The benefits that taxpayers derive form their local school district quality and property taxes are capitalized in their property values. Because taxpayers strive to protect and improve their property values, they constantly evaluate the quality of their school district so as to maximize their property values. If their school district’s quality deteriorates or is expected to decline, typical Tieboutian taxpayers will “vote with their feet.”
By voting with their feet taxpayers choose the local school district that best meets their needs and one that will contribute to their property values. But taxpayers vote not only with their feet but also on school district operating budgets, capital projects and board of education members. Through the exercise of these votes, taxpayers control the quality of education provided by their local schools as well as the level of property taxes levied. Their collective decisions lead to a Pareto efficient allocation of local public education. In this context, Baker, Green and Richards (2008) state that the “Tiebout model represents the most basic form of school choice.”
But states tend to make educational policies especially school finance regulations that are too uniform for the wide variety of school districts with their wide disparities in needs and priorities. It is decentralized or local control rather than centralized or state control over public education, therefore, that causes, supports and sustains the efficient allocation of a school district’s financial and human resources. Local control leads to the provision of the maximum level of educational quality and accountability.
California exemplifies the downside of state control. Fishel (2001) argues that the Serrano v. Priest ruling destroyed the connection among local control, property taxes and school district quality because California taxpayers essentially lost their ability to hold local school districts accountable. Furthermore, Fishel (2001) contends that the Serrano decision not only lead to the passage of Proposition 13 but also to the centralization of school finance in California. The adverse impact on local school districts of California’s centralization of school finance has never been as clear as it is today while the state faces bankruptcy. Because the state forced local school districts to be overly dependent on unsustainable state funding, the state’s fiscal crisis has brought many districts to the brink of financial collapse.
Tiebout (1956) argues that because crowding and congestion affect the provision of public goods and services, it is inefficient to provide public education at a centralized level whether state or federal. Public education is more efficiently provided at the local level. Fischel (2001) agrees with his assessment of school finance in California in which taxpayers lost control over local schools and property taxes which led to reduced levels of taxpayer involvement in and support for public education. Fischel (2001) concludes “the apparent quality of public education has declined nationwide as the states’ share of funding for it has risen.” It is essential that taxpayers have control over their local schools so they will be motivated to properly fund, support and improve public education.
References
Baker, B. D., Green, P., & Richards, C. E. (2008). Financing Education Systems, Upper Saddle River, New Jersey: Pearson Education, Inc.
Fischel, W., (2001) The Homevoter Hypothesis: How Home Values Influence Local Government Taxation, School Finance, and Land-Use Policies, Cambridge, Massachusetts: Harvard University Press.
Tiebout, C. M., (1956) A Pure Theory of Local Expenditures, The Journal of Political Economy, 64, 416-424.
