The Effects of Changes in Michigan's School Finance System

Abstract

I use district-level panel data from the 1991/92 school year through the 2003/04 school year to study the effects of Proposal A, passed in Michigan in 1994. Proposal A dramatically changed the way schools were funded starting in the 1994/95 school year. I discuss what has happened to the pattern of spending in years before and after the reform, including a discussion of funding equalization. Using the several additional years of data—which include additional periods of substantial funding increases for low-spending districts—and a richer lag structure in an econometric model, I find that increases in spending have nontrivial, statistically significant effects on math test pass rates. The effects are notably larger for districts with initially poor performance.