Abstract: Paper No. 175

School Finance Reform: Aid Formulas and Equity Objectives

William Duncombe and John Yinger

January 1996 

State and local education officials have been moving toward performance standards, but state education aid had not kept up. By focusing on the relationship between spending and property wealth, existing aid formulas ignore significant cost differences across districts and fail to promote equity in school performance. This paper shows how to estimate comprehensive educational cost indexes and include them in state aid formulas. This paper also simulates the impact of several aid formulas on educational performance and evaluates each formula on the basis of several equity criteria.

The revised version of this paper will be published in the National Tax Journal. Those interested in this work should see that journal.