Relationship Between Local Fiscal Effort and High School Graduation Rate

Education is an investment in human capital, but the cost to provide this public service is significant. Understanding the return on this investment is essential for informed and effective financial decision-making. While previous school finance studies have examined the relationship between funding and various indicators of student achievement and student attainment, most have focused on spending practices rather than the level of investment itself. Although the literature affirms the need for educational resources, further research is required to determine which types of investment most positively affect student outcomes. Therefore, funding must be analyzed prior to budgetary allocation to evaluate its impact on educational outcomes, rather than attributing the effects of fiscal effort solely to the manner in which funds are spent. The purpose of this study was to examine the relationship between local fiscal effort and high school graduation rates across 131 public school divisions in Virginia from 2010 to 2018. This non-experimental, quantitative study utilizes ex post facto data and employed repeated measures, analysis of variance, analysis of covariance, correlation analyses, and partial correlations, while controlling for student subgroups based on race, socioeconomic status (SES), and disability status. Results indicated that overall, local fiscal effort does not have a statistically significant impact on graduation rates when analyzed categorically by quartile. However, when fiscal effort was treated as a continuous variable, a small but statistically significant positive relationship was observed for White and non-disabled student subgroups. Regression analyses further revealed that in certain school divisions, increased fiscal effort is associated with improved graduation rates, while in others, the relationship was either negative or not statistically significant. These findings suggested that the effect of fiscal effort on student outcomes is context-dependent and may vary according to demographic and economic conditions within school divisions. The study concluded that while fiscal effort alone may not universally predict graduation outcomes, it remains a critical consideration in equity-based funding strategies. These findings contributed to the existing body of research on education finance and underscored the need for more targeted, localized analyses to determine where increased investment can most effectively improve student achievement and student attainment.