My dissertation consists of three chapters in the field of education finance. In the United States, education is the joint responsibility of Federal, state, and local governments. I explore the interactions between these different sources of funds and examine how these are affected by a variety of factors: immigration, policy changes, and education finance reform. I study state and local government education budgeting decisions, and build economic models that capture realities of public education financing when there are different but interrelated sources of funding. I use empirical analysis on extensive data on school district finances linked to demographics to evaluate the empirical implications of these models, and develop comprehensive measures of tax adjustments in public education finance. My first chapter offers an alternative interpretation of the negative relationship between immigration flows and changes in per-pupil spending in U.S. school districts. I argue that fiscal channels are sufficient to explain the negative effect of immigration on education funding and decompose the effect into separate responses at different levels of government.Immigrants have lower incomes on average than natives, and so their immigration increases the cost to natives of providing uniform education. I find that while state contributions to education do not respond to immigration, local governments decrease education revenues by 7.4 percent for every 1 percentage point increase in immigration, or about $319 when evaluated at the 2007 average county education contribution. This corresponds to an estimated elasticity of -0.43. Thus, median voter politics largely insulate state governments from increases in the tax price of education in the presence of immigration, but do not do so for local governments.My second chapter estimates the impact of Federal grant expansions during the Great Recession. During this period, the Federal government increased its contributions toward K-12 education by about 50%. I use an instrumental variable approach to estimate the effect of these expanded Federal contributions on state and local district education finance, focusing on the extent of crowd-out. I find that the fiscal response to increased Federal funding is different at these two levels of government, and is dependent on the program through which the additional funds are channeled. Funds from expanded existing programs like Title I and IDEA Special Education did not crowd out state and local district education contributions. These grants increased total revenue dollar for dollar. In sharp contrast, funds from the new State Fiscal Stabilization Fund completely crowded out state education contributions, leaving local district contributions unaffected.My third chapter investigates the crowding out of increased state education contributions on total education spending at the school district level and explores how the crowd-out rate relates to the stateâs choice of education funding system. Using an event study framework, I find that different properties of education funding systems imply different levels of redistribution within-state. State finance systems with properties that encourage equalization, like minimum foundation plans and spending limits, result in crowding-in of education funds by state contributions. On the other hand, properties like equalization plans and reward-for-effort plans result in crowding-out of funds.
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