School finance reform and voluntary fiscal federalism

California has transferred the financing of its public schools from localities to the state. In response, many families have supplemented the tax revenue of their local public schools with voluntary contributions. This paper analyzes that phenomenon. We propose a model of partial cooperation among parents in making voluntary contributions to their public schools. Under reasonable conditions, the model predicts that contributions per pupil should decline with school size. We estimate this relationship using data on contributions to California schools. Our estimates reveal that contributions per pupil do decline with size; however, the rate of decline is surprisingly slow. (C) 2002 Elsevier B.V. All rights reserved.