter-district property tax disparity. The poorest and least advantaged school districts do benefit from state equalization, meaning that the tax burden and tax effort of those districts are reduced. Furthermore, our findings indicate that there is less disparity between the wealthiest districts and the poorest districts.

Housing markets and residential segregation: Impacts of the Michigan school finance reform on inter- and intra-district sorting

Local financing of public schools in the U.S. leads to a bundling of two distinct choices – residential choice and school choice – and has been argued to increase the degree of socioeconomic segregation across school districts. A school finance reform, aimed at equalization of school finances, can in principle weaken this link between housing choice and choice of schools. In this paper, we study the impacts of the Michigan school finance reform of 1994 (Proposal A) on spatial segregation. The reform was a state initiative intended to equalize per pupil expenditures between Michigan school districts and reduce the role of local financing. We find that Proposal A led to a decline in neighborhood sorting within education markets, as measured by changes in the value of housing stock and several socioeconomic indicators. We also find that the reform affected the dispersion of incomes and educational attainment within school districts, increasing within-district heterogeneity in the lowest spending school districts, while decreasing the same in the highest spending districts. However, there is a continued high demand for residence in the highest spending communities. These findings are robust to various alternative definitions of “education market”, and survive several sensitivity checks. These spatial segregation patterns are not replicated in neighboring Ohio that did not face similar school finance equalization.

Who Deserves Good Schools? Cultural Categories of Worth and School Finance Reform

From the standpoint of the existing literature on cultural categories of worthiness or deservingness, school funding equalization presents a paradox: why has a reform targeted at morally deserving children been so difficult to enact? This article investigates cultural constructions of worthiness, which have been shown to affect the debate and implementation of social welfare policies, in this new policy arena. The authors analyze newspaper coverage in California and Texas, over multiple time periods, to explore whether and how arguments about deservingness of the policy's beneficiaries appear in debates surrounding school finance reform. The authors find that even though children are widely accepted to be morally worthy, the deservingness of other groups complicates the debate. The deservingness of taxpayers, teachers and administrators, and parents is contested, and can challenge or dilute claims about the deservingness of children. These findings help make sense of the paradoxes of school finance reform by showing how deservingness can still be contested even though the target population is widely accepted to be morally worthy.

The effect of property taxes on vacation home growth rates: Evidence from Michigan

The Tiebout model assumes that individuals sort to the jurisdiction which best matches their fiscal preferences. However, there is a paucity of reliable estimates for the impact of tax changes on household mobility. We utilize a state mandated school finance reform and temporal differences in vacation home densities to provide a unique test of this fundamental Tiebout assumption. The results show that changes in property taxes explain a significant amount of the variation in vacation home growth; a 3–4mil decrease in property tax rates is associated with an increase of approximately one vacation home per square kilometer.

Thirty-Seven and Counting: How Has AEFP Evolved from Its Origins?

It has been a busy time for the Association of Education Finance and Policy (AEFP). Over the past few years the association has acquired a new name, a new journal, and many new members. The 2012 annual conference, convened in Boston last March, proved to be the largest conference in the association’s thirty-seven-year history, with 556 members in attendance. The theme, selected by incoming president Deborah Cunningham, was “Education Finance, Policy, and Practice: The Role of Evidence in a Dynamic World,” which underscores the contemporary challenge to the association: how to apply an increasing abundance of information and sophisticated analytical tools to produce the evidence needed to guide decision making by educational policy makers and practitioners. The Boston meeting was notable not only for the number in attendance. The unique qualities and strengths of the association were in clear display: papers of unusual methodological rigor; an interdisciplinary mix of academics from the social sciences, public policy schools, and colleges of education; educational finance professionals, policy analysts, and practitioners, a mix rarely found in the same place; and sessions addressing today’s hot topics as well as issues that have endured over the years. Having said this, all indications are that AEFP is what it has always been: a small, diverse group of people tackling some really big problems. Of particular note was a trend that has been growing for years but has clearly come into full flower: the large

Housing Markets and Residential Segregation: Impacts of the Michigan School Finance Reform on Inter- and Intra-District Sorting

Local financing of public schools in the United States leads to a bundling of two distinct choices – residential choice and school choice – and has been argued to increase the degree of socioeconomic segregation across school districts. A school finance reform, aimed at equalization of school finances, can in principle weaken this link between housing choice and choice of schools. In this paper, we study the impacts of the Michigan school finance reform of 1994 (Proposal A) on spatial segregation. The reform was a state initiative intended to equalize per-pupil expenditures between Michigan school districts and reduce the role of local financing. We find that Proposal A was responsible for increases in the value of housing stock in the lowest-spending school districts, and for improvements in several socioeconomic indicators in these districts, implying a decline in neighborhood sorting. We also find that the reform affected dispersion of incomes and educational attainment within school districts, increasing within-district heterogeneity in the lowest-spending school districts, while decreasing the same in the highest-spending districts. However, there is continued high demand for residence in the highest-spending communities, suggesting the importance of neighborhood peer effects (local social capital) and implying that even a comprehensive government aid program can fail to make a large impact on residential segregation.

School Finance and Courts: Does Reform Matter, and how Can We Tell?

Background/ContextSchool finance litigation has often prompted funding reforms, but what happens as a result is the subject of considerable dispute.PurposeThis article explores design problems encountered in studies examining the nature and effects of those reforms.AnalysisAfter describing the development and current status of school finance litigation, the authors explore methodological complexities associated with estimating the effects of state school finance reforms. Then, following a review of the research literature that provides the most direct and empirically rigorous evaluations of the achievement effects of these reforms, the authors critique a growing body of weaker but nonetheless influential literature focused on attacking school finance reform and more generally on discrediting judicial involvement in public schooling and finance litigation. In the article's final section, the authors review school finance reform in the four states analyzed in an influential recent book by Hanushek and Lindseth, taking a second look at what the book's authors concluded were disappointing outcomes.ConclusionsMethodological complexities and design problems plague finance impact studies. Although there are high-quality studies covering these issues, the research appearing to have the greatest influence in media coverage and policymaking is often advocacy-oriented and of lesser quality.

Social status, values, and support for reform in education

Using a survey of Ohio and Indiana residents, we analyze the extent to which public support for school vouchers and school finance reform is structured by the same socioeconomic interests and values (equality, humanitarianism, individualism, and limited government) as is public support for contentious welfare policies. Disadvantaged individuals and individuals who live in disadvantaged communities are more likely to support vouchers but social status has a more ambiguous influence on support for finance reform. Values cannot explain the effect of social status on support for these education policies, but they exert independent effects. We speculate that disadvantaged individuals are more likely to see vouchers as in their interests than are advantaged individuals because voucher advocates have allied themselves with social movements and organizations representing clear constituencies (religious conservatives, low-income urban parents). On the other hand, we suggest that finance reform is more of an abstract issue because its advocates have mostly concentrated on intragovernmental litigation, and thus cleavages based on social status tend to be more obscured.