Opportunities to estimate the causal effect of school spending on student achievement are infrequent and have been based, almost entirely, on variation in spending from large school finance reforms. Property values also affect school spending through both local property tax revenue and the level of state aid provided to each school district. However, little is known about the effect property values have on student achievement through their impact on school revenue.
We explore how teachers unions affect education production by comparing outcomes between districts allocating new tax revenue amidst collective bargaining negotiations and districts allocating tax revenue well before. Districts facing union pressure increase teacher salaries and benefits, spend down reserves, and experience no student achievement gains. Conversely, districts facing less pressure hire more teachers (instead of increasing compensation) and realize significant student achievement gains. We interpret these results as causal evidence of the negative impact of teacher rent seeking on education production, as the timing of district tax elections relative to collective bargaining appears to be as good as random.