Suing for your supper? Resource allocation, teacher compensation and finance lawsuits

Despite a large literature examining the effect of litigation on education finance and student achievement, there is relatively little recent evidence about how extra resources generated by litigation are spent. This paper uses national data to examine the effects of high court finance rulings from 1991 to 2002 on school districts’ education spending: including the categories of capital, plant, and support expenses as well as the teacher wage bill. It also decomposes the latter change into a quantity effect from teacher hiring and a price effect due to increased wages. I find that the largest spending increase comes from salary increases to teachers, with other large increases for hiring more instructors and increasing support spending. Further evidence suggests that the higher salaries are manifest more in an increased experience premium rather than higher salaries for new teacher hires. This evidence helps rationalize the role teachers unions play in supporting, and sometimes originating finance lawsuits.

► Successful finance lawsuits increase district resources.
► The largest expenditure of added resources is for salary increases to teachers, followed by hiring more instructors and increasing support spending.
► The higher salaries increase the teacher experience premium rather than raising salaries for new teacher hires.
► This evidence helps rationalize the role teachers unions play in supporting, and sometimes originating finance lawsuits.