Impact of School Finance Reform on Resource Equalization and Academic Performance: Evidence from Michigan

Abstract

The state of Michigan radically altered its school finance system in 1994. This was a legislature-led reform that took place somewhat unexpectedly and without the intervention of any courts. The new plan, called Proposal A, significantly increased state aid to the lowest spending districts. I investigate the impact of Proposal A on distribution of resources and educational outcomes in Michigan. In the process this paper offers a first detailed look at the effectiveness of a legislature-led school finance reform. I find that Proposal A was successful in reducing inter-district spending disparities. The effect on academic performance is more modest, though there is evidence of significant gains by the lowest spending districts in state tests.

The Road Toward K-12 Excellence in Michigan: How an Upgraded Financing System Can Better Support Enhanced Student Achievement

“…We have replicated and extended the analyses of Papke (2005Papke ( , 2008 and Roy (2011). Later in this document, we use these results to extrapolate the amount of additional resources that it would take to upgrade Michigan's student achievement to the level of the U.S. average and to the level of exemplary states, as well as the resources it would take to reduce gaps between disadvantaged and non-disadvantaged students.…”

The Changing Distribution of Educational Opportunities: 1993–2012

“…Baker ( 2012 ) explains the evolution of assertions regarding the unimportance of money for improving student outcomes, pointing out that these assertions emanate in part from misrepresentations of the work of Coleman and colleagues in the 1960s, which found that school factors seemed less associated with student outcome differences than did family factors. This was not to suggest, however, that school factors 3 Roy ( 2011 ) published an analysis of the effects of Michigan's 1990s school fi nance reforms that led to a signifi cant leveling up for previously low-spending districts. Roy, whose analyses measure both whether the policy resulted in changes in funding and who was affected, found that the proposal "was quite successful in reducing interdistrict spending disparities.…”

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

“…20 that these schools were relatively more concentrated in these districts -so that property values went up due to charter schools, and wealthier and more educated households relocated to take advantage of these schools. However, the opposite is true in Michigan (see Roy 2011). The lowest spending groups (Groups 1 and 2) are predominantly rural, while charter schools in Michigan mostly serve urban city children and are located in the high spending districts.…”

“…Over time, the gap in spending was significantly reduced. Also, there is considerable evidence (Papke, 2005;Papke, 2008;Roy, 2011) that the reform led to significant gains in academic performance in the lowest spending districts and the gap in educational outcomes between the highest and lowest 1 spending districts narrowed. This relative equalization sets the stage for studying the impacts on socioeconomic segregation.…”

“…For example, the estimated coefficients might be underestimating the true effect of school finance reforms if the states included in their treatment group did not experience substantial gains in learning. In Michigan, on the other hand, there is convincing evidence of the reform having produced significant gains in student performance (Papke, 2005;Papke, 2008;Roy, 2011), so the results are particularly informative from that perspective. Second, Aaronson (1999) and Dee (2000) restrict themselves to heterogeneity in incomes and housing prices respectively.…”