Theoretical Models of School District Expenditure Determination and the Impact of Grants-In-Aid.

by Stephen M. Barro

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These models are based on the concept that school district decisionmakers seek an optimum balance between education program levels and tax burdens imposed on the community, subject to a budget constraint. A model is derived in which spending depends positively on community income and lump-sum grants and negatively on the relative price of educational inputs, the pupil/household ratio, and the local share of matching grants. Extensions take account of nonschool taxes, the composition of the property tax base (residential vs. business property), equalization features of state aid formulas, categorical grants, and enrollment growth. Since the models include lump-sum aid, matching aid, and interactions between them, they are potentially useful for selecting optimal aid formulas for accomplishing a grantor's objectives. Explicit functional forms of the expenditure relationships are developed and variants of the model that can be tested with different databases are described. 85 pp.

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