Optimal Fiscal Reform of Metropolitan Schools: Some Simulation Results
Abstract
In 1971 the California Supreme Court opened the door to a major reform movement to restructure the present system of decentralized school finance. With the exception of Hawaii, elementary and secondary education in the United States is supported primarily by local property taxation supplemented in part by state funded grants-in-aid. The California Supreme Court, in the now famous Serrano rulings, declared the California system in violation of the state constitution's equal protection clause. Similar rulings have also been handed down by the New Jersey Supreme Court (Robinson vs. Cahill) and the Superior Court of Hartford, Connecticut (Horton vs. Meskill). In addition, ten states have recently enacted major reform bills, and legislation is under consideration in several others. The pressure for reform is strong and continuing. As a review of the recent reform proposals indicates, the legislative search for new means of financing local schools is not simply an incremental tinkering with existing laws.' Major changes, often court required, are at issue. Long-run outcomes are uncertain; each proposal has new winners and new losers. When planning a major reform of local school finance, therefore, past experience from incremental policymaking may not be an adequate guide to choice. Long-run general equilibrium predictive models and a clearly specified evaluation rule will be needed. It is the purpose of this paper to develop such a policy framework and to apply the analysis to one region currently in the midst of school reform, the New York metropolitan area. Six alternative reform proposals are considered: foundation aid, two district power equalization plans, property tax credits, expanded Title I assistance under the Elementary and Secondary Education Act, and centralized financing and spending controls. Preferred reforms are selected under utilitarian (promiddle class), Rawlsian (pro-poor), and equal school spending (Serrano) criteria.
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