Outcome-based grants-in-aid to local school districts: how to apply them and analyze their impacts on fiscal and outcome equity

This paper investigates whether an outcome-based school aid formula could improve fiscal and outcome equity significantly more than a typical aid formula would. When outcome-based formula is applied to foundation aid, fiscal and outcome equity deteriorates compared to Ohio's recent aid formula. However, when it is applied to power-equalizing aid, the latter improves fiscal and outcome equity more significantly than both foundation aid and Ohio's recent aid formula do. This paper further shows how to apply them to real-world cases. The lessons from this paper can be easily applied to similar grant systems with standardized test scores.