SCHOOL-FINANCE REFORM - AID FORMULAS AND EQUITY OBJECTIVES

State education officials have implemented performance standards, but state education aid has not kept up. By focusing on the relationship b etween spending and property wealth, most existing aid formulas only p artially account for cost differences across districts and, thus, fail to fully promote equity in school performance. This paper shows how t o estimate comprehensive educational cost indexes that control for sch ool district inefficiency and include them in state aid formulas. It a lso simulates for New York the impact of several aid formulas on educa tional performance and evaluates each formula using several equity cri teria. The results indicate that outcome-based foundation formulas can achieve adequacy objectives, but that practical policies to promote v ertical equity or wealth neutrality do not yet exist.