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How Top Performers Build-and-Support
Provide Adequate School Funding

by Bill Honig

Many reformers argue that expenditure levels are not a key component of quality and claim that school spending is out of control. Both assertions are false. According to recent research and even reports by moderate and conservative institutions, the level of school funding matters. Increasing funding results in improved student performance and conversely, cutting school budgets depresses outcomes. When adjusted for personal income, school spending has not increased in the past generation. Teacher salaries in the US are now significantly below those in other industrial nations in terms of the percentage of salaries earned by professionals with comparable levels of education.
Unfortunately, the money-doesn’t-matter philosophy, combined with political antipathy toward public education, has severely hampered school funding in this country. As I explained in Reformers Target the Wrong Levers of Improvement, boosting student achievement requires comprehensive reform and an understanding of the many powerful leverage points that directly influence school quality and student achievement. Without adequate funding, many of these necessary initiatives—such as capacity and team building efforts—will be underfunded, teacher morale and engagement will suffer, and chances for improved instruction thwarted.

The Importance of Adequate Funding

There is extensive research confirming the link between per-pupil spending and student outcomes. For an excellent review of the literature, see Does Money Matter in Education? by Bruce Baker. For more recent reports, see The Effects of School Spending on Educational and Economic Outcomes: Evidence from School Finance Reforms and “At the Intersection of Money Reform, Part III: On Cost Functions & the Increased Costs of Higher Outcomes,” part of a series Baker wrote for his blog, School Finance 101. According to a paper written by Julien Lafortune, Jesse Rothstein, and Diane Whitmore Schanzenbach for the National Bureau of Economic Research, student performance improved when courts forced increased state spending.

In January 2014, the prestigious Center for the Budget and Policy Priorities (CBPP) reported the results of its survey of K–12 state and local funding. The report provides further evidence that money matters and documents the damage caused by massive cuts in education expenditures. Quoted by the authors of the report:

As common sense suggests, money matters for educational outcomes. For instance, poor children who attend better-funded schools are more likely to complete high school and have higher earnings and lower poverty rates in adulthood.

Drawing on the CBPP report, Jeff Bryant forcefully argues that increased funding is one of the most effective school improvement strategies, whereas decreased funding is a major cause of low performance:

Importantly, as the CBPP commentary states, “money matters for educational outcomes,” especially for low-income children, whose best interest, many have said, is the main intention of federal education policy. The CBPP commentary points to two recent studies showing the positive impact of increased school funding on students.

The most recent of the two studies found “a 20 percent increase in per-pupil spending each year for all 12 years of public school for children from poor families leads to about 0.9 more completed years of education, 25 percent higher earnings, and a 20 percentage point reduction in the annual incidence of adult poverty. . . . The magnitudes of these effects are sufficiently large to eliminate between two-thirds and all of the gaps in these adult outcomes between those raised in poor families and those raised in non-poor families.”

In the executive summary of the second edition of Does Money Matter in Education?, Bruce Baker states:

This second edition policy brief revisits the long and storied literature on whether money matters in providing a quality education. It includes research released since the original brief in 2012 and covers a handful of additional topics. Increasingly, political rhetoric adheres to the unfounded certainty that money doesn’t make a difference in education, and that reduced funding is unlikely to harm educational quality. Such proclamations have even been used to justify large cuts to education budgets over the past few years. These positions, however, have little basis in the empirical research on the relationship between funding and school quality.

In the following brief, I discuss major studies on three specific topics: (a) whether how much money schools spend matters; (b) whether specific schooling resources that cost money matter; and (c) whether substantive and sustained state school finance reforms matter. Regarding these three questions, I conclude:

Does money matter? Yes. On average, aggregate measures of per-pupil spending are positively associated with improved or higher student outcomes. The size of this effect is larger in some studies than in others, and, in some cases, additional funding appears to matter more for some students than for others. Clearly, there are other factors that may moderate the influence of funding on student outcomes, such as how that money is spent. In other words, money must be spent wisely to yield benefits. But, on balance, in direct tests of the relationship between financial resources and student outcomes, money matters.

Do schooling resources that cost money matter? Yes. Schooling resources that cost money, including smaller class sizes, additional supports, early childhood programs and more competitive teacher compensation (permitting schools and districts to recruit and retain a higher quality teacher workforce) are positively associated with student outcomes. Again, in some cases, those effects are larger than in others, and there is also variation
 by student population and other contextual variables. On the whole, however, the things that cost money benefit students, and there is scarce evidence that there are more cost-effective alternatives.

