Katherine
Baicker (UCLA) and Nora Gordon (UCSD)
ABSTRACT
Both the federal government and
the states use intergovernmental grants to try to change the
composition of local spending across different programs, as
well as the distribution of resources across localities.
Many states are now under court-order to use state education
grants to reduce local disparities in education spending.
While a substantial body of literature suggests that these
court orders increase the level and progressivity of state
education spending, there is little evidence on their
broader effects on the total resources available not just
for schools in low income districts, but for other programs
across all localities. We find that states finance the
required increase in education spending in part by reducing
their aid to localities for other programs, particularly for
wealthier districts. Thus, while court-ordered school
finance equalizations do increase total state aid to
localities for education, they do so at the expense of
drawing state intergovernmental aid away from programs like
public welfare, health, hospitals, and general services.
These findings provide insight into the effectiveness of
using earmarked funds to achieve redistribution.
