How State Takeovers of School Districts Affect Education Finance, 1990 to 2019

April 2024

State takeover of school districts—a form of political centralization that shifts decision-making power from locally elected leaders to the state—has increased in recent years, often with the purported goal of improving district financial condition. Takeover has affected millions of students throughout the U.S. since the first takeover in 1988 and is most common in larger districts and communities serving large shares of low-income students and students of color. While previous research finds takeovers do not benefit student academic achievement on average, we investigate whether takeovers achieve their goal of improving financial outcomes. Using an event study approach, we find takeovers from 1990 to 2019 increased annual school spending by roughly $2,000 per pupil after five years, on average, leading to improvements in financial condition. Increased funding came primarily from state sources and funded districts’ legacy costs. However, takeover did not affect spending for districts with majority-Black student populations—which are disproportionately targeted for takeover—adding to a growing literature suggesting that takeover unequally affects majority-Black communities.

Keywords

centralization and decentralization, state takeover, fiscal federalism, education finance, fiscal condition, governance shifts

Education level

K-12 Education

Topics

Staffing, Finance, and Operations