We leverage a discontinuity in Texas’s school finance policy granting additional revenue to geographically larger districts based on an arbitrary cutoff of 300 square miles. We use this exogenous increase in revenue to explore how districts spend additional discretionary funds, and to test whether these additional funds improve student outcomes. We employ two empirical strategies, regression discontinuity (RD) and instrumental variables (IV), to verify results. We find that a 10% increase in per-pupil expenditures improves district reading scores by approximately 0.15 standard deviations, and increases the share of students passing the state exam in reading by 1.1 percentage points. Effects on math scores are positive, although smaller and not consistently different from zero. A subsequent analysis of budget allocations reveals that districts receiving additional revenue as a result of the policy increase budget shares roughly in equal proportions across spending categories, suggesting that additional funds are not targeted toward any specific input. We conclude that while to some degree “money matters” in education, the potential impacts of increased funding may be limited by districts’ capacity to acquire or allocate resources effectively.