Outcome-based Grants-in-aid to Local School Districts: How to Apply Them and Analyze Their Impacts on Fiscal and Outcome Equity

This paper investigates whether an outcome-based aid formula can improve fiscal and outcome equity across local school districts more strongly than a typical aid formula does, including Ohio’s recent aid formula. When the outcome-based aid formula is applied to foundation aid, fiscal and outcome equity deteriorates compared with the Ohio’s recent aid formula. However, when it is applied to power-equalizing aid, the latter improves fiscal and outcome equity more significantly than both foundation aid and Ohio’s recent aid formula do. The lessons from this paper can be easily applied to similar grant systems in other states that have standardized test score systems. This paper further shows how to modify the theoretical parts of the outcome-based aid formula when applying it to real-world case like Ohio’s grants-in-aid to local school districts.