Howard Rosenthal (NYU, Department of Politics) presents The Twilight of the Setter? Local Public School Finance in a Time of Institutional Change (with Sean Corcoran (NYU, School of Culture, Education, and Human Development) & Thomas Romer (Princeton, Woodrow Wilson School of Public and International Affairs)) at UCLA today as part of its Tax Policy and Public Finance Colloquium hosted by Jason Oh, Kirk Stark, and Alexander Wu:
The operation and financing of primary and secondary public schools in the US is highly decentralized. Most of the budget of each of the 13,000+ school districts comes from a combination of local and state revenues. State constitutions and statutes determine the degree of local district autonomy and scope of taxing power.
As part of an ongoing project on the political economy of education finance, this paper reports on some developments in school spending in one state during a time when some of the state’s constitutional rules governing local school district taxing powers changed. In part, the paper provides a replication of tests of a model of bureaucratic agenda-setting in the financing of elementary and secondary public education.
In that agenda-setting model, a budget-maximizing agenda setter makes a proposal for a locally funded operating levy that must be approved by a referendum. In the basic model, the referendum is modeled as an ultimatum game where the agenda setter makes a take-it-or leave-it proposal to some pivotal voter. If a majority of the electorate rejects the proposal, the levy is an exogenously specified reversion level. The optimal, budget-maximizing proposal makes the pivotal voter indifferent between the proposal and the reversion. If the reversion is less than the most preferred level of spending of the pivotal voter, spending will be higher than this most preferred level. Hence, for low reversions, spending would exceed the level predicted by a median voter model (Romer and Rosenthal, Pub. Choice 1978, QJE 1979).
The original tests of this model used data from K-12 Oregon school districts with enrollments greater than 200 students for the school year 1971-72. The basic result was that a low reversion raised levies by as much as15 percent. More detailed results, e.g., about the situation in high-reversion districts, and the pattern of proposals and voting in referenda were also consistent with the model (Romer and Rosenthal, Econ. Inq. 1982; Filimon, Romer, and Rosenthal, J. Pub. Ec. 1982). We present here a replication of some of that earlier work using data for the 1982-83 through 1990-91 school years. During the first five years of that period, the constitutionally-defined rules were essentially the same as they were in 1971-72. Midway through the 1980s, the rules were changed, so the latter part of the period allows us to look at the response of districts to the changes.