No Child Left Behind Act Inadvertently Impacts State Governments’ Finances, says Rutgers–Camden Researcher

By Tom McLaughlin

In 2001, the U.S. Congress passed the bipartisan No Child Left Behind (NCLB) Act, reaffirming the federal government’s commitment to student achievement, particularly for disadvantaged students. Touted as a triumph for education reform, the act requires each state to develop and implement its own student-assessment standards in order to receive federal funding.

D12_429_042However, the act had an unintended fiscal impact on state governments’ finances as a result of the interaction between binding school district tax and expenditure limitations (TELs) and the underfunded mandates of NCLB, explains Michael Hayes, an assistant professor of public policy and administration at Rutgers University–Camden.

Hayes examines this differential effect of NCLB on states’ contributions to education funding in states with TELs, in the spring 2015 issue of Public Budgeting and Finance.

Using state-level data, Hayes found that, from 1992 to 2009, states which imposed TELs contributed 4.3 percent more towards education funding than states without binding school district TELs after the passage of NCLB.

“This suggests the financial burden of NCLB was placed on state governments, especially in states with TELs,” says Hayes, a Philadelphia resident.

According to the Rutgers–Camden researcher, while it is evident that states gain an expanded responsibility and role in financing public education, in this case it remains to be seen whether this expansion has a positive or negative outcome.

“Some policymakers would argue that centralizing education finance at the state level increased equity in public education across school districts,” says Hayes. “This argument assumes that states provide a disproportionally higher amount of education assistance to low-performing school districts. This may not have been the case, however, and it should be a topic for future research.”

Hayes posits that several steps could be taken on the federal and state levels to correct this “fiscal shock” to state governments’ finances. On the federal level, he says, the government could redesign underfunded mandates and grants so that local governments are exempt from binding TELs if they need to increase additional funding in order to meet federal requirements. If local governments can raise additional own-source revenues, he notes, this reduces the burden on state government.

Furthermore, explains Hayes, state governments may want to assess whether or not their specific TELs policies are meeting their intended fiscal goals, as well as examine the potential unintended consequences of TELs.

“To put it succinctly, if the social costs of TELs outweigh the social benefits, states may want to consider changing their TEL policies,” says Hayes.

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