Since the success of Serrano v. Priest in California, at least 43 states have experienced legal challenges to their education financing formulas and in 19 states court rulings have forced changes in these formulas. A result of this litigation is a transfer of resources from districts with higher property tax values to those with lower property tax values. Over roughly the same time span, more than 30 states have imposed new restrictions limiting tax collections, tax expenditures or both (TELs) at the local level. There is evidence that the effect of education finance reform depends upon whether a TEL is in place. Thus to understand fully the impact of such litigation, one must consider whether reform makes the passage of a TEL more likely. In this paper we use data for all states in which referenda are possible over the 1978 – 1990 period to investigate whether TEL referendums are more likely to pass in states where courts have ordered education finance reform. We find that the probability of TEL success in a statewide election is significantly higher if the state has experienced education finance reform.


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