School Spending and Student Outcomes: Evidence from Revenue Limit Elections in Wisconsin
65 Pages Posted: 6 Aug 2019 Last revised: 7 Nov 2019
Date Written: November 5, 2019
This study examines the causal impact of additional school spending on student outcomes. State-imposed revenue limits cap the total amount of revenue that a school district in Wisconsin can raise. If a district wishes to exceed this cap, it must hold a local referendum. I leverage close elections in a dynamic regression discontinuity framework to identify the impact of additional spending on educational outcomes. Importantly, Wisconsin law requires school districts to hold separate referenda for operational purposes (e.g., instruction and support services) and for bond issues targeted to fund school facility investments. This allows me to estimate the independent effects of additional operational and capital expenditures. I find that narrowly passing an operational referendum leads to a 5% increase in per-pupil spending. Districts allocate most of these additional resources to instruction, yielding increases in teacher experience and compensation, and reductions in class sizes and teacher turnover. Increases in operational funds result in a 25% reduction in the dropout rate, an increase in test scores of approximately 30% of a standard deviation, and a 15% increase in postsecondary enrollment. In contrast, narrowly approving a bond referendum leads to a sharp and immediate increase in capital outlays. These additional funds are primarily used to repair, maintain, or upgrade existing structures and are not associated with improvements in student outcomes.
Keywords: School Spending, Student Outcomes, Dynamic Regression Discontinuity
JEL Classification: H0, H41, H75, I20, I22, I24, I28, J24
Suggested Citation: Suggested Citation