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Finance

Christopher A. Candelaria, Shelby M. McNeill, Kenneth A. Shores.

School finance reforms are not well defined and are likely more prevalent than the current literature has documented. Using a Bayesian changepoint estimator, we quantitatively identify the years when state education revenues abruptly increased for each state between 1960 and 2008 and then document the state-specific events that gave rise to these changes. We find 108 instances of abrupt increases in state education revenues across 43 states; about one-quarter of these changes had been undocumented. Half of the abrupt increases that occurred post-1990 were preceded by litigation-prompted legislative activity, and Democrat-party control of a state increases the probability of a changepoint occurring by 8 percentage points.

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Min Sun, Christopher A. Candelaria, David Knight, Zachary LeClair, Sarah E. Kabourek, Katherine Chang.

Knowing how policy-induced salary schedule changes affect teacher recruitment and retention will significantly advance our understanding of how resources matter for K-12 student learning. This study sheds light on this issue by estimating how legislative funding changes in Washington state in 2018-19—induced by the McCleary court-ordered reform—affected teacher salaries and labor market outcomes. By embedding a simulated instrumental variables approach in a mixed methods design, we observed that local collective bargaining negotiations directed new state-level funding allocations toward certificated base salaries, particularly among more senior teachers. Variability in political power, priorities, and interests of both districts and unions led to greater heterogeneity in teacher salary schedules. Teacher mobility rate was reduced in the first year of the reform, and subsequently new hiring rate was reduced in the second year. Suggestive evidence indicates that a $1,000 salary increase would have larger effects on junior teachers’ hiring and their transfers between districts to a greater extent than late-career teachers.

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David S. Knight, Pooya Almasi, JoLynn Berge.

In this forthcoming book chapter, the authors provide an in-depth description of the history and current issues pertaining to public school finance in Washington State, including how recent federal stimulus funding impacted resource levels. The state uses a resource-based funding model, where the amount of funds each school district receives is based on the district’s enrollment level and a series of staffing ratios and salary schedules. In contrast, most U.S. states use a simpler, dollar-based funding formula that determines district funding levels using a per-student dollar amount. Dollar-based funding models typically include student weights that drive more state funds to school districts with greater need. Washington’s resource-based model does not have weights and provides approximately equal per-pupil state funding regardless of local need. When combined with the state’s local tax revenues, Washington’s K-12 finance system provides higher per-pupil funding levels to districts serving wealthier student populations. The system creates racial funding gaps that systematically disadvantage Latinx and Pacific Islander students. Federal COVID-19 stimulus funds were allocated progressively with respect to student income level; however, these funds are temporary, and districts may need to reduce budgets or identify additional funds once the federal stimulus is expended. The chapter concludes with recommendations for further reading.

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Cory Koedel, Trang Pham.

We study the conditional gender wage gap among faculty at public research universities in the U.S. We begin by using a cross-sectional dataset from 2016 to replicate the long-standing finding in research that conditional on rich controls, female faculty earn less than their male colleagues. Next, we construct a data panel to track the evolution of the wage gap through 2021. We show that the gap is narrowing. It declined by more than 50 percent over the course of our data panel to the point where by 2021, it is no longer detectable at conventional levels of statistical significance.

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Tammy Kolbe, Elizabeth Dhuey, Sara Menlove Doutre.

The formula used to allocate federal funding for state and local special education programs is one of the Individual with Disabilities Act’s most critical components. The formula not only serves as the primary mechanism for dividing available federal dollars among states, it also represents policymakers’ intent to equalize educational opportunities for students with disabilities nationwide. In this study, we evaluate the distribution of IDEA Part B(611) funding in the wake of changes to the formula that were instituted at the law’s 1997 reauthorization. We find that the revised formula generated large and concerning disparities among states in federal special education dollars. We find that, on average, states with proportionally larger populations of children and children living in poverty, children identified for special education, and non-White and Black children receive fewer federal dollars, both per pupil and per student receiving special education. We present policy simulations that illustrate how changes to the existing formula might improve the fairness and efficiency with which federal IDEA Part B funding is allocated to states.

