Unintended Consequence of Centralized Public School Funding in Michigan Education

Published in: Southern Economic Journal, v. 71, no. 3, Jan. 2005, p. 534-544

Posted on RAND.org on December 31, 2004

by Ron Zimmer, John T. Jones

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As part of the movement to create greater spending equity among school districts, states have centralized funding for public education and instituted funding formulas where high-spending districts are often constrained in their operational expenditures. However, these school districts often maintain local discretion over capital expenditures financed by the sale of bonds. In this study, the authors find that Michigan's high-spending school districts have a greater probability of issuing bonds after centralizing public school funding, indicating that debt financing of capital expenditures may have become a mechanism to allow these school districts to circumvent the policy's intent for greater spending equity.

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