420 T.A. Downes Economics of Education Review 19 2000 417–429
reveals, however, that, relative to fiscally independent districts, spending levels and aid elasticities could be
higher or lower in fiscally dependent districts. Thus, before venturing into a discussion of solutions to the fis-
cal dependency “problem”, the existence of such a prob- lem must be established. This can only be done empiri-
cally, and this cannot be done by examining only the experience of the fiscally dependent school districts in
New York. The commonly cited problems in these dis- tricts may be attributable to inadequacies and technical
inefficiencies in spending arising from fiscal depen- dency, but these problems could also be a result of the
fact that the fiscally dependent districts are also urban districts. The work of Duncombe and Yinger 1997 sug-
gests that, in New York, cost disparities contribute sig- nificantly to variation in student achievement and that
deficiencies in student performance in the five large city districts cannot be explained fully by technical inef-
ficiencies. Thus, the observed differences between dependent and independent districts in spending levels
and patterns could simply reflect rational responses to differences in circumstances.
The challenge is to isolate the effect of dependency. The next sections of this paper review some initial efforts
to estimate this effect.
3. Data
As has already been noted, examination of only the experience in New York state cannot permit us to deter-
mine if, for example, a one dollar increase in state aid for education translates into a smaller increase in education
expenditures in the five large city districts than in the other school districts in the state. For that reason, I have
assembled data on the revenues, expenditures, and characteristics of school districts in the 12 East Coast
states from Maine in the north to Virginia in the south. What is ideal about this data set is that it includes fiscally
dependent districts in rural, suburban, and urban settings, as well as urban, fiscally independent school districts.
Thus, the separate effects of urbanicity and fiscal depen- dency can be parcelled out.
These data are drawn from the Common Core of Data CCD.
6
Using the CCD assures comparability of rev- enue and expenditure measures. Further, the CCD pro-
vides multiple years of data; information for school years 1989–90 to 1994–95 was used in this analysis.
For both the fiscally dependent and fiscally inde-
6
Financial data for the 1992–93, 1993–94, and 1994–95 school years were acquired from the US Census Bureau’s web
site http:www.census.govgovswwwschools.html. These data will eventually be incorporated into the CCD.
pendent school districts in New York, Table 1 provides basic summary information on revenues, expenditures,
7
and demographics. To observers of New York’s schools, there are no surprises in these numbers. Per pupil expen-
ditures are lower in the dependent districts, while per pupil federal aid and per pupil state aid are higher. The
differences in the means of per pupil state aid are prim- arily attributable to differences in the categorical compo-
nents of state aid; the difference in the means of per pupil operating aid is less than 200. A hint of the higher
costs in the fiscally dependent districts is also provided in Table 1; the means of the percent of children living
in poverty, the percent of schoolchildren at-risk, and the percent of children who do not speak English well are
all substantially higher in the fiscally dependent districts.
What the numbers do not reveal is the adequacy or the efficiency of spending. In dependent districts, spend-
ing is lower while aid is higher, but such an observation does not allow us to conclude that five large city govern-
ments are “stealing” school aid or failing to give proper weight to the needs of schoolchildren. In fact, given the
demographics of these dependent districts, these num- bers could as easily support the conclusion that aid has
effectively promoted spending in localities with extra- ordinary demands for public services.
4. Fiscal dependency and aid elasticities: preliminary estimates
