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How to Design a State Education Aid Formula That Is Equitable, Adequate, and Politically Feasible: The Case of Connecticut

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  • Bo Zhao

Abstract

After being sued for inequity and inadequacy in school funding, many states have reformed their education aid policies. Using Connecticut as an example, this paper shows how to design a state education aid formula that can effectively address funding inequity and inadequacy while taking political feasibility into account. It first develops a measure of the gap between education cost and revenue capacity, both of which are estimated using school district characteristics that are outside the direct control of local officials at any given point in time. It then uses each district’s cost-capacity gap to evaluate the state’s existing education aid distribution. This paper shows that while larger-gap districts, on average, receive greater amounts of state aid per pupil under Connecticut’s existing distributions, significant inequity and inadequacy remain. This paper proposes, as a potential solution, a gap-based formula that allocates state aid to close the cost-capacity gaps. The formula includes tools such as minimum and maximum levels of aid to increase its political appeal. The research method and the formula design that this paper presents are sufficiently general and flexible to be adapted easily and applied to other states.

Suggested Citation

  • Bo Zhao, 2020. "How to Design a State Education Aid Formula That Is Equitable, Adequate, and Politically Feasible: The Case of Connecticut," Working Papers 21-1, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbwp:89774
    DOI: 10.29412/res.wp.2021.01
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    References listed on IDEAS

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    2. Jennifer Imazeki, 2008. "Assessing the Costs of Adequacy in California Public Schools: A Cost Function Approach," Education Finance and Policy, MIT Press, vol. 3(1), pages 90-108, January.
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    Cited by:

    1. Bo Zhao, 2023. "Estimating the cost function of connecticut public K–12 education: implications for inequity and inadequacy in school spending," Education Economics, Taylor & Francis Journals, vol. 31(4), pages 439-470, July.
    2. Bo Zhao, 2021. "Reforming Connecticut’s Education Aid Formula to Achieve Equity and Adequacy across School Districts," New England Public Policy Center Research Report 21-1, Federal Reserve Bank of Boston.

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    More about this item

    Keywords

    education costs; revenue capacity; state education aid; aid formula;
    All these keywords.

    JEL classification:

    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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