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Title:The effect of mandated state education spending on total local resources PDF Logo
Authors:Baicker, Katherine
Gordon, Nora
Issue Date:2004
Series/Report no.:CESifo working papers 1275
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.
Subjects:school finance equalization
state and local public finance
JEL:I22
H72
H52
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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