How do School Districts Use State Aid for Capital Expenditures? The Case of Iowa

INTRODUCTION In its most recent nationally representative survey, the National Center for Education Statistics reports that in 2013, the overall condition of over one fifth of schools with permanent buildings [...]
This study is the first to empirically examine how school districts allocate resources in response to capital investment revenue from statewide penny sales taxes (called SAVE funds), and whether SAVE funds affect student outputs (i.e., educational achievement). We found evidence that school districts do not use SAVE funds to increase capital investment or to provide property tax relief. Rather, school districts are most likely to shift existing resources that would have been used for capital purposes toward non-capital purposes, including instruction and administration. Despite a small gain in the number of teachers and minimum teacher salaries, SAVE does not result in a significant increase in student outputs.