School Finances Study by Penn State Doesn’t Pass Smell Test

Tom Shepstone
Shepstone Management Company, Inc.

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Two Penn State researchers have put out a study about school finances that suggests the shale revolution has hurt more than helped but it makes no sense.

It pains me, as a Penn State graduate to criticize my alma mater but I have no choice. Two members of the College of Education faculty have put out a study about school finances and the impact of shale gas development that simply don’t pass the smell test. I’m talking about a story that recently appeared in a blog called The Conservation and an identically titled piece in the Philadelphia Inquirer the other day. The latter is a little more complete, but the message is the same; “fracking has led to a ‘bust’ for Pennsylvania school district finances.” I categorically reject that claim based on what I see with my own eyes.

I wrote to one of the researchers after I saw the article in The Conversation. The article was all assertion and no data that amounted to anything. Indeed, when I clicked on the link titled “Get the Data” all I got was a spreadsheet with literally six entries; the same ones appearing in the following table from the story:

school finances

This data, of course, proves nothing other than the fact gas drilling has taken place in rural areas with less wealth, which is surely a surprise to no one and that is precisely why rural areas have wanted it.The rest of the piece was all bark, with one link after another to irrelevant and often clearly biased material plus these assertions:

  • School districts that experienced unconventional drilling had US$1,550.50 less per pupil in 2015 dollars, relative to otherwise similar districts that did not have unconventional drilling.
  • Contrary to the predictions of gas industry advocates, we found that it had largely negative impacts. Adjusting for a host of factors that can impact funding, districts where fracking occurred had lower per pupil incomes, real estate values and property tax revenues.

The Inquirer version of the school finances story added this one:

Similarly, some residents were able to benefit from gas leasing revenues when wells were drilled on their property, but those revenues don’t fall under “earned income.” As a consequence, they don’t contribute toward school revenues.

These assertions and the tone of the articles didn’t pass the smell test for me. So, I wrote to one of the authors and asked for a copy of the study itself. I received a very nice reply and a of the yet unpublished full report. Because it’s proposed for publishing and In do not wish to violate any copyright laws, I haven’t uploaded it. I can tell you, though, it’s one of those academic reports with all kinds of adjustments, covariates, entropy balancing, weighted treatments and calculations of “the average effect of treatment on the treated.” And, it was “robust” to boot.

The study concludes districts with no gas wells have had above average gains in local revenue contributions to school finances, while those with gas wells had gains less than a third as much. That proves absolutely nothing, of course, if school districts with gas wells are located in poorer rural school districts, but it is the essence of the case being made and it makes no sense.

I don’t do covariates, entropy balancing or weighted treatments and some would say I’m not all that “robust” either. I’m so sick of hearing about robustness, in fact, that I have zero desire to gain that distinction. Indeed, I instinctively avoid trendy academic terms. Nonetheless, I can count and I am able to access school finance data from here. I can even adjust for inflation and, like the authors of the study examine everything in 2015 dollars. So, let’s look at the data for the Elk Lake School District in Susquehanna County, where Dimock is located and compare it to the New Hope – Solebury School District in Bucks County where there’s no drilling anywhere nearby. Both districts have enrollments of roughly 1,150 students, so it’s a good smell test in this case.

school finances

I compared the actual revenues of both school districts for the 2007-08 and 2017-18 school years, adjusted them for inflation to 2015 dollars and calculated the changes over the decade as well as the per pupil numbers. Here’s what I found and what you can see for yourselves from the above:

  • The Elk Lake School District grew revenue slightly faster than the New Hope – Solebury School District, gaining 9% in constant dollars versus 8% in the latter case. (See green arrows.)
  • Elk Lake gained $549 in real dollars versus $2,210 for New Hope – Solebury, but that was a function, not of Marcellus Shale development, but, rather, where things started with Elk Lake at $6,140 per student and New Hope – Solebury at $26,081. They ended up (see red arrows) at $6,689 and $28,292, respectively, which gave the latter a much bigger gain, but only because it started very high.
  • When real estate estate taxes are segregated out Elk Lake gained 13% in real dollars compared to 9% for New Hope – Solebury.
  • Contrary to the Penn State study’s conclusion that earned income tax revenue didn’t grow from Marcellus Shale development, Elk Lake added 10% compared to 8% for New Hope – Solebury.
  • Relatively speaking, Elk Lake did better, but note how the numbers fall right in line with the Penn State study and demonstrate it proves absolutely nothing with respect to Marcellus Shale development.

This hyped up study, in other words, simply shows richer school districts have more revenue to work with and always have; four times more in this illustration. That was true at the beginning and at the end. Marcellus Shale development isn’t responsible for the differential, and it has, as a practical matter, helped Elk Lake grow somewhat faster than New Hope – Solebury.

The hype in The Conversation and the Inquirer is of the worst sort; it essentially says a 200 pound man who gains three pounds is growing three times faster than a 10 pound baby who grew by one. It’s meaningless and apparently intended to help make a case for a severance tax. Don’t fall for it.

