Both the Springfield public schools and the Shelbyville public schools are fully financed by local taxes of 1% on all property. In Shelbyville, the average house is worth $150,000, while houses in Springfield are only worth $100,000 on average. Each town has 10,000 houses and can decide to spend its tax revenue on schooling (R) or on other community goods (X).

a. What is the total amount of tax revenue in each town? On the same graph, draw the budget constraint for both school districts.

b. The state government wants to equalize spending in the two districts. The state government it provides a block grant to Springfield for the difference in the tax revenues between the two towns. Assuming there is no effect on property values, will this necessarily lead to the same amount of spending across districts? Explain.