How Local Economic Conditions Affect School Finances,Teacher Quality,and Student Achievement: Evidence from the Texas Shale Boom

Whether improved local economic conditions lead to better student outcomes is theoretically ambiguous and will depend on how schools use additional revenues and how students and teachers respond to rising private sector wages. The Texas boom in shale oil and gas drilling, with its large and localized effects on wages and the tax base, provides a unique opportunity to address this question that spans the areas of education, labor markets, and public finance. An empirical approach using variation in shale geology across school districts shows that the boom reduced test scores and student attendance, despite tripling the local tax base and creating a revenue windfall. Schools spent additional revenue on capital projects and debt service, but not on teachers. As the gap between teacher wages and private sector wages grew, so did teacher turnover and the percentage of inexperienced teachers, which helps explain the decline in student achievement. Changes in student composition did not account for the achievement decline but instead helped to moderate it. The findings illustrate the potential value of using revenue growth to retain teachers in times of rising private sector wages.     

Who Gains from Charitable Tax Credit Programs? The Arizona Model

The Bush administration and some states have promoted charitable tax credits as a way to increase private charitable giving, to support antipoverty programs, and to allow taxpayers to directly determine the utility and effectiveness of nonprofit services. Looking at Arizona's charitable tax credit program, this study assesses the strengths and limitations of this policy approach. Although charitable giving increased during the first two years of the program (1998 and 1999), tax returns from 2000 suggest it may be difficult to sustain these gains in a weak economy. Larger and better-known nonprofits and taxpayers who itemize their returns are the primary beneficiaries of the program. The program may put small but well-run organizations at a competitive disadvantage, weaken accountability in the sector, and pose administrative challenges to state departments of revenue. This analysis suggests that tax credits are not a panacea for the funding needs of nonprofits.     

Public Subsidies for Private Schooling: A Comparative Analysis of Argentina and Chile

Argentina and Chile have long-standing policies that award public subsidies to private schools. This article compares the academic outcomes of seventh- and eighth-graders in public and private schools in each country. Three types of private schools are analyzed: Catholic schools that are subsidized by the government, nonreligious schools that are subsidized, and private schools that receive no subsidies. Ultimately, the analyses suggest a mixed portrait of private school effectiveness, in which Catholic schools have the most consistent links to achievement. Nonreligious subsidized schools in Chile, often operated by for-profit corporations, produce outcomes no different from public schools.     

Private Schools and the Parents that Choose Them: Empirical Evidence from the Danish School Voucher System

Research on the effect of school choice on student performance has generally been based on small-scale experiments or comparisons of Catholic and public schools in the United States. Recent studies indicate, however, that the market competition stemming from school vouchers does not affect all private schools equally. This study makes use of individual-level register data on the performance of more than 30,000 students in Denmark, where private schools have been voucher-financed for more than 100 years, while public schools are governed and financed by the politico-administrative system. Using an instrumental variable model to exclude selection effects, the results show no significant average effect of private schooling on final examination scores. However, a multilevel model shows that private schools of high socio-economic status perform better than similar public schools, while private schools of low socio-economic status under-perform – even for individual students with high socio-economic status. This indicates that the institutional setting of a voucher system is not enough to raise educational performance in general, arguably because some parents choose schools on the basis of non-academic criteria.     

Local government grants and income tax revenue: Redistributive politics in Norway 1900–1990

An important aspect of the welfare state is public provision of private goods, primarily education and health care. In Norway the provision of these services has been organized through the local public sector. The development of the welfare state has to a large extent been the development of welfare communes. The important revenue sources of the local and county governments, grants and income tax revenue, have been controlled nationally, and the paper addresses the determinants of these revenues during 1900–1990. The approach combines a demand model of local public services emphasizing price and income-elasticities with a political economy model of central government ideology and strength. The decision making is understood as bargaining between the government and interest groups, and the political structure consequently is of importance for the policy outcome. The analysis shows how politics matter, and the results indicate that a minority coalition government implies 30% more grant and income tax revenue to local and county governments than one party majority in the long run.     

