The effect of state education finance reform on total local resources

Abstract

Both the federal government and the states use intergovernmental grants to try to change the composition of local spending across different programs, as well as the distribution of resources across localities. Many states are now under court-order to use state education grants to reduce local disparities in education spending. While a substantial body of literature suggests that these court orders increase the level and progressivity of state education spending, there is little evidence on their broader effects on the total resources available not just for schools in low income districts, but for other programs across all localities. We find that states finance the required increase in education spending in part by reducing their aid to localities for other programs, particularly for wealthier districts. Thus, while court-ordered school finance equalizations do increase total state aid to localities for education, they do so at the expense of drawing state intergovernmental aid away from programs like public welfare, health, hospitals, and general services. These findings provide insight into the effectiveness of using earmarked funds to achieve redistribution.

Who benefits from student aid? The economic incidence of tax-based federal student aid

“…However, I offer an important first step in establishing the incidence of tax-based aid by demonstrating that eligible students and their families are not directly benefitting from tax-based aid in the manner envisioned by policymakers. Similar unintended behaviors are found to offset the intention of policies in other contexts, including public health insurance (Cutler and Gruber 1996) and intergovernmental grants (Baicker and Gordon 2006;Gordon 2004;Hines and Thaler 1995).…”

Value for Money: Budget and financial management reform in the People's Republic of China, Taiwan and Australia

“…Baicker and Gordon (2006) find that, in the United States, states finance the required increase in education spending in part by reducing their aid for other programs. Thus, while court-ordered school finance equalisations do increase total state aid to localities for education, they do so at the expense of drawing state intergovernmental aid away from programs such as public welfare, health, hospitals and general services.…”

Attracting Capital: Magnets, Charters, and School Referendum Success

“…Some have argued that this decline helped spark the many school finance lawsuits of the following three decades: as local financial support became difficult to acquire, districts tried to force state governments to revise decades-old school finance laws and formulas and thereby circumvent the local voter. Their success has been mixed (Baicker & Gordon, 2006;Evans, Murray, & Schwab, 1997;Isaac, 2006;Shapiro & Sonstelie, 1982).…”