Education Finance Reform and the Great Recession: Did State Policy and Fiscal Federalism Improve Education Spending, School Resources, and Student Achievement in Pennsylvania?

We estimate the impact of school finance reform on adequate and equitable district spending, school resources and student achievement in Pennsylvania. From the 2008-09 to the 2010-11 school years, amid the Great Recession, Pennsylvania's Act 61 increased aid to school districts spending below state-determined adequacy targets ("shortfall districts"). We find that the gap in adequate spending between shortfall and no-shortfall districts narrowed by the final year of Act 61 when increases in education aid were provided through both federal stimulus and state funds. Effects on adequate spending were concentrated among districts with the greatest spending shortfalls and who served more economically disadvantaged communities and academically struggling students. However, few improvements in school resources and no effect on academic achievement were found. Our results suggest that federal aid can support adequate district spending during recessionary periods when state education budgets are constrained. However, if aid is modest, adequacy and equity improvements may not improve resources or achievement.