Discussion Paper

Did Local Funding Responses to Post-Recession State Aid Cuts Vary by Property Wealth?

Abstract: In the first of this two post series, we investigated the relationship between state aid and local funding before and after the Great Recession. We presented robust evidence that sharp changes in state aid brought about by the prolonged downturn influenced local budget decision-making. More specifically, we found that relative to the pre-recession relationship, a dollar decline in state aid resulted in a $0.19 increase in local revenue and a $0.14 increase in property tax revenue in New York school districts. In this post, we dive deeper to consider whether there were variations in this compensatory response across school districts, using an approach described in our recent study. For example, one might expect that there would be differences in willingness and ability to offset cuts in state aid across districts with varying levels of property wealth, which in turn might lead to differences in responses. Was this really the case?

Keywords: state funding; property tax; Education Finance; local revenue;

JEL Classification: Q1;R1;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2014-11-12

Number: 20141112