Money Troubles: How Budget Cuts Hit Schools in China

China made big changes to how taxes are shared between local and national governments. This put a lot of pressure on local budgets. So, what happened to school funding when money got tight? Researchers looked at what happened after a big tax reform in 2002. They found that counties hit hardest by the changes spent less on education. This didn't happen right away. It took time, and the effects lasted a long time. Some places were hit harder than others. Counties with stronger economies, those that already spent less on schools, and places that sent money to other areas cut education budgets the most. But special funds helped soften the blow. When money got tight, schools were often the first to feel the pinch. And competition between local governments made things worse. This shows how fiscal pressure can hurt education. This study helps explain why school funding is often lacking in China. It also gives ideas for how local governments can make better spending choices when money is tight. Plus, it offers insights for improving China's tax system.