The Role of Philanthropy in Local Government Finance

Nonprofit organizations thrive on the altruism of citizens, and actively court donors for major gifts. Yet individual gifts to government agencies are often unexpected, sporadic, and initiated by the donor. This article introduces the phenomenon of private giving to local governments and tests hypotheses regarding the expected forms of giving to public agencies. Results indicate that philanthropy is and will likely remain a minor and highly variable source of revenue, making it an ill‐suited replacement for broad‐based tax revenue. However, deliberate government efforts to provide a suitable environment for private donations appear to succeed in attracting more gifts per capita.     

Vouchers and voting: An initial estimate based on the median voter model

One of the major concerns associated with school voucher proposals is that they will only benefit those who leave public schools in favor of private schools. The children left behind in public schools are expected to necessarily be made worse off by such policies. This paper provides evidence suggesting that children left behind in public schools will also benefit. The available evidence suggests that, after a voucher plan, voter support for public schools will rise enough to increase the human capital of public school students, despite the presence of negative peer group effects.     

Impact of the Indiana Choice Scholarship Program: Achievement Effects for Students in Upper Elementary and Middle School

This paper examines the impact of the Indiana Choice Scholarship Program on student achievement for low‐income students in upper elementary and middle school who used a voucher to transfer from public to private schools during the first four years of the program. We analyzed student‐level longitudinal data from public and private schools taking the same statewide standardized assessment. Overall, voucher students experienced an average achievement loss of 0.15 SDs in mathematics during their first year of attending a private school compared with matched students who remained in a public school. This loss persisted regardless of the length of time spent in a private school. In English/Language Arts, we did not observe statistically meaningful effects. Although school vouchers aim to provide greater educational opportunities for students, the goal of improving the academic performance of low‐income students who use a voucher to move to a private school has not yet been realized in Indiana.     

Private and public choices in public education: An investigation of trustee effects

The paper applies the concepts of the horizon problem, agency costs, monitoring, and special interest incentives to trustee management of public schools and higher education. We examine whether South Carolina's 1984 Education Improvement Act, a major restructuring of educational organization and spending in South Carolina, is related to the ratio of pupils in private versus public schools. We employ 30 years of county level data in South Carolina, and we uncover several things. There is no statistically credible relation between public school expenditures per pupil and the private school/public school enrollment ratio. However, we do find that the directed changes in rules, organizational structure, and incentives mandated by the 1984 Educational Improvement Act are associated with a reduction in the relative number of children attending private school. We interpret this to mean that the features of the law requiring better accountability and the like were perceived by parents to make for better education while the increased money spent was only a transfer to teachers or some other groups; we find that organization matters more than money.     

Choice in a World of New School Types

As school choice options have evolved over recent years, it is important to understand what family and school factors are associated with the enrollment decisions families make. Use of restricted‐access data from the Early Childhood Longitudinal Study allowed us to identify household location from a nationally representative sample of students and to match households to the actual schools attended and other nearby schools. This matching is significant as previous research generally has not been able to link individual households to school enrollment decisions. Using these data, we examined the role that socioeconomic status, race, and ethnicity play in school enrollment decisions. One of our more interesting results suggests that the newest public alternative, charter schools, attracts families with higher socioeconomic status than those that traditional public schools attract. The attraction of charter schools, however, unlike traditional public schools, appears to be racially and ethnically neutral. Families do not choose a charter school because of its racial or ethnic composition, nor do race and ethnicity within a household influence its choice of charter schools. Other socioeconomic factors influencing charter school choice are more similar to factors explaining private school choice than to those factors explaining the choice of traditional public schools. The findings suggest that policies governing the design of charter schools should focus on broader socioeconomic diversity rather than race only.     