Do state school finance reforms matter? Yes. Sustained improvements to the level and distribution of funding across local public school districts can lead to improvements in the level and distribution of student outcomes. While money alone may not be the answer, more equitable and adequate allocation of financial inputs to schooling provide a necessary underlying condition for improving the equity and adequacy of outcomes. The available evidence suggests that appropriate combinations of more adequate funding with more accountability for its use may be most promising.

While there may in fact be better and more efficient ways to leverage the education dollar toward improved student outcomes, we do know the following:

  • Many of the ways in which schools currently spend money do improve student outcomes.
  • When schools have more money, they have greater opportunity to spend productively. When they don’t, they can’t.
  • Arguments that across-the-board budget cuts will not hurt outcomes are completely unfounded.

In short, money matters; resources that cost money matter, and a more equitable distribution of school funding can improve outcomes. Policymakers would be well advised to rely on high-quality research to guide the critical choices they make regarding school finance.

The crucial point of these studies: The effect size of these increased expenditures dwarfs the effect sizes of the most commonly proposed reform measures by Test-and-Punish advocates.

Alarming, Widespread Cuts in Educational Funding

In 2015, most states were spending below their 2008 funding level, and some were cutting even further, according to the CBPP report. In 15 states, the cuts exceeded 10%, and 12 states have imposed new cuts. This is happening even as our national economy continues to improve post-recession. Arizona has cut its state education funding by a whopping 23% in the face of widespread voter support for ameliorating the cuts. The CBPP report then documents some of the serious consequences of states’ funding decreases. Bryant lists some of the specifics for those states that have drastically reduced state funds:

In Virginia—where education funding is still over 11 percent below 2008 levels, according to CBPP—the Washington Post reports schools have cut 11,200 staff members statewide while student enrollment increased more than 42,000 students during the same time period.

Many of the additional students pose greater challenges to more time-strapped teachers—39 percent more are economically disadvantaged, 33 percent more don’t speak English as their first language, and the number of homeless students is up 73 percent.

In Pennsylvania, an ongoing funding crisis has driven many schools to borrow in order to make payroll. Some schools that are closing for the upcoming Winter break may not have the money to open up when the students return in January.

In North Carolina—where education funding is still nearly 14 percent below 2008 levels, according to CBPP—the impact of funding cuts are especially glaring.

As education correspondent Lindsay Wagner reports from the Tar Heel State, since 2008, “the economy has recovered significantly, but state spending on education has not. And that is reflected in the disappearance of teacher assistants and in schools left scrambling for supplies, textbooks, and professional development for their educators.”

Wagner’s ground level reporting from districts across the state reveals schools where lack of funding has bloated class sizes to out-of-hand levels and eliminated one-to-one assistance for struggling students. In many of these schools, lack of money means textbooks and teaching supplies are scarce, vital art, music, and other elective programs are a memory, and classes that help low-performing students no longer exist.

“There’s no turnaround in sight,” Wagner reports. “For fiscal 2015, state lawmakers cut funding for at-risk student services programs by more than $9 million.”

The chaos that ensued after Indiana slashed its education funding is well documented. From 2009 to 2013, public school funding was cut by more than $3 billion. During the same period, charter funding was increased by $539 million, vouchers by $248 million, and virtual schools by $143 million. Students who attend public schools account for 94% of Indiana students and took a huge hit. The remaining 7% gained more than $900 million.

Are Teachers Overpaid?

Another argument put forward by some “reformers” is that school funding should be cut because teachers are overpaid. The evidence shows this claim also to be unfounded. A major report by the Organisation for Economic Cooperation and Development (OECD), as quoted by the National Center for Education and the Economy’s Center on International Education Benchmarking states:

Around the world, teachers continue to be underpaid relative to their level of education. Across OECD countries, teachers earned, on average, 80 percent of what similarly educated workers did, in line with top performers Finland, Poland, and Estonia. The U.S. has an even greater disparity between the earnings of its teachers and similarly educated workers: it pays its teachers only 68 percent of what similarly educated workers earn.

The Facts on School Spending

Finally, “reform” advocates and their supporters in the media question the need for increased school funding contending that inflation-adjusted spending for schools has doubled in the past 45 years yet school performance has declined. The second part of the statement is patently false since performance on National Assessment of Educational Progress (NAEP), especially among lower-income students, had risen steadily for the past 30 years until it slowed with the advent of No Child Left Behind (NCLB) and then stalled altogether when tough high-stakes consequences became widespread. But the first part of the statement is also very misleading. A large percentage of the increase (25%) in funding was to accommodate special-education students who were substantially ignored before 1970—surely a legitimate new expenditure. Spending for the regular education program has grown much more slowly.

