How Money Matters

The following is a summary of a new report from the Learning Policy Institute in the United States on school finance reform. It reviews reforms by four US states to undertake progressive school funding strategies in order to substantially improve learning opportunities for all students. It provides recommendations for federal and state policies to address funding inequalities that contribute to the cycle of poverty. It shows that money matters when it comes to improving schools and that how money is spent is critical.

For many years, research on the relationship between spending and student learning appeared inconclusive. Due to the limitations of data sets and statistical methods, it was difficult to disentangle the effect of resource allocation from other factors, such as family income, parental education, or school structure. And because children from low-income families have typically attended poorly funded schools, it has been difficult to sort out whether it was their family income or school resources that predicted outcomes.

However, recent advances in data sets and statistical methods have supported a number of studies that show that when more money is spent on education, especially for students from low-income families, achievement and graduation rates improve, along with life outcomes such as employment, wages, and reduced poverty rates. Investments in instruction, especially high-quality teachers, appear to leverage the largest marginal gains in performance.

This insight has been documented in studies around the world, along with the several other areas of investment that have been found to make a difference in achievement and equity both in high-achieving nations and high-achieving states in the U.S. In addition to secure housing, food, and health care that enable children to come to school ready to learn, these places share a number of features needed in a system of education that routinely educates all children well, including:

• supportive early learning environments;

• equitably funded schools that provide equitable access to high-quality teaching;

• well-prepared and well-supported teachers;

• standards, curriculum, and assessments focused on 21st-century learning goals; and

• schools organized productively for student and teacher learning, providing time and opportunities for collaborative planning and collective improvement activities.

A number of states have undertaken reforms that have created these conditions and produced stronger educational outcomes. We review the strategies used in four states: Connecticut and Massachusetts undertook reforms that produced great strides in equity, adequacy, and achievement during the early 1990s. New Jersey made great strides a decade later. As a “majority-minority” state, New Jersey’s position as one of the top-achieving states in the country is particularly noteworthy. These three states are among the four highest scoring on the U.S. National Assessment of Educational Progress (NAEP) in reading and mathematics, and they perform at levels comparable to the highest achieving nations in the world on the Program for International Student Assessment (PISA). North Carolina’s sustained investments over two eras of reform in the 1980s and the 1990s enabled it to become the first high-poverty Southern state to achieve above national norms and to make more progress in closing the achievement gap during the 1990s than any other state.

All four of these states equalized funding across districts, providing more to those with greater needs, typically on the heels of an equity lawsuit. All of them also undertook a number of reforms to improve the quality of teaching, by raising salaries and standards for teacher education and licensing, investing in mentoring for beginning teachers and in high-quality professional development for veteran educators, and improving training for principals. All of them adopted new curriculum standards and assessments that focused on higher order thinking and performance skills and created ways to support schools and districts needing additional help to improve. Each of these states also invested in high-quality preschool to reduce the achievement gap before kindergarten.

While all of these states made impressive gains in educational outcomes, all of them have also suffered setbacks in funding, through tax caps or other fiscal limitations in later administrations, and all of them are currently confronting legal or political challenges to inequality, accompanied by opportunities to recoup those losses. Their experiences demonstrate that, in the U.S., these kinds of equity-focused changes require steady work.


Both federal and state governments can make a difference in achieving greater equity and adequacy in school funding.

The federal government has set a precedent for enforcing educational standards through its expectations in the last two authorizations of the Elementary and Secondary Education Act—the most recent titled the Every Student Succeeds Act (ESSA). The act requires states to develop means for monitoring progress toward student learning goals as a condition of receiving federal funds. It could equally tie federal education funding to each state’s movement toward equitable access to education resources. The federal government also has a role in ensuring adequate health care and nutrition, safe and secure housing, and healthy communities for children. In addition to investing in children’s basic welfare, the federal government could:

• Equalize allocations of ESSA resources across states so that high-poverty states receive a greater and fairer share. Allocation formulas should use indicators of student need, with adjustments for cost-of-living differentials, rather than relying on current measures of spending that disadvantage poor states.

