Did Cuts in State Aid During the Great Recession Lead to Changes in Local Property Taxes?

Rajashri Chakrabarti, Max Livingston () and Joydeep Roy ()
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Max Livingston: Federal Reserve Bank of New York

Education Finance and Policy, 2014, vol. 9, issue 4, 383-416

Abstract: The Great Recession led to marked declines in state revenue. In this paper we investigate whether (and how) local school districts modified their funding and taxing decisions in response to state aid declines in the post-recession period. Our results reveal school districts responded to state aid cuts in the post-recession period by countering these cuts. Relative to the pre-recession period, a unit decrease in state aid was associated with a relative increase in local funding. To further probe the school district role, we explore whether the property tax rate, which reflects decisions of districts facing budgetary needs, responded to state aid cuts. We find, relative to the pre-recession period, the post-recession period was characterized by a strong negative relationship between property tax rate and state aid per pupil. We also find important heterogeneities in these responses by region, property wealth, and importance of School Tax Relief Program revenue in district budgets. © 2014 Federal Reserve Bank of New York

Keywords: The Great Recession; local; post-recession; school districts (search for similar items in EconPapers)
JEL-codes: H20 H71 I20 I22 I25 N92 R10 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: Did cuts in state aid during the Great Recession lead to changes in local property taxes? (2013)
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