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Finance

Melissa Arnold Lyon, Joshua Bleiberg, Beth E. Schueler.

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.

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Kelli A. Bird, Benjamin L. Castleman.

Recent work highlights the challenge of scaling evidence-based educational programs. We report on a randomized controlled trial of a financial incentive program designed to increase the efficacy of a national remote college advising initiative for high-achieving students. We find substantial positive effects of the program on student engagement with college advisors; applications to well-matched colleges and universities; and review of financial aid awards. Yet treated students were no more likely to enroll at higher-quality institutions. Student survey responses suggest that institutional admissions and affordability barriers, alongside student preferences to attend institutions closer to home, explain the lack of enrollment effects.

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Reuben Hurst, Andrew Simon, Michael Ricks.

To understand the causes and consequences of polarized demand for government expenditure, we conduct three field experiments in the context of public higher education. The first two experiments study polarization in taxpayer demand. We provide information to shape beliefs about social returns on investment. Our treatments narrow the political partisan gap in ideal policies---a reduction in ideological polarization---by up to 32%, with differences in partisan reasoning as a key mechanism. Providing information also affects how people communicate their ideal policies to elected officials, increasing their propensity to write a (positive) letter to an official of the other party---a reduction in affective polarization. In the third experiment, we send these letters to a randomized subset of elected officials to study how policymakers respond to constituent demand. We find that officials who receive their constituents' demands engage more with higher education issues in our correspondences.

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Christopher D. Brooks, Matthew G. Springer.

We analyzed the proposed spending data for the American Recovery Plan’s Elementary and Secondary Emergency Relief III (ESSER III) fund from the spring of 2021 of nearly 3,000 traditional public-school districts in the United States to (1) identify trends in the strategies adopted and (2) to test whether spending strategies were observably heterogeneous across district characteristics. We found that districts proposed a breadth of spending patterns with ESSER III. Moreover, there was a clear prioritization on spending related to academic learning recovery and facilities and operations spending, with the latter being particularly emphasized in higher-poverty districts. This divergent spending pattern may have important equity implications for short-term academic learning recovery for students affected by the COVID-19 pandemic.

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Danielle Lowry, Lindsay C. Page, Aizat Nurshatayeva, Jennifer Iriti.

Award displacement occurs when one type of financial aid award directly contributes to the change in the quantity of another award. We explore whether postsecondary institutions displaced awards in response to the Pittsburgh Promise scholarship by capitalizing on the doubling of the maximum Promise amount in 2012. We use de-identified student-level data on each Promise recipient’s actual cost of attendance, grants, and scholarships, as well as demographic and academic characteristics from school district administrative files to examine whether and how components of students’ financial aid packages and total costs of attendance changed after the Promise award increase. To account for overall trends in pricing and financial aid, we compare Promise recipients to the average first-time, full-time freshman entering the same institutions in the same year as reported by the Integrated Postsecondary Education Data System (IPEDS). With these two data sources, we assess differences in costs and awards between Promise students and their peers, on average, and examine whether and in what ways these differences changed after the increase in Promise funding. We refer to this strategy as a “quasi-difference-in-differences” design. We do not find evidence that institutions are responding to the Promise increase through aid reductions.

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Jing Liu, Cameron Conrad, David Blazar.

This study provides the first causal analysis of the impact of expanding Computer Science (CS) education in U.S. K-12 schools on students’ choice of college major and early career outcomes. Utilizing rich longitudinal data from Maryland, we exploit variation from the staggered rollout of CS course offerings across high schools. Our findings suggest that taking a CS course increases students’ likelihood of declaring a CS major by 10 percentage points and receiving a CS BA degree by 5 percentage points. Additionally, access to CS coursework raises students’ likelihood of being employed and early career earnings. Notably, students who are female, low socioeconomic status, or Black experience larger benefits in terms of CS degree attainment and earnings. However, the lower take-up rates of these groups in CS courses highlight a pressing need for targeted efforts to enhance their participation as policymakers continue to expand CS curricula in K-12 education.

