The Impact of School District Fiscal Distress Labels on Private Contribution and Nonprofit Revenues

• In Event: Performance Management under Fiscal Distress

Abstract

Numerous state governments use fiscal labeling systems to communicate the financial health of school districts to stakeholders. Existing research has found that such systems increase the likelihood of passing tax referendums and affect housing prices, while evidence of impacts on student achievement is mixed. However, whether fiscal distress labels affect private contributions flowing into districts or the revenues of education-supporting nonprofits remains unexamined, despite research showing the important role private revenue sources play in educational equity. This paper examines how private revenues respond to public school district fiscal stress labels. We analyze two related outcomes: (1) the private contribution revenues received by labeled districts, capturing support from individuals, nonprofits, and other private entities, and (2) the revenues of education-supporting nonprofits, such as parent-teacher groups and booster clubs, operating within labeled districts. The direction of the effect is theoretically ambiguous. Labels may mobilize private revenue toward distressed districts or prompt substitution toward nonprofits perceived as more efficient providers. Conversely, labels may signal financial mismanagement and decrease private giving to schools or nonprofits that support them.To address this question, we study Ohio school districts from 2006 through 2019, using fiscal stress designations from the Ohio Department of Education, district-level data from the NCES Common Core of Data, and IRS Form 990 filings for education-related nonprofits. We estimate difference-in-differences models that account for heterogeneous treatment effects, combined with matching, by constructing comparison groups of unlabeled districts and proximate nonprofits similar to treated units based on treatment propensity and administrative data that establishes peer school districts. Preliminary results from regressing district private contribution revenue on fiscal label status do not find evidence of an impact on this source of revenue. District-level results controlling for relevant factors, or results for the broader set of education-supporting nonprofits, are not yet available. This study extends the fiscal labeling literature beyond voters and home buyers to the private stakeholders who play an important role in financing education. By jointly examining district private contributions and nonprofit-sector spillovers, it provides evidence on how a state informational intervention targeting public entities impacts private resource flows. The findings aim to inform ongoing debates about the interdependence of public and nonprofit finance in education.

Author

• Alex Combs, University of Georgia
  Presenting Author