Investigating the Fiscal Implications of School Choice

Abstract

The marketplace in education has expanded greatly, and states like Indiana are leading the charge by offering parents a plethora of choice options including inter- and intradistrict school choice, private school vouchers, charter schooling, virtual schooling, and homeschooling. With private and charter school options lacking across rural Indiana, interdistrict school choice has expanded the rural choice market, offering students the opportunity to attend traditional public schools outside their residential district. This public-to-public movement has major implications for rural district budgets, as Indiana has a “money follows the child” funding philosophy, meaning that no matter which district a student legally resides in, the district educating the student receives state funding for that child. This combination of open enrollment policies and funding structures creates an environment in which rural students are highly mobile, and a district’s state funding is contingent on their fluctuating enrollment. This chapter uses Indiana as an exemplary case study to explore the implications of school choice policies on rural school district finances. Conducting descriptive and bivariate analyses, I explore trends in student transfers, enrollment levels, and state aid patterns across the state, using student transfer reports and yearly fiscal reports at the school district level from the Indiana Department of Education. While interdistrict choice can be argued to increase choice options for rural parents and students, this analysis shows that this and other choice mechanisms can also severely impact rural district budgets, for better or for worse.