The effects of Connecticut's state aid to school districts: A public choice approach

Date of Completion

January 1996


Education, Finance|Economics, General|Political Science, Public Administration




In this dissertation I investigate empirically the effects of Connecticut's state aid to school districts in the 1987-88 school year, on the basis of public choice models of the effects of intergovernmental grants. During this period Connecticut school districts received substantial grants under the terms of the Education Enhancement Act. These were in addition to the equalization aid of the Guaranteed Tax Base program. Various researchers, e.g. Addonizio (1991), have used the median voter model approach to the effects of intergovernmental grants on town level spending decisions. I build on the work of Beck (1981) to provide an alternative budget-maximizing bureaucracy model, and test which is a more accurate fit to the Connecticut data. I then simulate the effects of the Connecticut state grants in order to show how equalization was affected.^ My results show that the median voter model performs better than the budget-maximizing model. I therefore use the estimated median voter model expenditure function to simulate the effects of the Connecticut state grants. I obtain mean tax-price elasticity of per pupil school spending of $-$0.35, and a mean income elasticity of 0.56, both of which are above average when compared to other studies of school district spending. The results of the simulation indicate significant equalization of per pupil spending across Connecticut school districts as a result of the state grants. The simulation also shows, however, that this was achieved at the cost of more dispersed school tax rates. Towns opted to bear the tax burden in the current school year of increasing spending in order to receive grants from the state with a three year lag. ^