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15 thoughts on “School Finances Study by Penn State Doesn’t Pass Smell Test

  1. I lived in Bucks County, Yardley/Lower Makefield Township area, for most of my life. One of the reasons we moved was because of the never ending increases in the property taxes. Solebury had some of the highest taxes in the county. And, all the liberals who moved into what was a nice semi rural farming/commuting community and destroyed it’s heritage and character.

    • This isn’t true. Yardley/Lower Make (pennsbury school district), have relatively high school taxes. New Hope/Solebury had the lowest in the county or many years (haven’t seen a township-by-township comparison of tax assessments for several years.

      My husband was in the title industry for many years and I sold real estate for a time, and I was well-acquainted with the differences in school taxes district-to-district.

      Totally agree that the inundation from NJ, NY, and Philly has almost destroyed Bucks County.

  2. Don’t forget to tell us how the revenues from the gas wells on Elk Lake School property and nearby gas wells have plummeted since their inception.
    Check out the amounts…
    it’s now about 1/5 of what they were in 2009 !!

    So, the gas revenues are not now much of a help.

    And the poverty rate of the children of the school district is still about the same around 40% .

    And with all the supposed gas wealth, which by the way, is a myth, why is Elk Lake only able to spend about $500. more per pupil in that time period while the
    unfracked district can spend another $1800. more per pupil in the same time period.!!

    What do you know, even if we get gas wells, we stay basically a poor district like we were !

    Who would have thunk it.

    And of course, Tom doesn’t like the Penn State Study since it doesn’t agree with his absolute loyalty and love of anything gas.

    Don’t forget, Tom, to send your super-intelligent appraisal of the Penn State study to them and see what they think of it.

    • You obviously didn’t understand a word of what I wrote, Vera. And, I didn’t even address the income from the wells. That’s a separate category, above and beyond local tax revenues.

    • I live near New Hope-Solebury, had a New Hope address for many years. It’s rather an anomaly, a very small district, but not sparsely populated. Some of the most expensive real estate in Bucks County, and therefore the state.

      Many of the people who can afford to do so send their kids to private school, so the school population is low. It contains a fair number of vacation homes for wealthy New Yorkers. So, the district can afford some of the highest per-pupil costs in the state.

      Ironically, because of these factors, it has some of the lowest school real estate taxes—if not the lowest—in the county. That doesn’t mean it’s a great district or particularly well-managed, it’s more an indication of the student-to-tax-payer population and general wealth of the district.

      Those points have much more to do with the differences between the two districts and their expenses than fracking or lack thereof.

      Just because people have more money doesn’t mean it goes to the schools. If your real estate values are low in Elk County, then you need to increase the school tax rate to increase the money in the coffers—if that’s your concern.

      By the way, I grew up in Beaver County, much of which is in the other end of the spectrum from Bucks. I can attest to the improvement in people’s lives there due to fracking.

  3. Fake, fake, and more fake.

    The researchers compared a bunch of school districts; Mr “not robust” Shepstone cherry-picked just two. Why those two? Perhaps it gave him the result he wanted?

    Mr. “not robust” Shepstone had access to the full research report, while we poor “low information” folks just have to take his word for all of what the researchers reported, and that his analysis was definitive.

    That’s not how peer review, which Mr. “not robust” Shepstone seems to dislike because it is a tool of the university elites to suppress the rest of us shleps, works. Peer review allows everyone full access to ALL the data and analyses.

    More: Mr. “non-robust” entirely missed the semi-macro economic point that, in the data he reluctantly decided to show us, the very poor Elk Lake school district appeared to have about 25% of the school finances per pupil of the apparently rich New Hope-Solebury district.

    Dontcha think that after all this time of more than 10 years of fracking in PA, and the riches the gas industry and their mouthpieces like Mr “Robust” here claim will flow to the poor rural towns and counties, that Elk Lake would be doing a little better than they are compared to New Hope?

    But no, the streets and roads of Susquehanna County’s Elk Lake district are still paved with dirt and not gold.

    Fake, fake, and more fake.

    Sad.

    • But, I let you comment, Stan! How can bad can it be? And, I actually provided data that more or less matched that of the study but put it in context to make my point, which is what you don’t like. My article is of considerably more depth than what appeared in either The Conversation or the Philadelphia Inquirer. If you want the full report, I’ll be pleased to email it you and then you can explain why an article claiming a loss in revenue doesn’t share the base data or address rates (for starters). And, stop bleating like a scared lamb, will you?

      • Fake, fake, fake.

        Your readers did not have access to the work you are snarking. That’s the point.

        And not that either Tom or Stan is a better analyst.

        Name calling always is a resort of scared fakers who are messaging true believers.

        I stand by my critique of your analysis.

        • Well, I gave you a copy, didn’t I? As for name calling…well, think about taking the log out of your own eye before critiquing the twig in mine. But, hey, Stan, you are welcome to read the report, judge its “robustness” and say whatever you’d like. I’m pleased to have your view and the debate!

  4. As a PSU EMS graduate it is apparent to me that the scientific method at Penn State is used selectively if the results collide with political expediency. Just remember that PSU gave us Michal Mann, Climategate, East Anglia and the hockey stick!!

    • Exactly. I lived in a residence hall with education majors. Not exactly students of scientific methodology. PSU, Food Science, ‘79

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