Most decisions about the level of local public school spending are made by local school districts. Their choices are conditioned by local resources and the availability of external funds, mostly from state governments. A major purpose of this substantial state aid is to further the goal of equal educational opportunity by helping to make spending more equal in rich and poor districts.

This article investigates the link between school spending disparities and state school aid by using data on school finances and community attributes to model the determinants of per-pupil operating spending by Massachusetts and Rhode Island school districts. These estimated relationships are used to quantify the impact of recent and newly enacted aid programs on educational expenditures in Massachusetts communities, focusing on their likely effect on spending disparities.