Equity and Adequacy in Education Finance Issues and Perspectives (1999) / Chapter Skim
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3 The Impact of Court-Mandated School Finance Reform
3 The Impact of Court-Mandated School Finance Reform
Pages 72-98
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From page 72... ...
Table 3-1 summarizes the status of finance reform litigation.) By 1998, supreme courts in 43 states had heard cases on the constitutionality of school finance systems.
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give a thorough account of the history of school finance litigation.
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A final section looks at some of the other important consequences of court decisions. We begin by examining the impact of the courts on education outcomes and then turn to private contributions to public schools and the demand for private schools.
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By looking at data from many states, these empirical studies allow us to look at more general responses to school finance reform efforts. Manwaring and Sheffrin (1995)
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, various years. Calculations exclude school districts from Alaska, District of Columbia, Hawaii, Montana, and Vermont.
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As a result of court-ordered reform, we found that spending would rise by 11 percent in the poorest school districts, rise by 7 percent in the median district, and remain roughly constant in the wealthiest districts. Third, finance reform leads states to increase spending for education and leave spending in other areas unchanged, and thus, by implication, states fund the additional spending on education through higher taxes.
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We find in Table 33 that, following court-mandated reform, total revenues rose significantly in districts with the lowest local revenues. All of this increase represents additional funds from the state government; we find some mixed evidence that some of this additional state money replaces local revenue.
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79 en He a' o He a' .5 c)
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Second, in Hoxby's paper school districts can increase spending by raising either the property tax rate or the property tax base. Changes in the structure of state aid change the optimal tax base and rate.
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We are also concerned about a second conceptual issue. As we noted above, in Hoxby's paper school districts can increase spending by raising either the property tax rate or the property tax base.
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All three models look at a fundamental question: What happens in a general equilibrium setting when we move from decentralized to centralized school financed The answers these three models offer are intriguing. Fernandez and Rogerson find that a centralized education finance system could generate significant welfare gains.
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The attraction of simulation models designed to study the impact of centralized school finance is obvious. In an ideal world from a researcher's perspective, we would like to watch a society function under a decentralized finance system, and then rerun history after the courts require more equal funding of schools.
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Given the uncertainty surrounding the size of the marginal benefits of education spending, the rate at which those benefits decline assumption (2) above must certainly be regarded as an open question.
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is a geographic index that only controls for the differences in housing values, income, and population growth across districts; the McMahon and Chang index yields the smallest inflation adjustment. Table 3-4 summarizes our attempts to adjust for cost differences between metropolitan and nonmetropolitan school districts in 1992.
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, the 1980 census (Summary Tape File 3F, School Districts Machine Readable Data file) from the Bureau of the Census (1982b)
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For districts in the first quartile of median family income, after 10 years of reform, state revenues increased by $1,020 but 40 percent of these gains were given back to taxpayers via lower local spending. The results for the Years After Court Reform variable also suggest a strong relationship between changes in total revenues and median family income.
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88 _ so ~ so- o so ~ ~ V Vet sat .
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+ Hi + ot + Vit (3) where ~ and ~ are state and year effects, respectively, vie is a random error, and Die is one of our court reform variables.
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From page 90... ...
State aid directed toward black students increased by an estimated $664 per student following reform; local spending on black students fell by $216. Thus, total per-pupil revenue for black students increased by $448 per pupil while per-pupil revenue for white students increased by $574.
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They conclude that the evidence points to a modest equalizing effect of school finance reforms on the test score outcomes for children from different family backgrounds (though they would agree that the evidence is not decisive)
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The Demand for Private Schools How else might families respond to court-mandated spending equalization plans? They might choose to abandon the public school system entirely and send their children to private schools.
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Using data from the 1970, 1980, and 1990 census for 160 metropolitan areas, they find that as average spending per pupil rises in a state and as spending becomes more equal, private school enrollments fall. SUMMARY AND CONCLUSIONS The literature on the impacts of court-mandated finance reform is an important element of the research on education finance.
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(1970~. The school finance literature sometimes draws distinctions between guaranteed tax base, guaranteed yield, and district power equalization programs.
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Stiefel 1984 The Measurement of Equity in School Finance: Conceptual, Methodological, and Empirical Dimensions. Baltimore: The Johns Hopkins University Press.
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1992 Evaluating the impact of school finance reform on the provision of education: The California case. National Tax Journal 45:405-419.
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Hoxby, C.M. 1996 All School Finance Equalizations Are Not Created Equal: Marginal Tax Rates Matter.
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Nechyba, T.J. 1997 Public School Finance in a General Equilibrium Tiebout World: Equalization Programs, Peer Effects, and Competition.
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