Tax Exportability, Intergovernmental AId, and School Finance Reform

This paper reports research on local school taxation determinants which, unlike most earlier studies: (a) focuses upon taxes rather than expenditures and upon local rather than total funding; (b) includes school tax exportability (cost spillout) measures; (c) divides intergovernmental school aid into lump-sum and matching categories; and (d) uses data for individual school districts rather than aggregates of such units. Two major research findings have important equity and efficiency implications for school finance reform: —Tax base composition (tax exportability) differences contribute importantly to per-pupil local revenue differences; and —Unless the principal objective is to reduce local taxes, intergovernmental school aid should require local matching.