School Finance Reform: Do Equalized Expenditures Imply Equalized Teacher Salaries?

Abstract

Kentucky is a poor, relatively rural state that contrasts greatly with the relatively urban and wealthy states typically the subject of education studies employing large-scale administrative data. For this reason, Kentucky's experience of major school finance and curricular reform is highly salient for understanding teacher labor market dynamics. This study examines the time path of teacher salaries in Appalachian and non-Appalachian Kentucky using a novel teacher-level administrative data set. Our results suggest that the Kentucky Education Reform Act (KERA) provided a salary boost for all Appalachian teachers, resulting in a wage premium for teachers of low and medium experience and equalizing pay across Appalachian and non-Appalachian districts for teachers of high experience. However, we find that Appalachian salaries fell back to the level of non-Appalachian teachers roughly a decade following reform, at which point the pre-KERA remuneration patterns re-emerge.