The Effects of School Spending on Education and Economic Outcomes: Evidence from School Finance Reforms

The Effects of School Spending on Education and Economic Outcomes: Evidence from School Finance Reforms

The following post presents research or analyses from outside KASB and is presented for information purposes.  KASB neither endorses nor refutes the conclusions or recommendations contained herein.for your consideration.gif

“The Effects of School Spending on Education and Economic Outcomes:  Evidence from School Finance Reforms”

In January, a working paper with the title above was released by the National Bureau of Economic Research.  You can find it here.  

The paper described an analysis conducted by researchers at Northwestern University and the University of California to determine the impact of court-mandated school finance reforms.  They looked at “nationally-representative data on children board between 1955 and 1985 and followed through 2011” to see how the type and timing of school funding reform impacted the adult outcomes for these students.  

The authors noted that national studies that correlated school resources with student outcomes usually find little association, so they wanted to do a more targeted analysis to specifically determine how school funding reforms impact outcomes for students.  

The study found that “a 10 percent increase in per-pupil spending each year for all twelve years of public school leads to 0.27 more completed years of education, 7.25 percent higher wages, and a 3.67 percentage-point reduction in the annual incidence of adult poverty.”  They further found that these effects were “much more pronounced for children from low-income families.”

The authors also found that “exogenous spending increases were associated with sizeable improvements in measured school quality, including reductions in student-to-teacher ratios, increases in teacher salaries, and longer school years.”

So what does this mean?  The authors conclude the study with the following:

…many have questioned whether money matters, and whether increased school spending can improve the lifetime outcomes of children from disadvantaged backgrounds.  Our findings indicate that state school finance reform policies can improve student outcomes and help reduce the intergenerational transmission of poverty.  Money alone may not be sufficient, but our findings indicate that provision of adequate funding may be a necessary condition.  Importantly, we find that how the money is spend 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 uses.