Constraints and Contributions: The Effects of Tax Limits on Education-Supporting Nonprofit Revenue

Abstract

This study explores the effects of state-imposed school district tax and expenditure limits (TELs) on contributions and total revenues for education-supporting nonprofits. These nonprofits provide resources and services to schools or communities, potentially promoting or undermining equality when TELs restrict local funding. The analysis compares nonprofits supporting specific schools or districts (school-supporting) with those serving students broadly (community-supporting). Using 2006–2015 data and a difference-in-differences approach, the study finds that increased TEL stringency decreases contributions to community-supporting nonprofits but raises contributions to school-supporting nonprofits. Total revenue grows for both groups, suggesting community-supporting nonprofits adjust their revenue portfolios following more stringent TELs, which could alter how they serve clients. Although TELs aim to enhance district equality, the findings reveal a revenue shift favoring school-supporting nonprofits, often tied to wealthier districts, potentially exacerbating inequalities.