Obstacles and Opportunities: Some Simple Economics of School Finance Reform

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Abstract
The rapid growth in education expenditure in a time of declining earnings and increased economic inequality presents both obstacles and opportunities for school finance reform. Opportunities are greatest for reforms that increase funding for low-achieving students, rather than schools, based on efficiency arguments. Special-education policy is one possible model for such reform. Evidence regarding school resource allocation processes and production efficiency is used to evaluate the potential impacts of increased spending on education outcomes, how much funding might be required to meet various goals, and the extent to which school restructuring strategies might improve efficiency. The author concludes that school finance reform policies may generate responses by families that offset at least some of their intended effects, and policies should be designed to minimize this problem. New research raises questions about conventional assumptions about educational production and cost, with implications for policy and research.