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Finance
This paper studies how school spending impacts student achievement by exploiting the US interstate branching deregulation as state tax revenue shocks. Leveraging school finance data from universal school districts, our difference-in-differences estimation reveals that deregulation leads to an increase in per-pupil total revenue and expenditure. The rise in revenue is primarily attributed to higher state revenues, while the expenditure increase is more prominent in low-income school districts. Using restricted-use student assessments from the Nation’s Report Card, we find that deregulation results in improved student achievement, with no distributional effects evident across students’ ability, race, or free lunch status. We introduce an instrumental variables approach that accounts for dynamic treatment effects and estimate that a one-thousand-dollar increase in per-pupil spending leads to a 0.035 standard deviation improvement in student achievement.
We study the progressivity of state funding of school districts under Tennessee’s weighted student funding formula. We propose a simple definition of progressivity based on the difference in exposure to district per-pupil funding between poor and non-poor students. The realized progressivity of district funding in Tennessee is much smaller—only about 17 percent as large—as the formula weights imply directly. The attenuation is driven by the mixing of poor and non-poor students within districts. We further show the components of the Tennessee formula not explicitly tied to student poverty are only modestly progressive. Notably, special education funding is essentially progressivity-neutral for poor students. If we adjust the formula so all factors except individual student poverty receive zero weight and distribute the excess to poor students, we can increase the progressivity of district funding by 124 percent. We interpret this as the opportunity cost of the non-poverty-based funding components, measured in terms of progressivity.
School districts across the U.S. have adopted funding policies designed to distribute resources more equitably across schools. However, schools are also increasing external fundraising efforts to supplement district budget allocations. We document the interaction between funding policies and fundraising efforts in Chicago Public Schools (CPS). We find that adoption of a weighted-student funding policy successfully reallocated more dollars to schools with high shares of students eligible for free/reduced-price (FRL) lunch, creating a policy-induced per-pupil expenditure gap. Further, almost all schools raised external funds over the study period with most dollars raised concentrated in schools serving relatively affluent populations. We estimate that external fundraising offset the policy-induced per- pupil expenditure gap between schools enrolling the lowest and highest shares of FRL-eligible students by 26-39 percent. Other districts have attempted to reallocate fundraised dollars to all schools; such a policy in CPS would have little impact on most schools’ budgets.
Generally, need-based financial aid improves students’ academic outcomes. However, the largest source of need-based grant aid in the United States, the Federal Pell Grant Program (Pell), has a mixed evaluation record. We assess the minimum Pell Grant in a regression discontinuity framework, using Kentucky administrative data. We focus on whether and how year-to-year changes in aid eligibility and interactions with other sources of aid attenuate Pell’s estimated effects on post-secondary outcomes. This evaluation complements past work by assessing explanations for the null or muted impacts found in our analysis and other Pell evaluations. We also discuss the limitations of using regression discontinuity methods to evaluate Pell—or other interventions with dynamic eligibility criteria—with respect to generalizability and construct validity.
Scholars disagree about the effect out-of-state university students have on potential in-state students. Despite paying a premium to attend state universities, researchers argue that out-of-state students may come at a cost to in-state students by negatively affecting academic quality or by crowding out in-state students. To study this relationship, we examine the effect of a 2016 policy at a highly ranked state flagship university that removed the limit on how many out-of-state students it could enroll. We find the policy caused an increase in out-of-state enrollment by around 29 percent and increased tuition revenue collected by the university by 47 percent. We argue that this revenue was used to fund increases in financial aid disbursed at the university, particularly to students from low-income households, indicating that out-of-state students cross-subsidize lower income students. We also fail to find evidence that this increase in out-of-state students had any effect on several measures of academic quality.
During the Great Recession and in the years that immediately followed, previous research has well-documented that U.S. public school districts receiving larger shares of their funding from state governments experienced larger declines in expenditures per student, as the GR impacted state tax bases more than it impacted local tax bases. Using detailed financial data from the academic years 2004 to 2020, we analyze the longer-term effects of the GR on a broader array of U.S. public school district finances. Employing both difference-in-differences and event study approaches, our results indicate that public school expenditures and unspent end-of-year fund balances recovered and eventually exceeded pre-GR levels on an inflation-adjusted and per-student basis. However, the funding increases were heterogeneous such that districts receiving larger shares of funding from states were less successful at increasing spending and fund balances through 2020—more than ten years after the GR officially ended. Our empirical strategy survives a host of robustness checks. This pattern is concerning as more state-dependent districts tend to have higher proportions of disadvantaged students.
In 2006, the federal government effectively uncapped student borrowing for graduate programs with the introduction of the Graduate PLUS loan program. Access to additional federal loans increased graduate students’ borrowing and shifted the composition of their loans from private to federal debt. However, the increase in borrowing limits did not improve access to existing programs overall or for underrepresented groups. Nor did access to additional loan aid result in significant increase in constrained students’ persistence or degree receipt. We document that among programs in which a larger share of graduate students had exhausted their annual federal loan eligibility before the policy change—and thus were more exposed to the expansion in access to credit—federal borrowing and prices increased.
The media discourse on student loans plays a significant role in the way that policy actors conceptualize challenges and potential solutions related to student debt. This study examines the racialized language in student loan news articles published in eight major news outlets between 2006 and 2021. We found that 18% of articles use any racialized language, though use has accelerated since 2018. This increase appears to be driven by terms that denote groups of people instead of structural problems, with 8% of articles mentioning “Black” but less than 1% mentioning “racism.” These findings emphasize the importance of treating the media as a policy actor capable of shaping the salience of racialization in discussions about student loans.
Efforts to attract and retain effective educators in high poverty public schools have had limited success. Dallas ISD addressed this challenge by using information produced by its evaluation and compensation reforms as the basis for effectiveness-adjusted payments that provided large compensating differentials to attract and retain effective teachers in its lowest achievement schools. The Accelerating Campus Excellence (ACE) program offers salary supplements to educators with records of high performance who are willing to work in the most educationally disadvantaged schools. We document that ACE resulted in immediate and sustained increases in student achievement, providing strong evidence that the multi-measure evaluation system identifies effective educators who foster the development of cognitive skills. The improvements at ACE schools were dramatic, bringing average achievement in the previously lowest performing schools close to the district average. When ACE stipends are largely eliminated, a substantial fraction of highly effective teachers leaves, and test scores fall. This highlights the central importance of the performance-based incentives to attract and retain effective educators in previously low-achievement schools.