10 Things We Now Know About Education Spending

by Staff Writers

August 12, 2012

Education spending has been a major talking point for politicians over the past few years as the recession has forced some serious cuts to just about every part of state and federal budget, with education hit especially hard in many areas around the U.S. While education funding is an issue that inspires some passionate debate, the results of studies done on the matter aren’t always what you’d expect and sometimes contrast the supposedly well-informed decisions politicians make about who and what to fund through education spending. Here, we cover some points about education spending that have been illuminated by research and raw data, showcasing where education spending should go to create the biggest benefit to students, who’s getting the biggest benefit, and the impact solid spending can have.

The U.S. spends more than any other nation on education.
Each year, the United States shells out billions of dollars on education. In 2010, the total annual spending on education was more than $809 billion dollars. That’s more than any other industrialized nation, and more than the spending of France, Germany, Japan, Brazil, the U. K., Canada, and Australia combined. The difference is substantial when you look at annual spending per child as well. In the U.S., the average student costs the government about $7,743. The next highest nation is the United Kingdom, with $5,834 per student, a difference of almost $2,000 a year per student. So what do top performing nations like Finland and South Korea spend? Just $5,653 and $3,759 per student, respectively.
Yet, math and science scores for U.S. students are substantially lower than many other nations.
When it comes to getting students to learn more and perform better in school, it isn’t purely an issue of collective education spending. While the U.S. spends more than any other nation on education, its test scores don’t reflect the average spending per student. On math tests, American students score an average of 474 on a 600 point scale, doing slightly better on science with an average score of 489. By comparison, Canadian students scored an average of 527 and 534 on the same tests, and Finnish students dominated the pack scoring 548 and 563. Of course, these are just averages. Students in affluent suburban districts score much higher than their poorer, urban counterparts, which leads us to our next point.
Educational spending is often inconsistent.
Educational dollars in the U.S. aren’t always fairly allocated. Students coming from the most high-need, desperate situations often don’t have access to good-quality schools, resources, and experienced teachers. Part of that has to do with inconsistent allocation of educational funds. Recent studies have found that school districts commonly distribute different amounts of funding to individual schools within the district, even those serving the same types of students. Many schools get less money for funding teacher salaries, which means they can’t afford to hire experienced teachers, a problem that’s further compounded by receiving lower amounts of unrestricted spending, leaving schools without a way to make up the difference. A study of Houston-area schools found that schools just miles apart had vast differences in funding, with some receiving $18,027 per student and others just $4,800. While some schools with high funding were successful, others were failing, demonstrating that money doesn’t always determine educational outcomes (though it usually doesn’t hurt).
More money isn’t always the solution, but better allocation of it can be.
Simply giving more funding to schools that are struggling or failing hasn’t proven to be a reliable solution to America’s educational problems. What does matter, however, is how that education funding is spent. A review of California schools in 2007 found no relationship between spending and student outcomes stating that more funding wouldn’t make a difference until “extensive and systematic reforms” were made. What does that mean? It means that many of the major problems with education in the state, and possibly nationwide, stem from the illogical and wasteful ways school funding is spent than from lack of money. In fact, the study suggested that even in underperforming inner city schools, students would see a much greater benefit from reforms than from simply increasing spending.
Education spending can have far-reaching economic effects.
Attending a high-quality, well-funded school can be one of the best gifts a young person can receive in life. Why? Because a solid elementary and secondary education has some far-reaching effects that can resonate throughout life. Those who attend quality schools are more likely to choose additional education throughout their lives and in turn are likely to make more than their peers who attended lower quality schools. Of course, education spending itself isn’t what separates a high-quality school from a low-quality one, but it does allow schools greater freedom to provide resources, extracurriculars, technology, experienced teachers, and arts and science education to students, the impact of which isn’t insignificant.
Teacher pay does matter.
Over the past few years, teachers have been hit hard by accusations that they’re overpaid and that they put an undue strain on state finances. Yet studies show that teacher pay does make a difference in improving educational outcomes for students and for improving the quality of education in America as a whole. In fact, teacher pay is uncompetitive with that offered by other professions, and the economic penalty teachers pay for their chosen profession increases the longer they stay on the job. As a result, many of the best teachers leave the teaching profession or never enter it in the first place. Consider these stats: every year 20% of teachers in urban districts quit, 46% of teachers quit before their fifth year, and the turnover costs associated with this costs the U.S. $7.34 billion every year. Lower pay means fewer top performing individuals are attracted to the profession and that more high-quality, experienced teachers leave, which has had a marked effect on education quality, especially in poor, urban schools.
The more money people have, the more they spend on education.
Education spending isn’t just an issue for the state and federal government; it affects individuals, too. As you might have guessed, those who come from the upper income brackets spend more on education than those in lower income brackets, probably largely because they have the resources to be able to do so. This can have a significant impact on the long-term academic and professional success of students, as parents who can afford to invest in tutoring, extra classes, and high-quality colleges generally have students who perform better than their peers. This can create an enormous gap between well-off students and their less well-off peers, before state and federal school spending is even taken into account.
Charter schools aren’t cure-alls for education woes.
Many cities struggling to deal with failing schools are investing millions of state dollars into funding charter schools. While some of these schools have seen success, they’re not necessarily the perfect solution to America’s bigger educational problems. Charter schools can kick out students that don’t measure up, don’t allow teachers to join unions which keeps their pay low, and as studies are finding, spending less money on students and more money on education than their public school counterparts. A study by the National Center for the Study of Privatization in Education found that charter schools spend less on instruction, even when controlling for other factors, finding a $1,140 discrepancy in spending on average. (It is important to note, however, that these results were not found at all charters schools, and some spent considerably more than their public counterparts.) The major problem with sending public money to the private charters, suggests the study, is the lack of transparency among some charter management organizations, making it hard to tell where funding is going.
The biggest return on investment in education spending comes from spending more on the lowest achieving students.
While high-performing and average students certainly should receive their fair share of educational funding and resources, studies suggest that education spending has the biggest impact when it’s focused on students who are below the status quo. Why? Because helping these students excel in school and beyond can have a big economic impact further down the road. Elite colleges and universities receive millions in funding every year, but those are schools that some students can’t even dream of attending and with little financial assistance or motivation, they often end up in dead end jobs, on welfare, or even in jail. Happily, the funding tide seems to be slowly changing, with Obama pledging billions in funding to community colleges and technical schools, providing greater economic opportunities for all, not just the top performers.
The earlier money is spent on education, the better the investment.
While there is much debate and confusion about the best way to reform education, one thing numerous studies point to and that most experts can agree on is that the earlier students receive high quality education, the better. A study at the German Institute for Economic Research found that immigrant children who attended public kindergarten were 25% more likely to go on to a pre-university track of study. A study at the University of Chicago found that preschool programs for disadvantaged kids generate a 16% annual rate of return on an initial $10,000 investment. Why such a big gain? These students are more likely to get good grades, stay in school, go to college, and enjoy higher lifetime earnings. They’re also less likely to go to jail and go on welfare, which means both society and the individual students reap the economic benefits of smart, early educational spending.