Increased Spending Improves School Results

A new study published in the Journal of Public Economics found that increased expenditure on schools in low-spending school districts led to significant improvements in student achievement and high school graduation. It adds to the large number of research studies showing that money matters in education.

The study’s conclusion is emphatic:

….this study provides convincing evidence that spending increases can have a significant impact on student achievement and attainment. To the extent that these results are generalizable to districts outside of our effective analytic sample, they support recent arguments that school finance policy could realize further gains by targeting funding toward low-spending districts. [p. 2]

The study estimated the impact of increases in education spending on student outcomes following over 3,000 local tax referenda in 566 school districts across seven states: Arkansas, Louisiana, Michigan, Missouri, Pennsylvania, Texas, and Wisconsin. Districts in which referenda passed spent an average of $400-$500 more annually per student after seven years. They spent this money on higher salaries per employee (over half of which were teachers) as opposed to employing more teachers or support staff.

The increase in district spending was found to be associated with a steady increase in average test scores in mathematics and English, as well as an increase in graduation rates. The results of the study implied that the impact after 5-7 years of increasing operational spending by $1000 per student increased test scores significantly and graduation rates by approximately 9 percentage points. The student achievement data was for grades 3-8 and the graduation rates were for four-year high schools.

The study found that districts that spent below the median prior to the tax referendum realised greater achievement and attainment gains than those that spent above the median, even though absolute revenue and spending increases were comparable between high- and low-spending districts. Increasing funding for high-spending districts was less likely to yield improvements in graduation rates and in mathematics and English achievement.

The study provides evidence that, even after the large increase in K-12 spending associated with state finance reforms in the late 20th Century, additional investments can still have significant impacts on the achievement.

….even after the large increase in K-12 spending associated with state finance reforms in the late 20th Century, additional investments continue to have significant impacts on student achievement and attainment…. they suggest that policymakers could realize significant gains in student achievement and attainment through increased district funding. [pp. 14-15]

The study was unable to determine whether districts increased salaries of existing personnel or whether they replaced them with higher-paid staff. The authors said that it is possible that districts realised achievement gains because they were able to employ higher-quality teachers or increase teacher effort. It could be that low-spending districts that passed referenda suddenly were able to hire more effective full-time teachers, as opposed to relying on temporary options or less qualified individuals. Whatever the precise mechanism, the evidence suggested that higher teacher pay yields returns, which is consistent with an accumulating body of research.

The fact that money matters in education is now well beyond dispute. This is the 27th study since 2015 showing that increased spending on schools increases student achievement and high school graduation rates. Numerous studies prior to 2015 show similar results.

Carolyn Abott, Vladimir Kogan, Stéphane Lavertu, Zachary Peskowitz, School district operational spending and student outcomes: Evidence from tax elections in seven states, Journal of Public Economics, Vol. 183,March, 2020.

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