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The Effect of Mandated State Education Spending on Total Local Resources

Author

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  • Katherine Baicker
  • Nora Gordon
Abstract
Many states are under court-order to reduce local disparities in education spending. While a substantial body of literature suggests that these orders and the resulting school finance equalizations have increased the level and progressivity of state education spending, there is little evidence on the broader effects of such measures on the change in total resources available not only for schools, but for other local government programs as well. When states spend more on education, both state and local budget constraints change. We find that while mandated school finance equalizations increase both the level and progressivity of state spending on education, states finance the required increase in education spending in part by reducing their aid to localities for other programs. Local governments, in turn, respond to the increases in state taxation and spending by reducing both their own revenue-raising and their own spending on education and on other programs. Thus, while state education aid does increase total spending on education, it does so at the expense of drawing resources away from spending on programs like public welfare, highways, and hospitals. These findings provide insight into the effectiveness of using earmarked funds to achieve redistribution.

Suggested Citation

  • Katherine Baicker & Nora Gordon, 2004. "The Effect of Mandated State Education Spending on Total Local Resources," NBER Working Papers 10701, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:10701
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    References listed on IDEAS

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    7. Melissa A. Clark, "undated". "Education Reform, Redistribution, and Student Achievement: Evidence from the Kentucky Education Reform Act," Mathematica Policy Research Reports 80c79eb4bd384723b5e7da0c9, Mathematica Policy Research.
    8. Baicker, Katherine, 2001. "Government decision-making and the incidence of federal mandates," Journal of Public Economics, Elsevier, vol. 82(2), pages 147-194, November.
    9. Murray, Sheila E & Evans, William N & Schwab, Robert M, 1998. "Education-Finance Reform and the Distribution of Education Resources," American Economic Review, American Economic Association, vol. 88(4), pages 789-812, September.
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    13. repec:mpr:mprres:7221 is not listed on IDEAS
    14. Figlio, David N. & Husted, Thomas A. & Kenny, Lawrence W., 2004. "Political economy of the inequality in school spending," Journal of Urban Economics, Elsevier, vol. 55(2), pages 338-349, March.
    15. Shama Gamkhar & Wallace Oates & Shama Gamkhar & Wallace Oates, 2004. "Asymmetries in the Response to Increases and Decreases in Intergovernmental Grants: Some Empirical Findings," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 15, pages 261-272, Edward Elgar Publishing.
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    Cited by:

    1. Byron F. Lutz, 2006. "Taxation with representation: intergovernmental grants in a plebiscite democracy," Finance and Economics Discussion Series 2006-06, Board of Governors of the Federal Reserve System (U.S.).
    2. Baicker, Katherine & Jacobson, Mireille, 2007. "Finders keepers: Forfeiture laws, policing incentives, and local budgets," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2113-2136, December.
    3. Franco Mariuzzo & Patrick Paul Walsh & Ciara Whelan, 2004. "EU Merger Control in Differentiated Product Industries," CESifo Working Paper Series 1312, CESifo.
    4. Marcel Thum & Thomas Fester & Andreas Kappler & Helmut Seitz, 2005. "Öffentliche Infrastruktur und kommunale Finanzen : Gutachten im Auftrag des Bundesministeriums für Verkehr, Bau- und Wohnungswesen und des Bundesamtes für Bauwesen und Raumordnung," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 37, May.
    5. Baicker, Katherine & Gordon, Nora, 2006. "The effect of state education finance reform on total local resources," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1519-1535, September.

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    More about this item

    JEL classification:

    • H0 - Public Economics - - General
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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