How We Spend Matters More Than What We Spend

How We Spend Matters More Than What We Spend 

In a previous version of the FY18-19 chart embedded in this post, the standardized test on the vertical axis was incorrectly labeled. The post now reflects the correct standardized assessment used in FY18-19. Additionally, the Edunomics Lab has called to our attention an updated chart for FY22, which we have embedded below the original post.

It is usually assumed that increased education funding leads to improved academic performance, but research suggests that the way financial resources are allocated is more important than the amount of money invested. The Edunomics Lab at Georgetown University has demonstrated that more money does not necessarily result in better outcomes.

The Edunomics Lab created a useful chart, shown below, of per-pupil expenditures and proficiency on Alaska’s statewide assessment. The chart plots schools’ per-pupil expenditures in fiscal year 2018-2019 on the horizontal axis and the percentage of students proficient on the Performance Evaluation for Alaska’s Schools (PEAKS) on the vertical axis. The proficiency level is an average of performance on the math and English language arts exams. Statewide, the average percentage of students proficient in a school was 36%, and the average spending per student was $20,907.

The size of a school’s bubble represents its enrollment while the color of the bubble represents the percentage of students in the school who are economically disadvantaged, which in Alaska includes those students eligible for free or reduced-price lunch. Charter schools are marked as plus signs rather than bubbles. The chart does not show schools with per-pupil spending higher than $40,000, although some of Alaska’s schools do spend more than that amount.

Surprisingly, as a school’s per-pupil expenditures increase, the percentage of proficient students declines. This trend, although there are exceptions, challenges the conventional belief that more funding directly translates to better outcomes. Furthermore, the chart reveals that the schools spending less than $10,000 per student not only consistently performed near or above the statewide proficiency average of 36%, but were also almost entirely correspondence schools or charter schools. Many of the top-performing schools are charter schools as well. These innovative models have demonstrated the ability to do more with limited resources.

The belief that injecting more money into schools will automatically yield positive outcomes is a common misconception. The key lies in wisely allocating funds to schools and programs that have successfully improved student performance. Simply increasing the overall budget for education is not sufficient to improve outcomes; it is essential to target effective initiatives and expand access to options that do more with less, such as correspondence schools and charter schools. More money can certainly make a difference, but funding that is absorbed by growth in administration or underfunded pension systems is not likely to benefit teachers’ classrooms, teachers’ salaries, or student outcomes.

It is essential to prioritize transparency and accountability in the allocation of education funds. As Eric A. Hanushek, a fellow at the Hoover Institution at Stanford University, said, “You can’t trust that you can just drop in a pile of money and expect good performance to come out.” Spending increases should be accompanied by a commitment to allocate and use the funds in productive ways, and transparency ensures that commitment is fulfilled. By taking a thoughtful approach to educational funding, every dollar invested can make a genuine difference in the lives and educational trajectories of Alaska’s students.

The below chart shows spending vs. outcomes for FY22. The horizontal axis extends to per-pupil spending of $55,000. Statewide, the average percentage of students proficient in a school in ELA was 28% and 23% in math, and the average spending per student was $25,707. The chart also shows fourth, eighth, and ninth-grade proficiency in ELA and math in additional tabs.