School Budgeting and School Performance: The Impact of New York City’s Performance Driven Budgeting Initiative

Performance Driven Budgeting (PDB) is a school-based budgeting initiative that was instituted in a select group of New York City schools beginning in the 1997-1998 school year. This paper analyzes the impact of the initiative on student test scores in the fourth and fifth grades and on spending patterns. Using school-level data provided by the New York City Board of Education, we construct a panel dataset of 609 elementary and middle schools over a span of four years, 1995-96 through 1998-99. To analyze the impact of the initiative we estimate school production function models that incorporate school fixed effects and an indicator for participation in PDB. After controlling for these and other student-body characteristics, we find that PDB had a positive effect on some student test scores and led to a change in the mix of spending, but not its level.