The Politics of School Finance Reform

• In Event: Laboratories of Democracy: Advances in Policy Diffusion Research

Abstract

Research demonstrates that school finance reforms increase educational spending in low-income districts and student outcomes (Candelaria & Shores, 2019; Jackson, Johnson, & Persico, 2016; Lafortune, Rothstein, & Schanzenbach, 2018). SFRs also cause changes in state taxation and the allocation of state expenditures, placing additional tax burdens on high-income households while allocating those funds to lower-income school districts (Liscow, 2018). The courts have resisted implementation of SFRs in many cases. Suits have been filed in 45 states, but only 26 states have implemented SFRs since 1990. Our goal in this paper is to try to understand why some states successfully implemented reforms and others did not. In particular, we are interested in whether the passage of SFRs is preceded or succeeded by changes in citizen ideology and legislative composition.

There are reasons to believe that SFR timing and implementation is correlated with political trends. First, to raise funds, especially for low-income districts, SFRs require state-level higher taxation or redistributive spending. Because changes in state fiscal policies are linked with the partisan balance of states governments (Barrilleaux, Holbrook, & Langer, 2002; Nicholson-Crotty, Theobald, & Wood, 2006), SFRs likely benefit from prior changes in the political composition of the state legislature. Second, pursuit of an SFR is initiated either through court order or legislative action; the reforms, therefore, are influenced by the political composition of state governments. This is most obvious with legislative reforms or court-mandated reforms in states where high-court justices are appointed by governors or selected in statewide partisan elections. However, even SFRs resulting from nonpartisan judicial elections may be influenced by political dynamics, since these judicial elections are impacted by partisan voting and polarization (Hutt, Klasik, & Tang, 2020; Kritzer, 2015; McLeod, 2012; Rock & Baum, 2010). Regardless, in states where SFRs are initiated by nonpartisan judicial electors, a legislative statute is still needed to implement these changes; thus, those SFRs that are enacted and effective are more likely to require legislative support. Taken together, we hypothesize that an SFR implementation is likely the result of either gradual changes or shocks to the state’s political composition.

While there are reasons to believe SFRs are preceded by changes in state-level politics, there is a further question as to whether SFR legislation results in changes to the political system. First, if SFRs are implemented in an environment of changing political composition that is disconnected from commensurate changes in citizen ideology, SFR implementation may result in voter displeasure. Second, because SFRs can raise taxes and allocate revenues in ways that disadvantage those in high-income districts, these policies may be resisted by elites who can then influence state political outcomes (Albertus & Menaldo, 2014; Gilens & Page, 2014). Taken together, this suggests two conditions in which an SFR would result in changes to state political composition: (1) passage of an SFR occurred in an environment in which citizen preferences for liberal economic policies was unchanging, and (2) SFR implementation coincided with a broader suite of liberal economic legislation, which motivated further elite political action.
To examine the potential political precursors and consequences of SFRs, we compile and update a list of SFRs for the period from 1990 to 2014 and merge this list to different data sources describing a state’s ideological (Caughey & Warshaw, 2018) and political composition (Klarner, 2013). Then, we estimate event analysis models that allow us to describe change in these variables before and after the passage of an SFR.

Our hypotheses are largely confirmed by the data. Prior to SFR implementation, states legislatures were becoming increasingly Democratic and the probability of Democratic supermajority increased. These changes did not coincide with changes in citizen preferences for economic liberalism measured by state-level ideology scores, nor did they coincide with the passage of liberal-coded referendums, which we include as another indicator of citizen preferences. Coinciding with SFR implementation, states were also more likely to pass other liberal economic legislation. Taken together, these results suggest a sweeping passage of liberal legislation mostly brought about by changes to the legislature not representative of citizen preferences. Consequently, in the years following an SFR implementation, the Democratic share in the state’s upper and lower houses declined.

Author

• KENNETH A SHORES