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Why have revenue-strapped New England school districts been slow to turn to alternative funding sources?

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  • Thomas Downes

Abstract

During and even after the Great Recession, numerous popular press stories commented on the apparent growth of non-tax revenues in the face of school district budget deficits. But Downes and Killeen (2014) show that nationally the growth of non-traditional revenues has been far less than these articles may lead the reader to believe. This paper uses data from the New England states to assess the empirical content of some of the possible explanations of this slow growth. In New England, as in the rest of the nation, non-tax revenues per pupil have grown in real terms but have not become a more important source of local revenues. Further analysis of Massachusetts offers equivocal evidence on whether non-tax revenues substitute for or are complements to revenues from overrides of revenue limits. Results from Vermont show that, when the incentives created by a school finance reform are sufficiently strong, districts turn to non-tax revenues in place of property taxes. However, once those incentives are removed, districts shift back to traditional revenues, indicating that districts are not inclined to use alternative revenues as a permanent replacement for property tax revenues.

Suggested Citation

  • Thomas Downes, 2016. "Why have revenue-strapped New England school districts been slow to turn to alternative funding sources?," Current Policy Perspectives 16-1, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbcq:2016_001
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    References listed on IDEAS

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    1. Stephen J. Schmidt & Karen Scott, 2004. "Reforming Reforms: Incentive Effects in Education Finance in Vermont," Rensselaer Working Papers in Economics 0425, Rensselaer Polytechnic Institute, Department of Economics.
    2. Katharine L. Bradbury & Karl E. Case & Christopher J. Mayer, 1998. "School quality and Massachusetts enrollment shifts in the context of tax limitations," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 3-20.
    3. Ashlyn Aiko Nelson & Beth Gazley, 2014. "The Rise of School-Supporting Nonprofits," Education Finance and Policy, MIT Press, vol. 9(4), pages 541-566, October.
    4. Tom Downes & Kieran M. Killeen, 2014. "So Slow to Change: The Limited Growth of Nontax Revenues in Public Education Finance, 1991–2010," Education Finance and Policy, MIT Press, vol. 9(4), pages 567-599, October.
    5. Darcy Rollins Saas, 2007. "School finance in Vermont: balancing equal education and fair tax burdens," New England Public Policy Center Discussion Paper 07-1, Federal Reserve Bank of Boston.
    6. Brunner, Eric & Sonstelie, Jon, 2003. "School finance reform and voluntary fiscal federalism," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2157-2185, September.
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    More about this item

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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