Predicting Significant Reductions in Instructional Expenditures by School Districts

This article uses survival analysis to investigate the symptoms of fiscal distress that can lead to significant reductions in instructional expenditures by independent public school districts in the United States. We hypothesize that the likelihood of significant reductions in instructional expenditures is positively correlated with revenue concentration and debt usage, and negatively correlated with organizational slack and entity resources. Parsimonious models are developed and tested to predict the likelihood of significant reductions in instructional expenditures. The model correctly classifies up to 92% of the sampled school districts. The results show that the most important indicator of significant reductions in instructional expenditures is revenue concentration. School districts with more diverse revenue sources are less susceptible to significant reductions in instructional expenditures. This information can be used to prevent, detect, and mitigate fiscal distress that could lead to significant reductions in instructional expenditures in U.S. school districts.