Association for Public Policy Analysis & Management

In 2009, as a consequence of the American Recovery and Reinvestment Act (ARRA) the share of total K-12 funding borne by the federal government suddenly shifted upwards, increasing by roughly 50% of the baseline level over a four year period, and then back down. The effect of federal funding on local education is complex, because it involves layers of strategic responses by state and local governments, as they decide how internal spending should respond to increased federal resources. While a great deal of attention in the literature has been given to state finance reforms and its ability to equalize local spending (Card and Payne, 2002), the effectiveness of federal programs which have multiple levels of response is less well understood.

Previous work in this subject has primarily focused on Title I funding, meant to target low income students. Cascio, Gordon and Reber (2013) and Gordon (2004) both find short term effects from increasing Title I funds.  The 2009 ARRA expansion included an expansion of not only Title I, but also Special Education Funding as well as the creation of a new federal financial support program.

In this work I exploit formulaic non-linearities while controlling for other ARRA funds and local economic conditions to assess the effects of this federal expansion at both the state and district levels. I find that due to the transient nature of the funding, teacher employment changed very little in response to additional federal funds, but federal funds have a direct effect on instructional support employment.

References

Card and Payne. 2002. School finance reform, the distribution of spending, and the distribution of student test scores. Journal of Public Economics 83, no. 1:49-82.

Cascio, Gordon, and Reber. 2013. Local responses to federal grants: Evidence from Title I in the south. American Economic Journal: Economic Policy 5, no. 3:126–159.

Gordon, Nora. 2004. Do federal grants boost school spending? Evidence from Title I. Journal of Public Economics 88, no. 9:1771-1792.