Fiscal Response of School Districts to District Fiscal Capacity and State Aid. Working Papers in Education Finance, Paper No. 15.

Data on 174 Colorado school districts were used to measure districts' responses (as indicated by per-pupil expenditures) to their own fiscal capacity and to state aid that changes over time. Colorado's modified guaranteed tax base (GTB) formula was analyzed and a model constructed that took into account the formula's limits on district spending and its year-to-year changes in a district's state aid based on the district's tax revenues in the preceding year. Such changes comprise an "intertemporal price variable." Data were collected on such variables as district wealth (total and residential assessed value), income, state and federal aid, enrollment size and growth, percentage of minority pupils, and agricultural land prices. Using linear and log-linear correlation equations, researchers analyzed the variables' effects on districts' total and locally-derived expenditures and on the elasticity of these expenditures in relation to changes in other variables' values. Results indicate that Colorado's GTB formula has had significant effects neither on differences across districts in expenditures per student nor on the strong correlation between assessed valuation and expenditures. The results also carry implications for the construction of models of districts' fiscal responses. (RW)