A Constrained Bureaucratic Model of Behavioral Responses to School Finance Reform

Tennessee Small School Systems v. McWherter case led to a significant reform of the state’s school finance system during 1992–1993 with the phased-in implementation of the Basic Education Program. This paper examines the impact of Tennessee’s school finance reform on education spending using a complete panel of school districts from 1989–2006. Five models of multiple-regression, panel data analysis are conducted to investigate the impact of the reforms. Results indicate that increased state education funding reduced locally provided discretionary funding. Institutional features of the reform, such as the five-year phase-in of state funds and the nominal maintenance-of-effort spending requirement, decreased locally provided funding relative to what would otherwise have been observed absent the reform.