Minnesota Free Market Institute

Prepared by the Minnesota Education League Foundation

How should we think about education spending?

From the earliest times in our history Americans have been committed to providing a strong public education system.

The Founding Fathers understood that the spread of education was necessary to the success of our Republican form of government, and their commitment to widespread education remains the cornerstone of America’s economic and political success over the past two centuries.

The evidence is clear: the best investment we can make is in educating our kids. Our system of government demands an educated and informed electorate, and the future of our economy depends upon smart and well-educated workers.

That’s why  we invest in education. The real question we have to ask is, how well do we make that investment?

Education Spending: An Historical Perspective.

First of all, let’s get some facts on the table. Despite what you may have heard, education spending in real dollars—meaning dollars adjusted for the effects of inflation—has risen dramatically over the years:

Source: National Center for Education Statistics

Minnesota’s spending per-pupil has more than quadrupled since 1950. Since 1970, around the time of the “Minnesota Miracle,” real spending per pupil has almost doubled. Any debate that focuses on a year by year analysis of spending per pupil clearly misses this obvious and undeniable fact: Minnesotans have clearly committed huge and growing resources to the education of our children.

The Relationship Between Spending and Results.

If spending on public education has been rising so quickly, why do we keep hearing about a looming funding crisis for our schools? If doubling spending after inflation in 35 years isn’t enough, then what would be?

This brings us to another, more fundamental question: what exactly is the relationship between education spending and the education results we are seeking?

Interestingly enough, the relationship is not at all what you think. Studies done over the decades have clearly shown that while policymakers focus on the inputs for the education system—the dollars they appropriate—there is little relationship between how much money we put into the system and what kind of results you can expect out of it.

“A massive amount of evidence indicates that spending on schools is not closely related to school quality or student learning” — Eric Hanushek, Hoover Institution/National Bureau of Economic Research

“The [public education] system you have is like a sponge. It will absorb the extra money. Because the incentives are wrong.”   — Milton Friedman, 1976 Nobel Laureate in Economics, Hoover Institution

Obviously, you have to spend enough on education to do the job right, but once you do, it turns out that spending more doesn’t get you much, if any better results.

If you look at both international comparisons, as well as comparisons between school districts in Minnesota, you begin to see an interesting pattern: to the extent that there is any correlation between education spending and educational results, that correlation is negative, not positive. The school districts that spend more per pupil actually tend to perform worse than those which spend less.

Source: MN Dept. of Education, 2005 School District Financial Profiles, and Basic Skills Assessments Accountability Data

Professional educators will be quick to tell you that there is a reason for this: we tend to spend more money per pupil in districts with students who are difficult to teach, have language barriers, or are more likely to have learning disabilities. All of this may be true, but it doesn’t really get to the heart of the matter: we are spending 20% more per pupil educating the kids in the bottom quartile of school districts than those in the top, and getting significantly poorer results.

In other words, even if we spend that extra money to get difficult-to-teach kids a leg up, it clearly isn’t working.

Look at international comparisons between the United States and the rest of the world. Why would it be that Luxembourg, which spends about 60% more per pupil than the United States, has students who not only perform less well than Americans, but less well than those in the Czech Republic, on whom is spent about one-fifth as much money?

Simply put: more money doesn’t equal better results. That is not only true here in Minnesota, or nationally, but worldwide. And the evidence is clear: this is as true with kids of all races, classes, and nationalities.

So why the focus on school funding?

A statistical analysis of data for 2005 shows a negative correlation (correlation coefficient = -0.45) between per-pupil spending and student test scores (8th grade math & reading combined average scale scores) among Minnesota school districts.

Sources: OECD, Education at a Glance 2005, and Learning for Tomorrow's World: First Results from PISA 2003

Again, look at the chart depicting eduation spending over the years. You can see a steadily increasing trend of more money being poured into the educational system as Americans have worried more and more about poor educational results.

As long as Americans are willing to spend more to get the same results, why would the education system change? Americans so far have demonstrated a willingness to increase funding without regard to the outcomes; whenever that is true, what you get is more expensive results, not better results.

It’s Time to Focus on Results.

As long as Minnesotans focus on the inputs into the education system rather than the outputs, there is no hope for better educational outcomes. The price of education will rise over time, but its value will remain steady or decline.

We’ve focused on the wrong problem in education: we keep on trying to find new ways to inject more money into the system, assuming that lack of money has been the ill plaguing our education system.
     
That’s simply not true: real spending on education—that’s dollars after you count the effect of inflation—has almost doubled over the last 30 years.And nobody can point to how that influx of money has significantly improved the educational outcomes for our kids. Instead, we keep hearing about the need for even more money lest the system come crashing down.

It’s time to stop paying for a bigger or better education system, and start paying for better education results.

What Next?

This brocuhure is the first in a series to focus on education in Minnesota. Over the next few months we will examine the role of standards and accountability in improving educational outcomes, the truth behind the achievement gap between white and minority students, what good educational standards would look like, and ways to break the cycle of spending more and getting the same or worse results.

The Minnesota Education League Foundation is a non-profit, non partisan grassroots organization dedicated to increasing real accountability, student achievement and parental choice in education. Since its inception in 2001, the Education League Foundation - a project of the Taxpayers League Foundation - has become a highly effective voice for parents and taxpayers who support education reform.