Impacts of Efficiency Targeting in School Aid on School District Efficiency, Student Performance, and Outcome Equity.

This article examines the application of efficiency targeting in formulas for school aid to local school districts, focusing on its effects on school district efficiency, student performance, and outcome equity. Using data from approximately 607 Ohio school districts between 2011 and 2019, the study employs a Conditional Frontier Approach (CFA) to measure efficiency while controlling for non-discretionary environmental factors. Simulation results indicate that stricter efficiency targeting—penalizing inefficient districts by reducing their aid—can improve school district efficiency by about 0.7 to 4 percent and enhance student performance by approximately 0.5 to 2.7 percent. Although poorer districts face disproportionately larger cuts in aid under stringent efficiency targets, these reductions incentivize efficiency improvements that translate into better educational outcomes, suggesting that under certain ranges of efficiency targeting, efficiency, student performance, and outcome equity can simultaneously improve. The paper also proposes a simplified, practitioner-friendly formula for incorporating efficiency targeting into existing school aid formulas, addressing limitations of prior complex models.