Educational Economics: Where Do School Funds Go?

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Educational Economics: Where Do School Funds Go?

By most objective measures, education in the United States has improved little during the past 30 years. To better understand our education system, Bill has been reading widely about the complexities of school finance. Here’s his review of one of the books he’s found useful.

Each year in the United States, the K-12 public education system spends $500 billion or about $9,000 per student. This is probably the most important investment that we make as a society, for education is a primary source of economic strength and equality of opportunity. So it’s critically important that we make sure school money is well spent.

This may be more critical now than ever before, because growth in education spending is leveling off and budgets are even being cut. The biggest contributors, state and local governments, are under immense fiscal pressure. California, for example, has reduced K-12 aid to local school districts by billions of dollars and is cutting a variety of programs, including adult literacy instruction and help for high-needs students. Illinois cut 2011 education funding by $311 million, including significant reduction in programs to improve reading skills. Idaho is raising class sizes, Hawaii has furloughed teachers, and districts around the country are renegotiating staff and teacher pay. With federal economic stimulus funds winding down across the nation, and the federal government facing large budget deficits, there’s nowhere left to turn.

For a basic understanding of where education money comes from and how it gets spent, one of the books I highly recommend is Where Do School Funds Go? by Marguerite Roza.

What you'll learn, unfortunately, is that the complexity of the system makes it very hard to answer the question in the book’s title. Education funding is a complex mix of federal, state and local money, much of it designated for various, particular purposes. So school finance data is either very high level, like the amount per student, or it’s very detailed, like a school budget document. Either way, it’s not very useful for making comparisons and evaluating results.

Even experts have a very hard time figuring out whether school money is well spent. Say what you will about the flaws in No Child Left Behind, the law provided data that most everyone could understand: school-by-school test scores that revealed racial gaps and put the spotlight on schools that were not teaching even basic subjects very well. We need to do something similar with school finance data, so that parents and everyone else in the community can understand it and participate in a discussion of how to make sure our education spending achieves the goals we all want for our kids. Roza’s book has some very good recommendations about how we should be able to look at the data, classify the data, know what we spend and know what’s most effective.

Until recently, Roza was a professor and highly regarded senior scholar at the University of Washington Center for Reinventing Public Education. Her research has focused on how the resources available to schools and classrooms are impacted by policies at the federal, state, and district levels. Her analyses have prompted changes in education finance policy at all levels in the education system. Marguerite Roza joined the Gates Foundation in May 2010 to advise on our education work, especially our College-Ready and Postsecondary Success initiatives. She is helping us make sure that our investments are making a difference in terms of students’ success in high school, college and beyond.

At 99 pages, Roza’s book is a quick read, but it includes some stunning insights. She explains how the complexity of school funding inhibits schools’ ability to deliver services aligned with their academic priorities. For example, although federal Title I programs and many state initiatives are set up to provide equal funding for schools with low-income students, these inner-city schools still get short-changed, because their teachers are less senior and therefore paid less.

Her analysis uncovers the surprisingly high per-student cost of certain programs, such as cheerleading and crafts courses, because of union contracts, the types of teachers employed and the numbers of students involved. Roza also explores how complex, earmarked funding formulas prevent schools from operating more efficiently by purchasing services from the local community college, for instance.

One bright spot, Roza notes, is that teacher pay has improved a lot over the last 30 years. But pay is still largely based on seniority and whether a teacher has a master’s degree. Almost no teachers are given raises based on any measure of their effectiveness.

Maybe what’s most striking is how little flexibility schools have. A lot of spending is for specialists, transportation and other things that the school district, let alone the individual school, has no control over. This finding forces you to question the idea that you can fix a "failing" school simply by closing it and opening a new one under the same district policies and union contracts. Very little is actually decided at the individual school level. Charismatic principals and dedicated teachers can make a difference in some schools, but in general, the big decisions are made elsewhere.

Schools’ lack of flexibility is especially problematic now, when state and local education budgets are under pressure, as I discussed in a November 2010 speech to the Council of Chief State School Officers. Schools have very little ability to adjust or respond creatively to cuts in funding. Roza’s findings and recommendations are very timely, and I hope they are heeded.


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