DOES SCHOOL FINANCE REFORM REDUCE THE RACE GAP IN SCHOOL FUNDING?

Oct 15, 2026

This paper provides new evidence on how school finance reforms (SFRs) triggered by school finance litigation affect racial gaps in district funding. It examines whether reform impacts vary with district racial composition using difference-in-differences and event study designs with district and year (or state-by-year) fixed effects across a sixteen-year panel of 10,000+ districts. Findings indicate SFR can ease racial funding gaps, though effects remain moderate.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages33

Reading Time1 h 23 min

AccessFree to download

Introduction

Background on racial gaps and resources

Court-ordered school finance reform (SFR)

Research questions and study approach

| | DOES SCHOOL FINANCE REFORM REDUCE THE RACE GAP IN SCHOOL FUNDING? | | --- | --- | Michah W. Rothbart Maxwell School of Citizenship and Public Aﬀairs Syracuse University Syracuse, NY 13244 [mwrothba@syr.edu](mwrothba@syr.edu) Abstract This paper oﬀers new evidence on the impacts of school ﬁnance reforms (SFRs) precipitated by school ﬁnance litigation, exploring the extent to which the impact of SFR diﬀers by district racial composition. Using diﬀerence-in-diﬀerences and event study models with a series of district and year (or state-by-year) ﬁxed eﬀects, and a sixteen-year panel of over 10,000 school districts, my analyses exploit variation in funding across school districts, and timing of school ﬁnance court orders across states, to estimate theeﬀect ofSFR on the distribution of district funding by racial composition. Models include relevant control variables available in national data and results are robust to numerous alternative speciﬁcations, including estimating impacts on percent changes in resources (in addition to levels), restricting analyses to districts in SFR states, controlling for additional covariates available in only some years and some states, and adding controls for state-speciﬁc time trends. In addition, I estimate changes in New York State to assess whether and to what extent results are sensitive to additional controls for revenue-raising capacity and district costs. Results suggest that SFR can work to alleviate racial funding gaps, though impacts are moderate. [https://doi.org/10.1162/edfp_a_00282](https://doi.org/10.1162/edfp_a_00282) © 2019 Association for Education Finance and Policy 1. INTRODUCTION A persistent issue in U.S. public education is the enduring racial gap in academic performance. One potential contributing factor to the achievement gap is a disparity in resources. Historically, school district ﬁnancial resources and share of students who are black are negatively correlated, though this has narrowed in recent decades (Card and Krueger 1996; Card and Rothstein 2007) . School ﬁnance reform (SFR) may partially explain narrowing resource disparities. Court-ordered SFR is a court ruling that mandates a state to change its school funding system and provide fairer educational opportunities to students across the state.1 Most often, SFRs explicitly work to break the link between district wealth and school spending. By this deﬁnition, twenty states had at least one SFR by 2010 .2 SFR may also weaken the link between race and education funding due to, for example, historical segregation that concentrates nonwhite students in districts with low property wealth (Ryan 1999; Rothstein 2017) . Alternatively, SFR may not aﬀect racial funding gaps, perhaps narrowing gaps in district funding between wealthy and poor districts without addressing gaps across racial groups. Thus, the questions remain: To what extent do the impacts of SFR on district funding vary by racial composition, and to what extent does SFR work to close racial funding gaps? This study aims to answer these questions, providing estimates on the extent to which the impacts of SFR are larger as district minority representation increases, and whether local revenue responses oﬀset increases in state aid. Previous work ﬁnds that total district funding is correlated with race (Card and Krueger 1996; Ryan 1999) . Districts with greater white student compositions, on average, raise greater levels of local revenues than those with greater nonwhite compositions, perhaps because of fewer resource constraints (Card and Payne 2002; Baker, Sciarra, and Farrie 2010) . Moreover, others document gaps in local revenues due to historical inequities in access to wealthier school districts (and higher property value communities) precipitated by segregational housing and zoning policies, which still remain insuﬃciently remedied today (Rothstein 2017) . Perhaps surprisingly, then, the share of students who are white is also positively c

FAQs

What is the paper’s main research question?

The study asks whether school finance reform reduces the race gap in school funding and how reform effects vary by district racial composition.

How does the paper estimate the impact of SFR?

It uses difference-in-differences and event study models with district and year (or state-by-year) fixed effects, leveraging timing and cross-district variation in funding and court orders.

What do the results suggest about closing racial funding gaps?

The results suggest SFR can alleviate racial funding gaps, but the impacts are moderate rather than large.

Oct 15, 2026

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