The Fiscal Impact of Federal and State Aid to Large U.S. Cities: An Empirical Analysis of Budgetary Response

This article examines four types of aid programs to thirty-nine large U.S. cities federal revenue sharing, federal categorical aid, state general aid, and state categorical aid. The central finding is that there is significant variation in the magnitude of property tax reduction resulting from different types of state general aid. Property tax credits and exemptions are less effective approaches in reducing local property taxes than are state lump-sum aid or city use of piggybacked taxes Categorical state and federal aid mostly fund additional city spending and have small but important stimulative effects on the revenue side These results suggest that differences in the design of aid programs have important implications for their fiscal impact and their effectiveness in reducing property taxes.     

Voter Responses to Referenda Seeking to Exceed Revenue Limits

Following voter approval of California's Proposition 13, a body of research has attempted to explain referenda outcomes aimed at restricting public sector tax and spending authority. Evaluating the determinants of voter attitudes toward referenda to exceed spending/revenue limits, however, has received little attention. Using data for all Wisconsin school districts, we examine the outcomes of referenda to exceed revenue caps. A key finding of our research is that when voters support bonding for capital expenditures, they tend also to approve referenda to override revenue limits. This enables school districts to cover new operating costs often associated with new capital projects.     

Taxation by Citation? Exploring Local Governments’ Revenue Motive for Traffic Fines

Anecdotal evidence suggests that local governments may have a revenue motive for traffic fines, beyond public safety concerns. Using California's county-level data over a 12-year period, this article shows that counties increased per capita traffic fines by 40 to 42 cents immediately after a 10 percentage point tax revenue loss in the previous year; however, these counties did not reduce traffic fines if they experienced a tax revenue increase in the previous year. This finding indicates that county governments probably view traffic fines as a revenue source to offset tax revenue loss, but not as a revenue stabilizer to manage revenue fluctuation. This article also finds that low-income and Hispanic-majority counties raised more traffic fines. Counties that generated more revenue from the hotel tax—a tax typically paid by travelers and visitors—raised more traffic fines, indicating a possible tax-exporting behavior by shifting the traffic fine burden to nonlocal drivers.     

How Quickly Do Corporations Respond to Changes in Tax Law? Evidence fromthe California Manufacturer's Investment Credit

An understanding of the timing of firm response to changes in corporate tax law is vital for accurately estimating the revenue impact of pending corporate tax legislation. Unfortunately, the literature does not contain any standard references describing the actual responses of firms to tax law changes. The recent adoption of California's Manufacturer's Investment Credit provides a unique opportunity to study how corporations adjust their tax payments in response to changes in tax law. For background, it is shown that even in the absence of law changes many corporations overpay on their estimated taxes, perhaps because of transactions costs or agency problems. Analysis of corporate tax payments indicates that taxpayers did adjust their estimated tax payments in response to the introduction of California's MIC, but that their response fell short of the response predicted by the zero transactions cost, perfect information model of the firm. Furthermore, firms whose MIC credit was large relative to their pre-MIC tax liability were less adept at adjusting to the law change than were firms for whom the MIC was relatively less important. As a result, the revenue loss to the State of California for 1995 tax year MIC credits is estimated to be spread out over four fiscal years.     

Educational vouchers: Effectiveness,choice, and costs

Most of the policy discussion on the effects of educational vouchers has been premised on theoretical or ideological positions rather than evidence. This article analyzes a substantial body of recent empirical evidence on achievement differences between public and private schools; on who chooses and its probable impact on educational equity; and on the comparative costs of public and private schools and an overall voucher system. The findings indicate that: (1) results among numerous studies suggest no difference or only a slight advantage for private schools over public schools in student achievement for a given student, but evidence of substantially higher rates of graduation, college attendance, and college graduation for Catholic high school students; (2) evidence is consistent that educational choice leads to greater socioeconomic (SES) and racial segregation of students; and (3) evidence does not support the contention that costs of private schools are considerably lower than those of public schools, but the costs of an overall voucher infrastructure appear to exceed those of the present system.     