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Barbara Biasi, Julien Lafortune, David Schönholzer.

This paper identifies which investments in school facilities help students and are valued by homeowners. Using novel data on school district bonds, test scores, and house prices for 29 U.S. states and a research design that exploits close elections with staggered timing, we show that increased school capital spending raises test scores and house prices on average. However, impacts differ vastly across types of funded projects. Spending on basic infrastructure (such as HVAC) or on the removal of pollutants raises test scores but not house prices; conversely, spending on athletic facilities raises house prices but not test scores. Socio-economically disadvantaged districts benefit more from capital outlays, even conditioning on project type and the existing capital stock. Our estimates suggest that closing the spending gap between high- and low-SES districts and targeting spending towards high-impact projects may close as much as 25% of the observed achievement gap between these districts.

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Shelby M. McNeill, Christopher A. Candelaria.

This study investigates how individual states raise revenue to pay for elementary-secondary education spending after a school finance reform (SFR). We consider 24 states that implemented SFRs between 1989 and 2005. Using a synthetic control approach, we identify six case-study states (Arkansas, Kansas, Maryland, Michigan, New Hampshire, and Vermont) that increased and sustained education expenditures after reform. We then searched for legislative statutes that appropriated funding for increased education spending and identified how policymakers intended to fund the SFR. Five states—AK, KS, MI, NH, and VT—paid for increased education expenditures by altering tax rates and changing tax revenue sources. A common feature among these five states is that they increased their control over the management of property tax revenues.

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David Menefee-Libey, Carolyn Herrington, Kyoung-Jun Choi, Julie Marsh, Katrina Bulkley.

COVID-19 upended schooling across the United States, but with what consequences for the state-level institutions that drive most education policy? This paper reports findings on two related research questions. First, what were the most important ways state government education policymakers changed schools and schooling from the moment they began to reckon with the seriousness of COVID-19 through the first full academic year of the pandemic? Second, how deep did those changes go – are there indications the pandemic triggered efforts to make lasting changes in states’ education policymaking institutions? Using multiple-methods research focused on Colorado, Florida, Louisiana, Michigan, and Oregon, we documented policies enacted during the period from March 2020 through June 2021 across states and across sectors (traditional and choice) in three COVID-19-related education policy domains: school closings and reopenings, budgeting and resource allocation, and assessment and accountability systems. We found that states quickly enacted radical changes to policies that had taken generations to develop. They mandated sweeping school closures in Spring 2020, and then a diverse array of school reopening policies in the 2020/2021 school year. States temporarily modified their attendance-based funding systems and allocated massive federal COVID-19 relief funds. Finally, states suspended annual student testing, modified the wide array of accountability policies and programs linked to the results of those tests, and adapted to new assessment methods. These crisis-driven policy changes deeply disrupted long-established patterns and practices in education. Despite this, we found that state education governance systems remained resilient, and that at least during the first 16 months of the pandemic, stakeholders showed little interest in using the crisis to trigger more lasting institutional change. We hope these findings enable state policymakers to better prepare for future crises.

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Xi Yang, Jian Zou.

This paper studies how school spending impacts student achievement by exploiting the US interstate branching deregulation as state tax revenue shocks. Leveraging school finance data from universal school districts, our difference-in-differences estimation reveals that deregulation leads to an increase in per-pupil total revenue and expenditure. The rise in revenue is primarily attributed to higher state revenues, while the expenditure increase is more prominent in low-income school districts. Using restricted-use student assessments from the Nation’s Report Card, we find that deregulation results in improved student achievement, with no distributional effects evident across students’ ability, race, or free lunch status. We introduce an instrumental variables approach that accounts for dynamic treatment effects and estimate that a one-thousand-dollar increase in per-pupil spending leads to a 0.035 standard deviation improvement in student achievement.

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