Recent empirical work suggests that legal constraints are significant in choosing state educational grant structures. Unfortunately, the literature has not taken such constraints into account, thus calling into question particular grant structure recommendations. This paper studies the conditions under which a legislature, under order to reform its educational grant structure, prefers foundation grants over district power equalization grants. A theoretical model is presented in which the choice is shown to depend on the legal basis of the court's decision, and the empirical validity of this conclusion is demonstrated using Connecticut data and a separate model of school district expenditure choice
