New Review of Evidence That Increased Education Spending Leads to Improved Outcomes

A new paper published by the US Century Foundation reviews studies of two school finance reforms in the US that proved effective at improving student outcomes, especially in low-income and previously lower-spending schools. The two reforms reviewed are new school funding formulae introduced in Massachusetts in 1993 and in California in 2013. Both reforms were based on the principle that school districts serving higher need children require not the same, but more resources per student.

The Massachusetts reform provided a significant increase in state funding of the state’s highest need school districts. Three studies of the reforms found consistently positive results. One published by the Massachusetts Institute for a New Commonwealth found that the change was successful in raising the achievement of students in the previously low-spending districts.

The second, a study published by the National Bureau of Economic Research, focused more specifically on the redistribution of spending resulting from changes to the state school finance formula. It found that:

…increases in per-pupil spending led to significant increases in math, reading, science, and social studies test scores for 4th- and 8th-grade students. The magnitudes imply that a $1,000 increase in per-pupil spending leads to about a third to a half of a standard-deviation increase in average test scores. It is noted that the state aid driving the estimates is targeted to under-funded school districts, which may have atypical returns to additional expenditures.

The third study, published in the Journal of Education Finance, found that the change in the distribution of funding resulted in significantly increased student performance.

In California, the new funding formula established base, supplemental, and concentration grants to school districts and provided more funds to districts with a greater share of high-cost students. State funding increased significantly for high poverty school districts from 2013 to 2017 and is already showing benefits in terms of student results. A research study showed that the increased funding led to significant increases in high school graduation rates and academic achievement, particularly among poor and minority students.

The author of the review is Bruce Baker, professor in the Department of Educational Theory, Policy and Administration at Rutgers Graduate School of Education in New Jersey. He recommends that a new national school finance system be developed for the US that includes targeting federal funding to districts within states. He says that national cost models should be used to set funding targets for states and school districts based on explicit student outcome goals and to evaluate the extent to which states are targeting funding to the areas of greatest need.

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