The Shock‐Buffering Role of School District Savings

This is the authors' abstract. We don't add key points for this paper.

School districts operate in an unstable revenue environment, with changes in state transfers being a source of uncertainty. District savings, in the form of unrestricted general fund balance, could provide a tool for maintaining budget stability. This study provides the first cross‐state examination of school fund balance. First, descriptive statistics illustrate variations in state laws regarding district fund balance and in the average balance levels. Second, districts adjust savings based on revenue risk exposure, but the capacity to save also matters. Lastly, districts starting a year with a higher fund balance experience smaller spending gaps when state aid declines.