Homestead exemptions for senior and disabled homeowners disproportionally erode rural tax bases but may still stimulate local educational spending. This article examines one such exemption in Kentucky. Two-stage generalized method of moments is used to estimate the demand for local education spending, then spending in the absence of the exemption is simulated to estimate effects on school district expenditure and academic performance. We combine Census and National Center of Education Statistics data with detailed exemption and academic performance data from Kentucky’s Departments of Revenue and Education into a panel spanning 1999–2013. Results suggest the exemption provides relatively generous tax relief without increasing resource and academic achievement gaps between rural and nonrural districts. This is largely attributable to Kentucky’s strong school finance equalization effort. Our findings can help states with a similarly targeted exemption consider such impacts in relation to their own demography and funding systems.
This study explores the effects of state-imposed school district tax and expenditure limits (TELs) on contributions and total revenues for education-supporting nonprofits. These nonprofits provide resources and services to schools or communities, potentially promoting or undermining equality when TELs restrict local funding. The analysis compares nonprofits supporting specific schools or districts (school-supporting) with those serving students broadly (community-supporting). Using 2006–2015 data and a difference-in-differences approach, the study finds that increased TEL stringency decreases contributions to community-supporting nonprofits but raises contributions to school-supporting nonprofits. Total revenue grows for both groups, suggesting community-supporting nonprofits adjust their revenue portfolios following more stringent TELs, which could alter how they serve clients. Although TELs aim to enhance district equality, the findings reveal a revenue shift favoring school-supporting nonprofits, often tied to wealthier districts, potentially exacerbating inequalities.
Combs, A. E., & Foster, J. M. (2021). The Effects of Homestead Exemptions for Seniors and Disabled People on School Districts. AERA Open, 7. https://doi.org/10.1177/2332858420988712 (Original work published 2021)
