Why has growth of user fees and other nontraditional sources of local education revenues been so limited? Evidence from Colorado

Purpose - The purpose of this paper is to explore why school districts in the USA made so little use of local sources of non-tax revenues, even when faced with declines in traditional revenue as occurred during the Great Recession? The analysis uses the case of Colorado, where historically districts have made more use of alternative revenues. Design/methodology/approach - Data for the analysis are drawn from the NCES’s Common Core of Data with administrative data to create a panel of Colorado school districts. The paper presents estimates of traditional panel models, as well as spatial panel models, that give the correlates of variation in alternative revenue for education. Findings - As is true nationally, in Colorado school districts made no increased use of non-tax revenues in fiscal downturns, while the presence of expenditure limits does increase use, though not as might be expected. Revenues from overrides of the limits and alternative local revenues appear to be complements. Further, there is no evidence of spatial relationships for the alternative revenue sources considered. Originality/value - This paper uses richer data than has ever been used to explore the determinants of alternative revenues, making it possible to explore relationships others could not. In addition, synthetic cohort analysis is used to generate plausible instrumental variables for passage of an override of an expenditure limitation. Further, no existing analysis of nontraditional revenues considers the possibility that use of those revenues might be spatially correlated.