The Growth of Local Education Transfers

We argue that previous research studying the relationship between a growing elderly population and local support for public education has overlooked a key component to public education finance: redistribution payments made by older households. A fuller accounting of these payments indicates that a growing elderly population might very well prove to be a boon to local public school students not a burden as has been previously suggested. Beginning with a national sample of suburban school districts, this article shows that a higher elderly to student ratio within a district actually increases per-student revenues, even after accounting for the downward pressure that older households place on tax rates. We then explore a specific channel through which elderly households redistribute resources to school-age children: local property taxes. Focusing on Chicago-area suburban school districts, we show that a rise in a community’s elderly to student ratio actually increases the level of per-student property tax redistribution that occurs.