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Abstract

In 1990, Kentucky passed the Kentucky Education Reform Act (KERA) in response to a State Supreme Court mandate regarding educational spending inequality across rich and poor school districts. A comprehensive bill, KERA completely altered the existing school funding system, and instituted a number of accountability and curricular changes. More specifically, KERA effectively equalized per pupil funding across Kentucky school districts, pulling a majority of both low-spending and poor districts up to what had been higher spending quartiles. Economic theory suggests such a dramatic transformation in school finance has the potential to increase income heterogeneity within districts, which may, in turn, improve the educational and economic outcomes of those previously segregated.

This honors thesis examines whether KERA significantly decreased residential income segregation across school districts. Differing from existing research, I focus on one of the most comprehensive reforms in history and its subsequent impact on residential sorting patterns. Using a difference-in-difference regression technique, I find that KERA had no effect on the household poverty rate across districts when compared to Tennessee. These results are robust through a number of different specifications.

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