Related Expertise Cost & Efficiency
It’s summer, and the budget knives have been out again in many school districts across the United States. Over the past few years, education spending has tightened, and relative fiscal austerity at the state and federal levels means that budgets are more likely to fall than to rise in the near future. In at least 30 states, according to a report by the Center on Budget and Policy Priorities, school funding now stands below 2008 levels—in many cases, far below.
But as taxpayers and local school stakeholders argue about whether the budget should be cut or increased, they’re missing the bigger issues. All spending is not created equal: How a school system spends its dollars is just as important as—perhaps even more important than—how much it spends. For roughly 40 years, student outcomes have barely budged in the United States, even though inflation-adjusted education spending per student has doubled over the same period. (See Exhibit 1.)
The challenge is clear: since the 1970s, math and literacy test scores for U.S. students at age 17 have remained flat, according to the National Center for Education Statistics of the U.S. Department of Education, and the country continues to fall in international rankings. Among the countries measured by the Organisation for Economic Co-operation and Development (OECD), the U.S. fell from twenty-third place in mathematics in 2003 to thirty-first in 2009. By comparison, Poland spends approximately one-third this amount per pupil yet ranked six places higher in 2009.
To view the problem another way, consider two U.S. students in 1994—one entering kindergarten and one graduating from high school. On average, an additional $25,000 was spent on the kindergartener over the 13 years (from 1994 through 2007), yet she achieved the same test scores as the 1994 senior.
Some states have managed their funds better than others. When we compare the ten-year period ending in 1998 with that ending in 2008, we see that the top quartile of states in terms of spending efficiency saw every $3,000 of additional cumulative per-pupil spending lead to an average increase of 1 percentage point in high-school graduation rates. By contrast, a similar spending increase among the lowest-performing quartile of states was associated with a drop in graduation rates, according to The Boston Consulting Group’s analysis of data from the National Center for Higher Education Management Systems and the National Center for Education Statistics. (See Exhibit 2.) (Even accounting for the fact that different states calculate graduation rates differently, the data indicate an interesting correlation.)
Part of the problem lies in the nation’s haphazard approach to allocating school funds, with new spending often directed at interventions that have unproven or limited impact. For instance, in 2009, California earmarked more than $41 million to hire additional gym teachers to combat childhood obesity—despite there being no shortage of gym instructors in the state or any evidence that hiring more of them would reduce obesity. The grants were not even targeted at schools with large percentages of overweight students, according to the report “Leaders and Laggards: A State-by-State Report Card on Educational Innovation,” published by the Center for American Progress, the U.S. Chamber of Commerce, and Frederick M. Hess of the American Enterprise Institute.
Once such initiatives begin, they’re rarely assessed for effectiveness—and rarely canceled. They persist year after year regardless of their value, layering legacy costs on top of other costs. Few legislators or administrators have been willing to acknowledge the tension between cost and outcome or to accept that spending in one area might deprive a more promising area of funds.
And the lack of a value-based approach is not limited to incremental initiatives. As “The Widget Effect,” the pivotal report from the U.S. advocacy organization TNTP, argued, the education system has not taken a value-based approach in the way it treats its most important and most costly asset: teachers. Historically, differences in teachers’ effectiveness have not been linked to differentiation in their recognition, support, compensation, or career trajectory.