Predicting the Cost of Fiscal Equalization in School Finance

Abstract

The recent appearance on the national scene of the Serrano and Rodriguez cases served to dramatize one of the most persistent problems of school finance reform–the vast differences between the tax bases per pupil and the ability to provide educational services among school districts in the same state. As these cases have highlighted the issue, and as the presence of these inequities have been more widely recognized, the states have begun to consider reform more seriously. One of the major obstacles to the elimination of these fiscal differentials is the apparent cost. Although intuition would argue for a very high cost, there seems to have been no consistent estimates. This article estimates the cost for Texas. Using an estimating equation for shifts in district expenditure under different tax bases and aid patterns, and solving a system of equations for the fiscal equalization, I have derived the estimates. The results are encouraging as the tax bill for such reform may be less than the previously available estimates would lead us to believe.