Sean Corcoran, Thomas Romer & Howard Rosenthal (PDF):

The operation and financing of primary and secondary public schools in the US is highly decentralized. Most of the budget of each of the 13,000+ school districts comes from a combination of local and state revenues. State constitutions and statutes determine the degree of local district autonomy and scope of taxing power.
As part of an ongoing project on the political economy of education finance, this paper reports on some developments in school spending in one state during a time when some of the state’s constitutional rules governing local school district taxing powers changed. In part, the paper provides a replication of tests of a model of bureaucratic agenda-setting in the financing of elementary and secondary public education. In that agenda-setting model, a budget-maximizing agenda setter makes a proposal for a locally funded operating levy that must be approved by a referendum. In the basic model, the referendum is modeled as an ultimatum game where the agenda setter makes a take-it-or leave-it proposal to some pivotal voter. If a majority of the electorate rejects the proposal, the levy is an exogenously specified reversion level. The optimal, budget-maximizing proposal makes the pivotal voter indifferent between the proposal and the