But most importantly, adjusting only for inflation is approximately 2% a year less than personal income growth (standard of living growth) over the past 45 years, especially for professionals. So if personal income growth were used as the fair measure of how much school funding should increase to allow teachers and other staff to share in standard-of-living growth, you would expect expenditures to grow faster than inflation.

If you add the 2% extra for personal income growth to inflation, it would double every 35 years due to compounding. A shorthand way to calculate this is to divide 70 by the percentage growth, 2%, which is 35 years. Expenditures actually doubled over 45 years. Since over two-thirds of school spending is for staff members, to keep them sharing in prosperity would mean total expenditures adjusted for inflation would need to double over the 45-year period, which is exactly what happened. In contrast, successful nations worldwide have increased the salaries of teachers in relation to other professionals. In the US, teachers earn only two-thirds of average college graduates—ranking us 28th out of 33 OECD countries. See also Baker and Weber’s reportDeconstructing the Myth of American Public School Inefficiency.


What a difference it would have made had the US Department of Education and many “reform” states and districts implemented policies that followed what top-performing districts and states have pursued instead of a narrow, punitive agenda. The new Every Student Succeeds Act (ESSA) now gives states the opportunity to shift direction and model their improvement efforts on the success of states such as Massachusetts. California has adopted this strategy, and the companion articles in The California Context tell its story.

Recent Developments

8/9/16 According to a new report by EPI: The teacher pay penalty is bigger than ever. In 2015, public school teachers’ weekly wages were 17.0 percent lower than those of comparable workers—compared with just 1.8 percent lower in 1994

7/30/2016 Another source demonstrating the extremely low pay of US teachers compared to professionals in other industrial nations. One of the results: lower numeracy scores.

7/30/2016 Class size matters. William Mathis has compiled the latest research showing lower class sizes pay off.

BBS Companion Articles

Why Conventional School “Reforms” Have Failed
Reformers Target the Wrong Levers of Improvement
The California Context
California Policymakers and Educators Shift from Test-and-Punish to Build-and-Support
How the California Reading Wars Got Resolved: A Personal Story

Reference Notes

Sawhill, I. V. (2015, Sep 8). Does Money Matter? Brookings Institution. See also Jackson, C. K., Johnson, R. C., & Persico, C. (2015, Fall). Boosting Educational Attainment and Adult Earnings. Education Next.

The Importance of Adequate Funding
Baker, B. D. (2012). Does Money Matter in Education? Second Edition. Albert Shanker Institute. For the first edition, see

Jackson, C. K., Johnson, R., & Persico, C. (2015, Jan). The Effects of School Spending on Educational and Economic Outcomes: Evidence from School Finance Reforms. National Bureau of Economic Research.

Baker, B. D. (2015, Dec 16). At the Intersection of Money and Reform, Part III: On Cost Functions & the Increased Costs of Higher Outcomes. See also Baker, B. D. (2015, Dec 28). School Finance Reality vs. the Money Doesn’t Matter Echo Chamber.

Lafortune, J., Rothstein, J., & Whitmore Schanzenbach, D. (2016, Feb). School Finance Reform and the Distribution of Student Achievement. National Bureau of Economic Research.

Leachman, M., Albares, N., Masterson, K., & Wallace, M. (2016, Jan 25). Most States Have Cut School Funding, and Some Continue Cutting. Center on Budget and Policy Priorities.

Jackson, C. K., Johnson, R., & Persico, C. (2015, Oct 1). The Effects of School Spending on Educational and Economic Outcomes: Evidence from School Finance Reforms. Quarterly Journal of Economics.

Bryant, J. (2015, Dec 16). The Important Education Issue Leaders Are Still Ignoring.

Baker, B. D. (2016). Does Money Matter in Education? Albert Shanker Institute.

Alarming, Widespread Cuts in Educational Funding
Bryant, J. (2015, Dec 16). The Important Education Issue Leaders Are Still Ignoring.

Ravitch, D. (2015, Oct 20). Indiana: Less Money, More Chaos.

Are Teachers Overpaid?
Organisation for Economic Cooperation and Development (OECD). (2015). Education at a Glance 2015.

Driskell, N. (2015, Dec 17). International Spotlight: New Data Abounds in OECD’s 2015 Education at a Glance. Center on International Education Benchmarking (CIEB).

The Facts on School Spending
Organisation for Economic Cooperation and Development (OECD). Education at a Glance 2015: OECD Indicators.

Baker, B.D., & Weber, M. (2016). Deconstructing the Myth of American Public School Inefficiency. Albert Shanker Institute.

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