Another Study Shows That Funding Matters in Education

Yet another study shows that money matters in education. A new study published in the latest issue of the Economics of Education Review found that increased funding for New York State school districts led to increased student test scores. It concluded:

The findings in this study show clear and compelling evidence that educational resources improve student learning…[and] builds onto a growing body of evidence that educational resources contribute to improved student outcomes. [pp. 176, 177]

The study investigated the relationship between educational expenditures and student performance in New York State school districts between the 2007-08 and 2014-15 academic years. It found that higher per student expenditure has a statistically significant impact on student achievement. An increase of $1,000 per student in elementary schools (grades 3-8) increased achievement in mathematics by one-seventh of a grade level and one-ninth of a grade level in English.

The $1,000 increase amounts to about a 5% increase in average per student expenditure. Thus, even a small increase in expenditure can have a significant effect on achievement.

The study utilised a special provision of the New York State education finance system to estimate the effect of increases in expenditure on achievement. A policy called “Save Harmless” stipulated that school districts could not lose money if their estimated need declined. Its main impact was that districts did not lose funding when their enrolments decreased, leading districts with declining enrolments to have systematically higher per-pupil expenditures.

While this policy was in place, New York experienced the highest levels of population loss in the country, causing significant changes in enrolment and rapidly compounding increases in resources available per student. By controlling for demographic changes associated with these enrolment losses, the study isolated exogenous variation in school resources associated with enrolment changes and was, thereby, able to estimate the effect of the expenditure increases on student test scores.

The authors state that their findings caution against cutting expenditure on public schools and support targeted expenditure increases as a policy instrument to improve academic performance.

As achievement gaps between privileged and disadvantaged students remain a persistent source of inequality in society, this study provides a persuasive case that greater investment in education could help close these gaps. [p.177]

There is now an abundance of evidence that money matters in education, especially for disadvantaged students. Some 13 studies in the last two years found that increases in school funding improve student results. Numerous other studies in earlier years produced similar results. The studies variously show that increased funding improves test score results, reduces achievement gaps between rich and poor, and increase high school completion rates, post-school earnings and employment. They provide compelling evidence of the worth of targeting funding increases to meet the learning needs of disadvantaged students.

The clear policy implication from the new study and earlier ones is that money matters in school education and can improve the quality of public education. The findings call into question the cuts to public education by state governments in Australia over recent years. Since 2009, state governments have cut funding for public schools in real terms (adjusted for inflation) by $481 per student. It has denied additional resources for disadvantaged students, the large majority of whom attend public schools, and more than likely precludes improvements in achievement or reductions in achievement gaps between rich and poor.

Trevor Cobbold

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