• Enforce comparability provisions for ensuring equally qualified teachers are assigned to schools serving different populations of students. The law already requires that states develop policies and incentives to balance the qualifications of teachers across schools serving more- and less-advantaged students, but this aspect of the law is weakly enforced, and wide disparities persist.

• Require states to report and act on opportunity indicators to accompany their reports of academic progress for each school, reflecting the availability of well-qualified teachers; strong curriculum opportunities; books, materials, and equipment (such as science labs and computers); and adequate facilities. ESSA includes a number of expectations for reporting the kinds of educational resources students receive, and states have incorporated others into their new accountability and improvement systems under the law. The law requires a resource audit for schools identified as in need of intervention and support, as well as the collection of measures regarding funding, staffing, and access to advanced courses. To live up to the spirit of the law, the federal government should evaluate progress on these opportunity measures and require states to meet a set of opportunity-to-learn standards for schools identified as failing. As a condition for receiving federal funds, each state should include in its application for federal funds a report describing the state’s demonstrated movement toward adequacy and equitable access to these education resources—and a plan for further progress.

Meanwhile, states need to figure out not only how much money to invest in education, but also how to send that money to districts and schools in ways that will translate into strong educational programs. As the models in this report show, state funding can be allocated in ways that are more effective for improving the central work of schools.

States can:

• Focus funding on pupil needs and the costs of meeting the state’s standards so that all districts can attend to the central tasks of education: hiring effective educators and providing the materials needed to teach the standards, plus any additional services their specific mix of students requires. One way to do this is to fund schools based on equal dollars per student adjusted or weighted for specific student needs, such as poverty, limited English proficiency, foster care or homeless status, special education status, etc., and further adjusted for geographic cost differentials of various kinds.

• Develop a reliable base of funding without a bevy of categorical programs that come and go. The gains made by states that have seen strong outcomes from their school funding reforms have been the result of continuity in funding and the flexibility to make locally appropriate, strategic decisions about how to spend resources to achieve results.

• Ensure high-quality preschool for children who may have fewer learning opportunities or greater learning needs before they enter school—for example, children from low-income families, new English learners, and children with disabilities. This closes much of the gap that would otherwise be present at entry to kindergarten and launches children into their educational careers from a much more even playing field.

• Enable districts to hire and keep well-prepared educators by coupling funding increases that support improved salaries and working conditions in previously under-resourced districts with stronger educator preparation, induction and mentoring for novices, and ongoing professional learning. Once resources are in place to recruit qualified teachers and principals to all communities, it is important to ensure that they have the professional knowledge and skills to teach and lead schools successfully.

In order for districts to hire more qualified staff, the state needs to ensure that a supply of well-prepared staff is available for them to recruit. This requires that the state develop and enforce standards for teacher quality and create a strong, steady supply of effective practitioners through salary and training incentives—a job that goes beyond what districts themselves can do, even with a more stable and equitable distribution of local resources.

As the fate of individuals and nations is increasingly interdependent, the quest for access to an equitable, empowering education for all people has become a critical issue for the nation as a whole. No society can thrive in a technological, knowledge-based economy by starving large segments of its population of learning. The path to our mutual well-being is built on equal educational opportunity. And such opportunity begins with an equitable, purposeful school funding system that allows all schools to support high-quality teaching for each and every child.

Linda Darling-Hammond (2019). Investing for student success: Lessons from state school finance reforms. Palo Alto, CA: Learning Policy Institute.

One Reply to “How Money Matters”

  1. How has the research landscape evolved concerning the relationship between education spending and student learning outcomes, especially in terms of overcoming challenges related to data limitations and statistical methods? Moreover, what progress has been made in disentangling the impact of resource allocation from other influential factors like family income, parental education, and school structure, particularly for students from low-income families?

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