WHAT DETERMINES STATE AID TO SCHOOL DISTRICTS - A POSITIVE MODEL OF FOUNDATION AID AS REDISTRIBUTION

Between 1970 and 1990 the veal value (per pupil) of state aid for prim ary and secondary education doubled. This article suggests that this i ncrease is in part caused by the increase in income inequality over th e same period. A positive model is presented in which foundation aid i s used to redistribute income from rich to poor communities, It is sho wn that a structure-induced equilibrium exists, and it is ''as if'' th ere is a decisive voter with median income. Using state panel data for 1970, 1980, and 1990, regressions suggest that between 32 percent and 66 percent of the increase in school aid between 1970 and 1990 is a r esult of the change in the income distribution. In contrast, the regre ssions suggest that 18 percent of the increase in aid is because of ju dicial decisions.