Risky Schooling? K-12 funding over the business cycles. Christopher Biolsi * Steven G. Craig † Amrita Dhar ‡ Bent E. Sørensen § IN PROGRESS October 10, 2016 Abstract Is school funding insured against business cycle shocks or are students attending school in booms advantaged over their peers that attend school in downturns? We study the sensitivity of funding to the economic conditions of the county and the state and we examine if states insure school districts against county-level income shocks. We find that there is perfect risk sharing between school districts within a given state, as state governments increase transfers to local school districts when a shock to local per- sonal income generates a fall in locally raised revenue. However, local school districts are exposed to state income shocks. The sensitivity of school spending is heterogeneous according to the specific funding formula employed by the state. JEL: I22, H72, H77 * Office of Management and Budget; The views expressed in this paper are those of the authors and do not reflect the views of the Office of Management and Budget or the Executive Office of the President; christopherjohnbiolsi@gmail.com † University of Houston; scraig2@central.uh.edu ‡ University of Houston; adhar2@uh.edu § University of Houston and CEPR; besorensen@uh.edu. 1