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School Finance Reforms, Tax Limits, and Student Performance: Do Reforms Level Up or Dumb Down?

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  • T. A. Downes
  • D. N. Figlio

Abstract

During the late 1970s and early 1980s, a majority of states substantially changed the ways in which schools were funded, either directly through court- or legislatively mandated school finance reform, or indirectly through tax and expenditure limits. To date, there have been few academic attempts to gauge the effects of these policy changes on actual outcomes of education. This paper is an attempt to fill this gap in the literature. We find compelling evidence that the imposition of tax or expenditure limits on local governments in a state results in a significant reduction in the mean for that state of student performance on standardized tests of mathematics skills. We also find that finance reforms in response to court mandates do not result in significant changes in either the mean level or the distribution of student performance on standardized tests of reading and mathematics. In addition, substantial finance reforms that are not legislative responses to explicit court mandates generally result in increases in mean student performance. Further, in those states that have implemented finance reforms of this type, the test performance of students residing in localities in which local revenues formed smaller shares of total revenue prior to the reforms improve relative to others after the reforms are implemented.

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  • T. A. Downes & D. N. Figlio, "undated". "School Finance Reforms, Tax Limits, and Student Performance: Do Reforms Level Up or Dumb Down?," Institute for Research on Poverty Discussion Papers 1142-97, University of Wisconsin Institute for Research on Poverty.
  • Handle: RePEc:wop:wispod:1142-97
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    Cited by:

    1. Justina A.V. Fischer, 2005. "The Impact of Direct Democracy on Public Education: Performance of Swiss Students in Reading," University of St. Gallen Department of Economics working paper series 2005 2005-10, Department of Economics, University of St. Gallen.
    2. Aaronson, Daniel, 1999. "The Effect of School Finance Reform on Population Heterogeneity," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(1), pages 5-29, March.
    3. Gebhard Kirchgassner, 2002. "The effects of fiscal institutions on public finance: a survey of the empirical evidence," Chapters,in: Political Economy and Public Finance, chapter 9 Edward Elgar Publishing.
    4. Downes, Thomas A. & Dye, Richard F. & McGuire, Therese J., 1998. "Do Limits Matter? Evidence on the Effects of Tax Limitations on Student Performance," Journal of Urban Economics, Elsevier, vol. 43(3), pages 401-417, May.
    5. Michael Dinerstein & Troy Smith, 2015. "Quantifying the Supply Response of Private Schools to Public Policies," Discussion Papers 15-019, Stanford Institute for Economic Policy Research.
    6. Figlio, David N., 1998. "Short-Term Effects of a 1990s-Era Property Tax Limit: Panel Evidence on Oregon's Measure 5," National Tax Journal, National Tax Association, vol. 51(n. 1), pages 55-70, March.
    7. Lars P. Feld & Gebhard Kirchgässner, 2004. "Sustainable Fiscal Policy in a Federal System: Switzerland as an Example," Marburg Working Papers on Economics 200424, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    8. Figlio, David N., 1999. "Functional form and the estimated effects of school resources," Economics of Education Review, Elsevier, vol. 18(2), pages 241-252, April.
    9. Loeb, Susanna, 2001. "Estimating the effects of school finance reform: a framework for a federalist system," Journal of Public Economics, Elsevier, vol. 80(2), pages 225-247, May.
    10. Sims, David P., 2011. "Suing for your supper? Resource allocation, teacher compensation and finance lawsuits," Economics of Education Review, Elsevier, vol. 30(5), pages 1034-1044, October.
    11. David Card & Abigail A. Payne, 1997. "School Finance Reform, the Distribution of School Spending, and the Distribution of SAT Scores," Working Papers 766, Princeton University, Department of Economics, Industrial Relations Section..
    12. Fischer, Justina A.V., 2007. "The Impact of Direct Democracy on Public Education: Evidence for Swiss Students in Reading, Mathematics and Natural Science," SSE/EFI Working Paper Series in Economics and Finance 688, Stockholm School of Economics.
    13. Dee, Thomas S, 2000. "The Capitalization of Education Finance Reforms," Journal of Law and Economics, University of Chicago Press, vol. 43(1), pages 185-214, April.
    14. Justina A.V. Fischer, 2005. "Do Institutions of Direct Democracy Tame the Leviathan? Swiss Evidence on the Structure of Expenditure for Public Education," CESifo Working Paper Series 1628, CESifo Group Munich.
    15. Susanna Loeb & Patrick J. McEwan, 2010. "Education Reforms," NBER Chapters,in: Targeting Investments in Children: Fighting Poverty When Resources are Limited, pages 145-178 National Bureau of Economic Research, Inc.
    16. Katharine L. Bradbury & Karl E. Case & Chirstopher 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.
    17. Card, David & Payne, A. Abigail, 2002. "School finance reform, the distribution of school spending, and the distribution of student test scores," Journal of Public Economics, Elsevier, vol. 83(1), pages 49-82, January.
    18. Chakrabarti, Rajashri & Roy, Joydeep, 2010. "Effect of constraints on Tiebout competition: evidence from a school finance reform in the United States," Staff Reports 471, Federal Reserve Bank of New York, revised 01 Apr 2016.
    19. Susan E. Mayer, 2001. "How Economic Segregation Affects Children's Educational Attainment," JCPR Working Papers 235, Northwestern University/University of Chicago Joint Center for Poverty Research.
    20. C. Kirabo Jackson & Rucker C. Johnson & Claudia Persico, 2016. "The Effects of School Spending on Educational and Economic Outcomes: Evidence from School Finance Reforms," The Quarterly Journal of Economics, Oxford University Press, vol. 131(1), pages 157-218.
    21. C. Kirabo Jackson & Rucker Johnson & Claudia Persico, 2014. "The Effect of School Finance Reforms on the Distribution of Spending, Academic Achievement, and Adult Outcomes," NBER Working Papers 20118, National Bureau of Economic Research, Inc.
    22. Brian Jacob & Jens Ludwig, 2008. "Improving Educational Outcomes for Poor Children," NBER Working Papers 14550, National Bureau of Economic Research, Inc.
    23. Sungoh Kwon, 2017. "Does Public School Spending Raise Intergenerational Mobility?: Evidence from U.S. School Finance Reforms," Working papers 2017-06, University of Connecticut, Department of Economics.
    24. David N. Figlio, 2003. "Fiscal Implications of School Accountability Initiatives," NBER Chapters,in: Tax Policy and the Economy, Volume 17, pages 1-36 National Bureau of Economic Research, Inc.
    25. Eric J. Brunner & Jon Sonstelie, 2006. "California's School Finance Reform: An Experiment in Fiscal Federalism," Working papers 2006-09, University of Connecticut, Department of Economics.

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