An article entitled “The Effects of School Spending on Educational and Economic Outcomes: Evidence from School Finance Reforms” published in October, 2015 in The Quarterly Journal of Economics concluded the following:
“Our findings show that increased per pupil spending induced by state SFR policies did improve student outcomes and helped reduce the intergenerational transmission of poverty. Increased school funding alone may not guarantee improved outcomes, but our findings indicate that provision of adequate funding may be a necessary condition. Importantly, we find that how the money is spent may be important. As such, to be most effective it is likely that spending increases should be coupled with systems that help ensure spending is allocated toward the most productive inputs.”
The researchers looked at students born between 1955 and 1985 and compared a variety of outcome measures based on increased spending resulting from state school finance reform. Specific findings of the study include:
- Increased per-pupil spending induced by SFTs increased the educational attainment and improved the adult labor market outcomes of low-income children.
- Reform-induced school spending increases were associated with reductions in student-to-teacher ratios, longer school years, and increased teacher salaries – suggesting that improvements in these school inputs improved student outcomes.
- Given that money per se will not improve student outcomes, understanding how the increased funding was spent is key to understanding why we find large spending effects where others do not.
- When a district increases school spending by $100 due to reforms, spending on capital increases by $10.60, spending on instruction increases by $66.80, and spending on support services increases by $40.80 on average.
- Instructional spending makes up about 60% of all spending, and it accounts for about two thirds of the increases due to reform.
- Spending on support services makes up about 32% of all spending, and it accounts for about 40% of the increases due to reform.
- A 10% increase in school spending is associated with a 5.7% reduction in the student-teacher ratio, 1.36 more school days, and a 4% increase in base teacher salaries.
- For children from low-income families, increasing per pupil spending yields large improvements in educational attainment, wages, family income, and reductions in the annual incidence of adult poverty.
- For children from nonpoor families, there are smaller effects of increased school spending on subsequent educational attainment and family income in adulthood.
- Increasing spending by 10% for all school-age years increased wages by 7.7% each year.
- A 25% increase in per pupil spending throughout the school-age years could eliminate the attainment gaps between children from low-income and nonpoor families.