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  1. Education

Study examines the power of money in schools

Published Dec. 13, 2016

If you spend more on education, will students do better?

Educators, politicians and unions have battled in court over that crucial question for decades, most recently in a sweeping decision this fall in Connecticut, where a judge ordered the state to revamp nearly every facet of its education policies, from graduation requirements to special education, along with its school funding.

For many years, research on the relationship between spending and student learning has been surprisingly inconclusive. Many factors, including student poverty, parental education and how schools are organized, contribute to educational results.

Teasing out the specific effect of money is methodologically hard. Opponents of increased school funding have seized on that to argue that, for schools, money doesn't matter — and, therefore, more money isn't needed.

But new, first-of-its-kind research suggests that conclusion is mistaken. Money really does matter in education, which could provide fresh momentum for more lawsuits and judgments such as the Connecticut decision.

The study, published by the National Bureau of Economic Research in July, was conducted by the economists Julien Lafortune and Jesse Rothstein of the University of California at Berkeley and Diane Whitmore Schanzenbach of Northwestern. They examined student test scores in 26 states that have changed the way they fund schools since 1990, usually in response to a lawsuit such as Connecticut's, and compared them with those in 23 states that haven't. While no two states did exactly the same thing, they all had the effect of increasing funding for the poorest districts.

The post-1990 time frame is important: That's when courts changed how they think about states' obligations to public school children. Previously, nearly all school funding lawsuits focused on the question of "equity" — did disadvantaged students receive funding equal to that of their well-off peers?

The problem with that perspective was the answer could be "yes," even if funding was too low across the board. Starting with a 1990 court case in Kentucky, courts started asking about "adequacy" instead. Were school districts getting enough money, which might require giving extra money to districts that enroll many low-income, expensive-to-serve students?

"There's now growing evidence, from my work and from others, that those reforms did lead to improved achievement and improved outcomes for children in low-income school districts," Rothstein said.

Lafortune, Rothstein and Schanzenbach also solved a methodological problem that had plagued school finance researchers for decades. More money isn't an end unto itself — the goal is to produce better results. But before the recent widespread adoption of the Common Core State Standards, every state had its own standards and related tests. That made it hard to compare academic results from one state to another.

The researchers took advantage of the one test that is taken by a representative sample of schoolchildren nationwide: the National Assessment of Educational Progress, which is administered by the Department of Education.

Although NAEP results are usually published only for whole states and a small number of large urban school districts, the researchers got the Education Department to let them analyze individual student scores. Those results include information on the test-taker's race and income, as well as school district attended. The researchers could compare performance in poor and wealthy districts before and after changes in spending.

They found a consistent pattern: In the long run, over comparable time frames, states that send additional money to their lowest-income school districts see more academic improvement in those districts than states that don't. The size of the effect was significant. The changes bought at least twice as much achievement per dollar as a well-known experiment that decreased class sizes in the early grades.

Another paper, published this year in the Quarterly Journal of Economics, looked at the same question through a different lens. That study examined longer-term outcomes, like how long students stayed in school and how much they earned as adults, for students in districts with and without court-ordered funding changes. Here, too, researchers saw gains with more money spent.

That study was conducted by C. Kirabo Jackson of Northwestern, Rucker C. Johnson from the University of California at Berkeley and Claudia Persico, then a graduate student at Northwestern and now an assistant professor at the University of Wisconsin. They examined outcomes for about 15,000 people, born between 1955 and 1985, and found that for poor children, a 10 percent increase in per-pupil spending each year of elementary and secondary school was associated with wages that were nearly 10 percent higher, a drop in the incidence of adult poverty and roughly six additional months of schooling.

"The notion that spending doesn't matter is just not true," Jackson said. "We found that exposure to higher levels of public K-12 spending when you're in school has a pretty large beneficial effect on the adult outcomes of kids, and that those effects are much more pronounced for children from low-income families."

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