The neglected role of school district revenue instability : measurement, causes and responses

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Much of the school finance literature has focused on the distribution or equality of resources across school districts. Such literature compares levels of spending between school districts or states. But it has ignored the variability and unpredictability of those revenues within school districts over time. Meanwhile, public finance literature has focused on states or counties, and disregarded school districts as a unit of analysis for responses to fiscal stress. This dissertation addresses these gaps. First, drawing from techniques both within and outside of public finance, I contribute a new measure of fiscal stress based on unpredictability of state revenues. Second, I explicitly assess policy and tax mechanisms that may aggravate revenue instability for school districts and to what extent instability changes over time. Finally, I examine school districts response to chronic unpredictability in state revenues. Despite states' increasing reliance on more volatile sales and income taxes to fund public education, I find that unpredictability in state revenues to districts has declined by one-fourth of a standard deviation over time. In states that shifted to the more volatile sales and income tax base while also centralizing school finance as part of efforts to equalize school funding, unpredictability in state revenues to districts declined by a full standard deviation. In effect, centralization and more equal distribution of funding appears to trump the effects of a volatile tax base, as states have a greater ability to buffer against shocks than local education agencies do. Yet districts still face uncertain and unstable revenues from the states, aggravated by economic downturns. With primary and secondary data, I study the case of California where districts face uncertain cuts to their allocations during the year and between years. I use three key fiscal health measures: average revenue instability over time, whether revenues declined in the prior period, and the experience of the budget officer. I find that highly unstable districts are more likely to raise local revenues, but that cost-cutting is more prevalent that revenue-raising. Experienced budget officers use a greater variety of policy instruments to cope with instability, pointing to the under-explored role of management in the fiscal health of a district. These findings as a whole suggest that revenue instability merits further attention in the school finance literature in particular and public management in general. Unpredictability in states revenues is a phenomenon that concerns school districts, one that changes over time, but one to which they may adapt.


Type of resource text
Form electronic; electronic resource; remote
Extent 1 online resource.
Publication date 2011
Issuance monographic
Language English


Associated with Balu, Rekha
Associated with Stanford University, School of Education.
Primary advisor Loeb, Susanna
Thesis advisor Loeb, Susanna
Thesis advisor Bettinger, Eric
Thesis advisor Plank, David
Advisor Bettinger, Eric
Advisor Plank, David


Genre Theses

Bibliographic information

Statement of responsibility Rekha Balu.
Note Submitted to the School of Education.
Thesis Thesis (Ph.D.)--Stanford University, 2011.
Location electronic resource

Access conditions

© 2011 by Rekha Balu
This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).

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