Intergovernmental Financial Monitoring and Intervention: Does it make the Grade?

Does state financial monitoring of school districts improve district financial condition? Since the 1980s, the Illinois State Board of Education (ISBE) has been monitoring the fiscal health of public school districts, and currently uses a system called the School District Financial Profile. ISBE scores districts’ financial health and intervenes when scores fall below acceptable levels. A premise underlying this system is that early intervention can improve district financial health. To assess state fiscal monitoring and intervention of Illinois school districts I assemble a panel data set of financial indicators covering over 800 school districts in Illinois for thirteen years (2002-2014). I employ statistical techniques that appropriately control for district conditions as well as discontinuities in the application of policy interventions. I find that state intervention does not improve the trajectory of district financial indicators in the short term, but does significantly improve districts’ trajectory in the longer term. This research adds to scholarship in both the financial management and educational policy fields and offers practical implications for state and district policymakers.