Christopher Candelaria

This study investigates how individual states raise revenue to pay for elementary-secondary education spending after a school finance reform (SFR). We consider 24 states that implemented SFRs between 1989 and 2005. Using a synthetic control approach, we identify six case-study states (Arkansas, Kansas, Maryland, Michigan, New Hampshire, and Vermont) that increased and sustained education expenditures after reform. We then searched for legislative statutes that appropriated funding for increased education spending and identified how policymakers intended to fund the SFR. Five states—AK, KS, MI, NH, and VT—paid for increased education expenditures by altering tax rates and changing tax revenue sources. A common feature among these five states is that they increased their control over the management of property tax revenues.

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School finance reforms are not well defined and are likely more prevalent than the current literature has documented. Using a Bayesian changepoint estimator, we quantitatively identify the years when state education revenues abruptly increased for each state between 1960 and 2008 and then document the state-specific events that gave rise to these changes. We find 108 instances of abrupt increases in state education revenues across 43 states; about one-quarter of these changes had been undocumented. Half of the abrupt increases that occurred post-1990 were preceded by litigation-prompted legislative activity, and Democrat-party control of a state increases the probability of a changepoint occurring by 8 percentage points.

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Sixty-seven school finance reforms (SFRs), a combination of court-ordered and legislative reforms, have taken place since 1990; however, there is little empirical evidence on the heterogeneity of SFR effects. In this study, we estimate the effects of SFRs on revenues and expenditures between 1990 and 2014 for 26 states. We find that, on average, per pupil spending increased, especially in low-income districts relative to high-income districts. However, underlying these average effect estimates, the distribution of state-level effect sizes ranges from negative to positive---there is substantial heterogeneity. When predicting SFR impacts, we find that multiple state-level SFRs, union strength, and some funding formula components are positively associated with SFR effect sizes in low-income districts. We also show that, on average, states without SFRs adopted funding formula components and increased K-12 state revenues similarly to states with SFRs.

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Use of education finance data is ubiquitous. Yet, because the academic calendar circumscribes two calendar years, researchers have linked the Consumer Price Index to three different dates: the Fall, Spring and academic fiscal years. We demonstrate that linking the CPI to these different academic year results in identifying different trends in U.S. educational spending during the Great Recession. Descriptive inferences should not be sensitive to researcher discretion about merge years. We provide an easy-to-use software package to facilitate implementation of NCES guidelines in the hope that future analyses of education finance data will explicitly and consistently apply inflation adjustments.  

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