Impact of School Finance Reform on Resource Equalization and Academic Performance: Evidence from Michigan

Princeton University, Eduation Research Section Working Paper No. 8

50 Pages Posted: 9 Dec 2004

See all articles by Joydeep Roy

Joydeep Roy

Economic Policy Institute; Georgetown University

Date Written: October 2003

Abstract

The state of Michigan radically altered its school finance system in 1994. This was a legislature-led reform that took place somewhat unexpectedly and without the intervention of any courts. The new plan, called Proposal A, significantly increased state aid to the lowest spending districts and limited future increases in spending in the richest ones. I investigate the impact of Proposal A on distribution of resources and educational outcomes in Michigan. In the process this paper offers a first detailed look at the effectiveness of a legislature-led school finance reform. Using panel data on Michigan K-12 districts from 1990 to 2001, I find that Proposal A was quite successful in reducing inter-district spending disparities. The effect on academic performance is more modest. Though there is evidence of significant gains by the lowest spending districts in state tests, as yet these do not show up in nationwide tests like NAEP and ACT. The results are largely unchanged when I use Indiana and Ohio as control states.

Keywords: School Finance, Inequality and Redistribution, Academic Performance

JEL Classification: H4, H7, I2

Suggested Citation

Roy, Joydeep, Impact of School Finance Reform on Resource Equalization and Academic Performance: Evidence from Michigan (October 2003). Princeton University, Eduation Research Section Working Paper No. 8. Available at SSRN: https://ssrn.com/abstract=630121 or http://dx.doi.org/10.2139/ssrn.630121

Joydeep Roy (Contact Author)

Economic Policy Institute ( email )

1660 L Street NW, Suite 1200
Washington, DC 20036
United States
617 832 5626 (Phone)
703 465 0992 (Fax)

Georgetown University ( email )

Washington, DC 20057
United States

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