New and fascinating research uses a creative study design and a unique data set to address whether a thriving local economy leads to better student outcomes. Specifically, it examines how the Texas boom in shale oil and gas drilling, which brought with it large and localized effects on wages and the tax base, impacted district schools.
Researchers Joseph Marchand and Jeremy Weber use the variation in shale geology across school districts to model the potential impact of the boom. Specifically they use data on the shale depth—the average distance in kilometers from the surface to the shale formation—as a measure of shale richness and a proxy for the district’s resource endowment. (Deeper shale tends to have greater pressure, so it is more productive and profitable.) They compare results in the districts located at the shale formations versus those outside the formations.
The sample includes over 1,000 school districts for which shale geologic data were available and focuses on shale oil and not the natural gas formations. Districts are followed for fourteen years, from 2001 to 2014. The district outcomes of interest are school finance, spending, labor market outcomes, composition of the student and teacher body, and student achievement outcomes. Analysts use a couple different models, including a district fixed effects model, but both are essentially looking at how outcomes change over time based on shale depth. They also look only at the “within-shale” sample because “non-shale” districts may be quite different than those with shale.
In a nutshell, they find that the percentage of students passing standardized tests in the average shale oil district declined relative to districts outside of any shale formation, even relative to districts with below-average shale geology. There were no clear differences relative to college completion rates or participation and performance on college entrance exams. Attendance rates also slightly declined as a result of the boom.
These declines occurred despite that fact that, over the entire period, the total tax base of an oil district with average shale depth grew by over a staggering $1 million more per student, relative to non-shale districts. This led school districts to lower property tax rates, borrow more, and spend more.
Analysts found that most additional spending went to capital projects or to service debt, with none going to payroll or teacher salaries, despite the fact that two-thirds of total school spending goes to payroll. Analysts say that the capital spending may stem from a state’s focus on equalizing operational spending—but not facility spending—across districts. Unlike operational spending, districts must fund facilities almost entirely through local property taxes, but with an expanded tax base, they can issue bonds and service them without increasing property taxes. (Plus if and when the boom goes bust, they aren’t on the hook to maintain higher salaries this way.)
The boom also widened the gap between private and education sector wages. Specifically, the average shale district experienced nearly a 20 percent increase in the private sector wage. Student composition also changed, but in a way that moderated the decline in achievement since there was a decline in economically disadvantaged students—most likely as a result of extra family income. Finally, the boom was linked to increased teacher turnover, and it led to more inexperienced teachers in the classroom. The overall negative effect of shale development on student achievement likely stems in part from this turnover and the decline in teacher quality.
So in the end, the boom strengthened the local economy, raising wages and adding new jobs. All good. But it didn’t improve student achievement, perhaps because it lured more experienced teachers to leave the classroom. Moreover, it no doubt resulted in some ecstatic kids and teens who are now enjoying stunning school buildings, decked out science labs, fancy gyms, and professional-grade football fields.
SOURCE: Joseph Marchand and Jeremy Weber, “How Local Economic Conditions Affect School Finances, Teacher Quality, and Student Achievement: Evidence from the Texas Shale Boom,” Journal of Policy Analysis and Management (August 2019).