So Slow to Change: The Limited Growth of Nontax Revenues in Public Education Finance, 1991–2010

Abstract

We examine changes in the use of nontax revenues for education finance from 1991 to 2010. Beyond the summary of usage over time, we ask whether nontraditional revenues like fees accentuate or mitigate the impact of downturns. More generally, we examine the extent to which school districts have responded to fiscal pressures by turning to nontax revenues. We also document the extent to which the use of nontax revenues varies across districts according to student poverty status. We show that alternative revenues continue to be a small source of local revenues and have increased quite little since the early 1990s. There was at most a minimal shift to nontax revenues in downturns, though there is evidence of greater use of these revenues among school districts facing more permanent fiscal pressures like tax limits. Differential access to fee revenues and other alternative revenues during downturns may slightly accentuate inequities in K–12 education spending.

Cap and Gap: The Fiscal Effects of Property Tax Levy Limits in New York

“…Second, property taxes constitute the lion's share of own-source revenue for most school districts in the U.S. Therefore, when confronted with a constraining limit on property taxes, they are less able to raise adequate other own-source revenues to offset the shortfall, as confirmed by the historical analysis in Downes and Killeen (2014). Also, the constraining effects of TELs on school districts may become stronger over time (Dye, McGuire, and McMillen 2005).…”

Why has growth of user fees and other nontraditional sources of local education revenues been so limited? Evidence from Colorado

“…In our previous work, Downes and Killeen (2014) found that the use of fees was higher in districts in states in which districts were subject to TELs, but the authors could not determine the extent to which there was significant within-state variation in the use of alternative revenues in states with limits in place. Colorado gives us the opportunity to see if there is such within-state heterogeneity.…”

“…Downes and Killeen (2014) found that one of the few consistent determinants of the use of fees and other alternative revenue sources was the presence of limits on the ability of localities to raise revenues or increase expenditures. However, the authors of that paper could only include relatively crude controls for the presence of local TELs, given the national nature of the analysis.…”

“…In the spirit of Killeen (2007), we begin our analysis by considering variants of (1) in which ρ , the coefficient on the spatial factor, is set to 0. Starting with this specification allows us to compare the results for Colorado to those from an analysis of national data (Downes and Killeen, 2014). In addition, we can use this specification to highlight the potential advantages of focusing on a single state and using data that facilitate drawing out the nuances of that state’s context.…”

“…And, given the fiscal constraints facing school districts and the potential revenues from charging for auxiliary services, it is unsurprising that numerous popular press stories (Bergal, 2015; Conti, 2015; Mohl and Patel, 2015) comment on the apparent growth of these charges and other non-tax revenues in the face of budget deficits. But, while this apparent growth of fees and other nontraditional revenues[1] has been much noted, it has been far less extensive than these articles may lead the reader to believe, as shown by Downes and Killeen (2014).…”