Rich Districts, Poor Districts: The Property Tax Equity Impact of Arkansas School Finance Equalization

Abstract

From 1992 to 2003, the State of Arkansas was immersed in the Lake View case, which led to a ruling that the state funding of schools was unconstitutional. The Lake View School District argued that the state's funding was inequitable and harmed students and taxpayers of poor districts. The ruling was as much about correcting fiscal disparities across districts as it was about correcting disparities in educational outcomes. Subsequently, state education school finance reform required the State to provide districts with equalization funding. This study examines the impact of equalization on inter-district property tax disparity. Specifically, this study seeks to determine if the lower wealth and less advantaged school districts are better off, as measured by their property tax burden and tax effort. We analyze four measures of district level wealth and advantage: assessed value of property, percentage of students enrolled in the federal school lunch program, percentage of African-American students, and the NCES locale codes for rural or non-rural. Our results indicate that state equalization did have an impact on inter-district property tax disparity. The poorest and least advantaged school districts do benefit from state equalization, meaning that the tax burden and tax effort of those districts are reduced. Furthermore, our findings indicate that there is less disparity between the wealthiest districts and the poorest districts.