School District Responses to Matching Aid Programs for Capital Facilities: A Case Study of New York's Building Aid Program

Abstract

States are financing a larger share of capital investment by school districts but little is known about district response to facility aid programs. This paper addresses this gap by examining how a short-term increase in the matching rate for the Building Aid program in New York affected district capital investment decisions. We estimate a capital investment model and find that most districts are responsive to price incentives but that price responsiveness is related to the fiscal health and urban location of the district, we provide recommendations for the design of capital investment aid programs to support high-need urban districts.

Keywords: Capital investment, education finance, matching grant

JEL Classification: H71, H72, H75, H77