Education Spending is Increasing, but Where is the Money Going?

The COVID-19 pandemic and subsequent economic shutdown have caused severe revenue shortfalls in many states. Consequently, these states have been forced to make tough decisions on spending, including cuts to education. For example, Colorado – where K-12 education takes up 36% of the annual budget – has seen a 25% reduction in revenue. This shortfall led to an average per-pupil spending reduction of 5%. While the COVID-19 economic shutdown has certainly jeopardized education funding in the short term, education spending has seen a long-term increase in real dollars. Despite more money going to public education in recent decades, the data suggests that the additional funding has proven ineffective when it comes to student achievement.

Although most of the money for education comes from the states and municipalities themselves, federal subsidies for education (in real dollars) have increased 14.9% from $38.9 billion in 2010 to $44.7 billion in 2020. State and local spending (in real dollars) has also gone up from $674.6 billion to $739.2 billion, an increase of 10%. Interestingly, the average teacher salary has decreased by 4.5% over the same period of time. This increase in education spending is not going towards classrooms. Looking at how efficiently states invest in education can improve educational outcomes that merely increasing spending could not.

Waste and inefficiency in public education spending has resulted in no link between increased spending and student achievement. In 2016, a team of economists and policy analysts from across the country developed a comprehensive ranking system of education spending efficiency. By dividing 112 cities’ aggregate standardized test scores by per capita education spending (dividing total education spending by the number of residents), while also accounting for poverty rates and median household income, the researchers found some cities spent more per capita, yet generated lower test scores.

The city with the highest median household income – Fremont, California – ranked 84th most efficient in terms of spending. Washington, D.C – with average academic expenditures at $3,552 per resident (the highest out of all cities) – ranked 68th in test scores and was ranked as the 106th most efficient. Not only does this highlight the inefficiencies of public education spending, it demonstrably disproves the notion of increased funding resulting in increased success. In short, America’s school districts are spending more to achieve the same – or worse – results.

Kansas exemplifies the disparity of increased education spending resulting in decreased achievement. In 2017, the Kansas Supreme Court decided the state legislature had inadequately funded public schools in poorer districts. The case, Gannon v. State, represented merely the latest development in a long list of court rulings dating back to 1990 in the state of Kansas regarding the supposed inequities of public education funding. Consequently, the court mandated the legislature expand education spending across the state in order to remediate the funding discrepancies. But neither a court mandate nor an increase in funding will solve the student achievement problems facing Kansas; it has been proven time and time again that spending more will not create better results.

Taking into account the cost of living, Kansas has the 15th highest per pupil spending at $15,798; and yet, the state ranks 36th in achievement productivity. Kansas and many other states’ experience indicates a bigger education budget does not correspond with student performance, nor does it imply more funding going directly into classrooms.

In 2019, Wisconsin governor Tony Evers proposed increasing K-12 education spending by $1.4 billion despite no concrete evidence to suggest increased spending has any positive impact on student performance. In fact, another econometric analysis of state education spending demonstrates that high-spending districts perform the same or worse on state-mandated exams and the ACT relative to low-spending districts.

Despite increased funding, anemic student performance in high-spending districts suggests that merely increasing education spending is ineffective at improving student performance. Inefficiency in school administrations has made it difficult for school districts to use their budgets effectively. Cutting unnecessary waste would aid in mitigating this issue. The ALEC K-12 Efficiency Commission model policy provides a framework for states to ensure education dollars go directly toward educating students.

Another policy framework is the Public School Financial Transparency Act, a model policy that would require every school district in a state to “create and maintain a searchable expenditure and revenue…database” in an easily accessible and public format. By creating a task force of nonpartisan experts to study and review state-wide data and increasing transparency in education expenditures, school districts can enact the most cost-effective and common sense approaches to increasing the efficiency and effectiveness of education spending.

It ought to come as no surprise that revenue shortfalls following the COVID-19 economic shutdown would result in states making cuts to education spending to close budget deficits. However, state budget deficits have given states the opportunity to fix education spending for the long term by increasing the effectiveness of every dollar spent. With the number of students, cost of living, and demand for public education increasing every year, states must increase education spending efficiency and strive to improve academic achievement for children across the country.

In Depth: Education

An excellent education has long been recognized as key to the American Dream. Unfortunately, the current monopolistic and expensive K-12 education system is failing our students, leaving them unprepared for college, careers, or life. Similarly, our higher education system is leaving students with higher debt burdens and fewer career guarantees…

+ Education In Depth