Heterogeneous District Response to Statewide Finance Reform: Did Pennsylvania's Act 61 Reduce Cross-District Spending Inequality?
*Names in bold indicate Presenter
We employ a comparative interrupted time series (CITS) design to explore the extent to which low- and high-tax shortfall districts responded differently to the introduction of state reform, using districts without a shortfall as our comparison group. We find that increases in state aid led high-tax shortfall school districts to reduce their property tax rate, compared with no-shortfall districts. The decrease in tax effort among high-tax shortfall districts reveals that additional state support served as a substitution for rather than as a supplement to local funding. We also find that the provision of equalization aid to districts with adequacy shortfalls had no discernible effect on education spending, while also not reducing cross-district achievement disparities (and, at worst, exacerbating achievement differences between high-tax shortfall districts and no-shortfall districts by the third year of the reform). Taken together, these results indicate that the state’s finance reform effort did not reduce cross-district spending or achievement disparities.
Our findings support prior empirical evidence that, when districts’ ability to reduce their property tax rate are unconstrained by state policy, increases in state aid will be coupled with property tax relief for district residents. In doing so, equalization aid will substitute for, rather than supplement, local support of education spending. These findings have important policy implications for the current education finance climate in Pennsylvania. Our results point to the important role that district response can play in moderating the influence of additional grant aid. Indeed, if future finance reform efforts in Pennsylvania (and beyond) are dedicated to increasing district spending as well as reducing the spending gap between property rich school districts and their less advantaged counterparts, consideration must be given to both the magnitude of equalization aid provided to districts as well as maintenance of effort requirements that limit the transfer of state aid to property tax relief.