Panel Paper: Assymetric Flypaper Effects: Georgia School District Responses to ARRA

Saturday, November 8, 2014 : 10:35 AM
Grand Pavilion I (Hyatt)

*Names in bold indicate Presenter

Carolyn J. Bourdeaux and Nicholas I. Warner, Georgia State University
The research on the intergovernmental grant phenomenon known as the “flypaper effect” has taken some interesting turns which have implications for the allocation of federal stimulus funds during periods of recession.  Most notable are a series of findings that there are asymmetric responses to the growth and decline of certain types of interjurisdictional grants rather than symmetric responses. The type of asymmetry varies.  Some research has found a grant increase induces growth, but a grant decrease leads to a much smaller or non-existent decline in expenditures in response. Jurisdictions replace the lost grant funds. In other cases, when grants decline, expenditures decline by an amount greater than they grew when the grant was increasing, an inducement effect.  The hope of the federal stimulus funds for education, received by most school districts between 2009-2011, was that jurisdictions would replace federal funds as they declined (and presumably state and local tax bases grew stronger).  This research examines the actual impact of the stimulus funds drawing on panel data of Georgia’s 180 school districts to examine the impact of these grants.  Preliminary findings indicate fiscal inducement rather than replacement effect, where the decreasing federal funds were not replaced by other revenues but were accompanied by even greater cuts to instructional funding.