The Effect of Fiscal Stress Label Receipt on School District Tax Referenda Outcomes: Evidence from Ohio

Graduation date: 2016This paper evaluates the previously unknown effect that a Fiscal Stress Label (FSL), a State fiscal intervention program signaling fiscal duress, has on passage rates and voter support for school district tax referenda. Previous research suggests that FSL receipt is associated with increased school district revenue, however the reason why is still unknown. In order to determine why district revenues increase with FSL receipt, this research utilizes a conceptual process predicated on Tiebout and yardstick competition theory, in addition to information shock literature, communication and willingness to pay research, and school bond success evidence. Once a conceptual basis is provided, I examine the effect that a FSL has on passage rates and the level of voter support for school district tax referenda elections. These two variables were deemed critical for analysis given that a majority of local revenue in Ohio is voted on in tax referenda elections. Using Ordinary Least Squares (OLS), Logistic regression, and several robustness checks, I find that a district’s own FSL is associated with marginal increases in the level of voter support for school district tax referenda elections, which significantly increases the probability of school district tax referenda passage. However, evaluation fails to show any substantial effect of a FSL in a neighboring district on voting outcomes for school district tax referenda. Ultimately, these results may be helpful for local school districts and State policymakers concerned with increasing revenues via the referenda process and preventing deficits