Competition, expenditures and student performance in mathematics: A comment on Couch et al.

In a recent issue of this journal (August, 1993), Couch et al. find that competition, as measured by the percentage of school-age children in a county who attend private schools, increases student performance in public schools. In addition, they find that school expenditures are positive and significant, although only marginally significant, in terms of influence on student performance. This paper extends the work by Couch et al. in two ways. First, this paper defines competition so as to include the effects of other public schools as well as private schools on student performance. Second, this paper explores the simultaneity of student performance and expenditures within the model formulation. Evidence presented suggests (1) that competition, as measured by other public schools and private schools, increases student performance, and (2) that empirical studies in this area need to recognize the simultaneous relationship between student performance and expenditures.     

Private tax collection—remnant of the past or a way forward? Evidence from rural Uganda

This article examines the growing role and impacts of private tax collection under fiscal decentralisation in Uganda. Based on evidence from six rural councils, three aspects of privatised tax collection are examined: (i) the impact on the nature of fiscal corruption; (ii) the problem of overzealous collection; and (iii) the challenge of assessing revenue potentials. While possibly meeting short‐term demands for local revenue growth and stability, the present form of private tax collection appears to transform the nature of fiscal corruption by reducing corruption at collection point and transferring the problem into the district administration. Moreover, while the charge of overzealousness permeates historical and theoretical work on privatised tax collection, the Ugandan experience casts doubt on its general validity. Instead, perverse distributional effects are the most likely cause of deteriorating state‐citizen relations in rural Uganda. Finally, the article considers the merit of the prediction of private collection as a preferred contractual choice for certain indirect taxes, suggesting that problems of asymmetric information in assessing the revenue yields of most rural markets are exaggerated. Copyright © 2006 John Wiley & Sons, Ltd.     

An Evaluation of the Recent Move to Centralize the Finance of Public Schools in Michigan

This article examines Michigan's 1994–95 shift from its system of K–12 public education being funded largely by local property taxes, to it being funded predominately by statewide revenue sources. We briefly describe events that led up to the adoption of Michigan's school finance reform and then go into some detail about the tax and revenue-sharing specifics. Since the structure of Michigan's school finance reform is complex, somewhat unique, and likely to be considered as a model for other states to duplicate, this examination will assist policy analysts and policymakers throughout the United States. Other states considering similar reforms will benefit from the simulations we provide with regard to the likely long-run results of Michigan's school finance reform.     

The effects of state R&D tax credits in stimulating private R&D expenditure: A cross‐state empirical analysis

This is a cross‐state empirical study which examines the effects of state research and development (R&D) tax credits on private R&D expenditure in the states. Other explanatory variables include federal R&D subsidies, public services in higher education and R&D‐targeted programs as well as other control variables. The statistical result shows that the establishment of state R&D credit programs is effective in stimulating more industrial R&D expenditure. In addition, state services in higher education and R&D‐targeted programs also matter in private decision of R&D investment. This policy assessment sends a positive message to state policymakers because it shows the great potential in using R&D policy instruments to promote innovation‐based economic development. © 2005 by the Association for Public Policy Analysis and Management     

Dynamic selection effects in means‐tested,urban school voucher programs

Much of the controversy surrounding school vouchers, and privatization schemes generally, stems from concerns about social stratification. This paper identifies the form and magnitude of selection effects in a means‐tested New York City voucher program. It compares students who applied for vouchers, with the eligible population of public‐school students; those who initially used vouchers, with those who declined them; and those who remained in private schools, with those who eventually returned to public schools. Differences along the lines of ethnicity, residential mobility, mother's education, and income are observed. In addition, specific aspects of a child's education—parental satisfaction, school uniform requirements, and larger class sizes—all increased the length of time voucher students remained in private schools. Throughout the program's life span, however, the largest and most consistent effects revolved around families' religious identity and practices. © 2004 by the Association for Public Policy Analysis and Management.