Public Education Funding Cuts and Enrollment Shift to Private Schools: Evidence From the Great Recession

ABSTRACT This paper examines whether public school funding affects private school enrollment. To identify causal effects, we exploit the fact that states historically more reliant on state appropriations and those without a state income tax experienced larger K‐12 funding cuts after the Great Recession. These fiscal characteristics provide plausibly exogenous variation in public school resources. We find that a $1000 decrease in per‐pupil funding increases private school enrollment by 0.48 to 0.57 percentage points. The effect is strongest among middle‐ and upper‐middle‐income households, suggesting that budget cuts to public education may exacerbate socioeconomic inequality in educational opportunities.