The Impact of Marginal Dollars on Teacher Workforce and Student Achievement: Evidence from Illinois’ Evidence-Based Funding

• In Event: The Design of School Funding Formulas: Distributional Consequences across Federal and State Policy

Abstract

Background

Illinois’ Evidence-Based Funding (EBF) formula, a school funding formula to equitably distribute state funding across districts, uses the ‘Tier’ system as its key equalizing mechanism. Districts are assigned annually to one of four Tiers based on their needs. Tiers 1 and 2 districts are considered high-needs and collectively receive 99% of all EBF funding, while Tiers 3 and 4 districts are considered adequately funded and receive a smaller share of EBF funding.

I hypothesize there is a blind spot in the design of this Tier system. As Tier assignments change every year, I assume that districts located just below or above the Tier cutoff, being vulnerable to Tier changes, may experience fiscal instability. In particular, Tiers 2 and 3 are where the amount of guaranteed state aid varies most; 99% of Tier funding goes to Tiers 1 and 2 districts, defined as high-needs under the EBF, while only 1% is allocated to Tiers 3 and 4.

Research Questions
I ask two questions: (1) What is the localized impact of marginal funding on districts’ teacher resource landscape and student achievement? (2) What is the statewide impact of annual Tier changes on districts’ teacher resource landscape and student achievement? These questions align closely with the 2026 APPAM conference theme, as they provide state-specific evidence on the impact of policy design in school funding formulas, given that these formulas are highly context-specific and heterogeneous (Handel & Hanushek, 2024; Shores et al., 2023).

Data/Method
I use statewide longitudinal public datasets from the Illinois State Board of Education (ISBE): Report Card Data, EBF Distribution Calculation, and EBF Quick Fact, which include necessary data on Illinois districts’ characteristics, financial and teacher resources. The analysis spans FY2013 to FY2025, covering the pre- and post-EBF implementation, and includes 848 districts in Illinois.

I use a multi-year regression discontinuity to estimate the Local Average Treatment Effect for the first research question, leveraging the fact that the Tier cutoff clearly determines districts’ treatment. Then, I employ an instrumental variable (IV) to estimate the statewide impact of annual Tier changes. I consider large districts (e.g., Chicago Public Schools) to be exogenous shocks. All required assumptions for each strategy are not violated.

Results
My preliminary results show a sharp jump in district funding at the Tier 2 cutoff. However, there is little to no evidence that this reduced inequities in teacher resources across districts or improved student achievement. On the other hand, the IV estimates show that annual Tier changes affect the landscape of teacher resources and lead to better student achievement.

Implications
To my knowledge, this is the first study to employ causal methods to longitudinally and quantitatively examine the impact of the EBF implementation. Given that rigorous, causal evidence on the impact of EBF remains largely unknown, this study will provide timely evidence to guide more equitable future funding decisions for EBF in Illinois, particularly as the EBF budget is growing (Illinois.gov, 2024).

Author

• Haeryun Kim, University of Illinois
  Presenting Author