Fiscal Implications of School Accountability Initiatives

This paper describes many of the fiscal implications to states and school districts of the No Child Left Behind Act of 2001. While considerable ambiguities exist in the current law and states will implement the law differently, predictable consequences exist for the school finance system. Moreover, the nature of these consequences is likely influenced by the actual implementation of the law. There are both direct and indirect fiscal implications of the federal education reforms. Direct fiscal consequences can be substantial for certain types of school districts and for school funding equity within states, and depend crucially on design considerations in the implementation of the law. Indirect fiscal implications, through consequences for the special education placement and grade retention systems, input prices, and house prices, can be substantial as well, and also depend on the implementation of the policy. This paper also presents some key design issues for states to consider.