Funding Increases Benefit Low Income Students

There is now a mountain of evidence that increased funding for low income and other disadvantaged students improves student results. The latest evidence comes from a study published in the April issue of the American Economic Journal: Applied Economics. It found that legislative reforms in the United States that led to increases in funding in low income school districts resulted in large increases in student achievement.

…we show that reforms lead to sharp, immediate, and sustained increases in spending in low-income school districts. Using representative samples from the National Assessment of Educational Progress, we find that reforms cause increases in the achievement of students in these districts, phasing in gradually over the years following the reform. The implied effect of school resources on educational achievement is large. [p. 1]

The study concluded that its results refute claims that money doesn’t matter in education:

Our results thus show that money can and does matter in education, and complement similar results for the long-run impacts of school finance reforms… [p. 24]

The study is significant because it is the first study to be based on a large nationally representative data set. Other studies showing positive effects of increased funding on the achievement of low income and other disadvantaged students are based on smaller data sets or case studies of reforms in individual states.

The constitutions of many US states require that every child must be provided with an equal opportunity to have an adequate education. Beginning in 1989, a wave of court cases found that school funding formula were not consistent with meeting the “adequate education” requirement and ordered school finance reforms. Legislatures in other states acted without court decisions to stave off potential orders.

Between 1990 and 2011, there were 64 school finance reforms in 26 states resulting in substantial funding increases in low-income districts. They did not accomplish this by “levelling down” school funding, but rather by increasing spending across the board, with larger increases in low-income districts.

The study used the variation in the timing of the reforms to analyse their causal effect. Its strategy was based on the idea that states without finance reforms in a particular year provide a counterfactual for states that do have events in that year, after accounting for fixed differences between the states and for common time effects.

It found no sign of systematic changes in either funding or test scores in the period leading up to a reform. Following the reforms, there were sharp increases in state revenues, with large increases in funding for low-income districts and smaller but still positive increases in high-income districts. Funding in low-income districts increased by an average of $1,200 per student per year for several years. Schools used the additional funding on instructional spending, reduced class sizes and capital spending.

There were clear changes in achievement trends following the funding reforms and they increased as students were exposed to the increases for longer. There were significant increases in average test scores in the lowest income districts and a reduction in the achievement gaps between low- and high-income districts.

Ten years after a reform, the achievement of students in low-income districts relative to the state average rose by about 0.1 standard deviation, which was approximately 20% of the baseline gap between high- and low-income districts. The implied impact is between 0.12 and 0.24 standard deviations per $1,000 per student in annual spending. This is a significant impact and is at least twice the impact per dollar implied by the Tennessee Project class size reduction experiment.

However, the study found no discernible effect of the reforms on state-wide achievement gaps between high- and low-income students or between minority and white students. It said this was because most inequality is within school districts rather than between districts and changes in the distribution of resources across districts are not well enough targeted to meaningfully close these the state-wide gaps. The school finance reforms led to only small increases in the funding to which the average low-income or minority student is exposed.

Thus, while school funding reforms aimed at low-income districts were successful at raising resources and outcomes in these districts, the study concluded that within-district changes in the distribution of funding or in other policies that reduce achievement gaps are necessary to have dramatic impacts on the average low-income, minority, or low-scoring student.

There can be no dispute now that increased funding targeted at disadvantaged students is necessary to improve student results. This is the 8th study in the last six months to demonstrate this.These studies complement six others over 2016 and 2017 showing that increases in school funding improve student results. Numerous other studies in earlier years produced similar results.

The studies provide compelling evidence of the worth of targeting funding increases to meet the learning needs of disadvantaged students. 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 present a robust refutation of claims that school funding increases directed at disadvantaged schools and students fail to improve results. As a recent review of academic studies on the relationship between school funding and outcomes concluded:

The available evidence leaves little doubt: Sufficient financial resources, equitably distributed in relation to pupil needs, are a necessary underlying condition for providing quality education. [Bruce Baker, How Money Matters in Education, p. 15]

Trevor Cobbold

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