School Finance Reform: Responses, Equity and Outcomes

School finance reform cases have become immensely more common since the Serrano v. Priest case in California in 1971. Tennessee’s case Small Schools v. McWherter led to a significant reform of the Tennessee school finance system during the 1992-1993 school year. This reform created a new system of education funding in Tennessee known as the Basic Education Program (BEP). Essay 1 examines the impact Tennessee’s school finance reform had on education spending as well as local and stateprovided education revenues from 1989-2006. Results indicate that as state funding for education improved, locally-provided funding decreased, all else constant. In addition, institutional features such as the phase-in of state funds and the nominal maintenance of spending effort requirement decreased locally-provided funding, all else constant.

Essay 2 includes analyses regarding the changes in equity associated with the switch to the BEP during the 1992-1993 school year and the factors that may have impacted changes in equity. The calculation of commonly used equity measures shows an increase in school spending equity during time period analyzed. These equity measures also indicate that locally-provided revenues have become less equitable over time. Further analyses show the relationship between school district level wealth measures and key spending and revenue variables. Results indicate that the relationship between wealth and state spending has grown over time, which shows that from the state perspective, the BEP has continued to equalize over time. However, the relationship between locally-provided funding and wealth has become more positive over time and has led to a considerable gap between education spending in rich and poor districts. In order to decrease this gap in spending, tighter controls are needed on locally-provided spending via the school finance system.