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Dan Goldhaber, Cyrus Grout, Kris Holden, Josh B. McGee.

Over the last two decades, twenty-two states have moved away from traditional defined benefit (DB) pension systems and toward pension plan structures like the defined contribution (DC) plans now prevalent in the private sector. Others are considering such a reform as it is seen as a means of limiting future pension funding risk. It is important to understand the implications of such reforms for end-of-career exit patterns and workforce composition. Empirical evidence on the relationship between pension plan structure and retirement timing is currently limited, primarily because, most state pension reforms are so new that few employees enrolled in those alternative plans have reached retirement age. An exception, and the subject of our analysis, is the teacher retirement system in Washington State, which introduced a hybrid DB-DC plan in 1996 and allowed employees in its traditional DB plan to transfer into the new plan. Our analysis focuses on a years-of-service threshold, the crossing of which grants employees early retirement eligibility and, in many cases, a large upward shift in retirement wealth. The financial implications of crossing this threshold are far greater under the state’s traditional DB plan than under the hybrid plan. We find that employees are responsive to crossing the years-of-service threshold, but we fail to find significant evidence that the propensity to exit the workforce varies according to plan enrollment.

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Maxwell J. Cook, Cory Koedel, Michael Reda.

We estimate the education and earnings returns to enrolling in technical two-year degree programs at community colleges in Missouri. A unique feature of the Missouri context is the presence of a highly-regarded, nationally-ranked technical college: State Technical College of Missouri (State Tech). Compared to enrolling in a non-technical community college program, we find that enrolling in a technical program at State Tech greatly increases students’ likelihoods of graduation and earnings. In contrast, there is no evidence that technical education programs at other Missouri community colleges increase graduation rates, and our estimates of the earnings impacts of these other programs are much smaller than for State Tech. Our findings exemplify the importance of institutional differences in driving the efficacy of technical education and suggest great potential for high-quality programs to improve student outcomes.

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Kenneth A. Shores, Matthew P. Steinberg.

We synthesize and critique federal fiscal policy during the Great Recession and Covid-19 pandemic. First, the amount of aid during both crises was inadequate to meet policy goals. Second, the mechanisms used to distribute funds was disconnected from policy goals and provided different levels of aid to districts with equivalent levels of economic disadvantage. Third, data tools are missing making it difficult to understand whether funds were used to meet policy goals. Details for these results are provided along with policy recommendations.

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William A. Fischel.

This article reviews the development of my thesis that the California Supreme Court's Serrano decisions, which began in 1971 and sought to disconnect district school spending with local property taxes, led to the fiscal conditions that caused California voters to embrace Proposition 13 in 1978, which radically undermined the local property tax system. I submit that my thesis is most likely true because of Proposition 13’s durability and the absence of alternative explanations that account for its longstanding power over California politics. The article then circles back to John Serrano himself. I want to respectfully suggest that John’s views about the role of public education and my own have more in common than might be suspected. At the very least I want to correct the impression that John supported Proposition 13, which was suggested by the title of my last full article about this topic.

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Virginia S. Lovison, Cecilia H. Mo.

While investing in the teacher workforce is central to improving schools, school resources are notoriously limited, forcing school leaders to make difficult decisions on how to prioritize funds. This paper examines a critical input to resource allocation decisions: teacher preferences. Using an original, online discrete choice survey experiment with a national sample of 1,030 U.S. teachers, we estimate how much teachers value different features of a hypothetical teaching job. The findings show that (a) teachers value access to special education specialists, counselors, and nurses more than a 10% salary increase or 3-student reduction in class size, (b) investments in school counselors and nurses are strikingly cost-effective, as the value teachers alone place on each of these support roles far exceeds the per teacher cost of funding these positions, and (c) teachers who are also parents treat a 10% salary increase and a child care subsidy of similar value as near perfect substitutes. These novel estimates of teachers’ willingness to pay for student-based support professionals challenge the idea that inadequate compensation lies at the root of teacher workforce challenges and illustrate that reforms that exclusively focus on salary as a lever for influencing teacher mobility (e.g. transfer incentives) may be poorly aligned to teachers’ preferences.

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