Policy Position

Public School Finance

in Education

Introduction

Discussions of funding levels are necessary, but not sufficient, for truly understanding the health of our public schools. Researchers generally agree that how the money is spent is far more important than how much money is available to be spent. But no matter how many times researchers find weak empirical relationships between spending and performance, the public will insist that schools are one teacher pay raise away from the educational promised land.

Unfortunately, the American public too often equates the quality of public schooling with the condition of various inputs – per-student spending, educational technology, teacher pay, class size, school buildings, and the like. Presumably, schools will succeed so long as federal, state, and local governments use taxpayer money to furnish high-tech gadgets, pay teachers more, reduce class sizes, and construct magnificent school buildings.

But there is a better way for us to think about education finance – a focus on productivity. Researchers use the term “educational productivity” to describe analyses that compare funding to student performance. To do so, they use quantitative methods to measure the relative return on investment for schools and school districts, while considering differences in cost of living, household income, English language proficiency, and special education services.

All things being equal, there are tremendous variations in productivity within North Carolina’s public school system. Some districts have below-average per-pupil expenditures but above-average test scores. Others have relatively high per-pupil expenditures, but their test scores are disappointingly low.

Whether you call it “return on investment,” “educational productivity,” or “bang for the buck,” an assessment of the relationship between educational inputs and outputs is an essential starting point for good K-12 education policy.

Key Facts

  • North Carolina spent an average of $9,172 per K-12 student in federal, state, and local operating funds in 2017. When average spending for buildings and other capital costs is included, the total per-student expenditure on public education in our state is nearly $9,707 per student.
  • During the 2016-17 school year, total operating expenditures reached $13.1 billion. State funds accounted for over $8.5 billion or 65 percent of that total.
  • State funding is not distributed to all public school children equally. State and federal agencies allocate funds based on the needs, circumstances, and grade level of each student.  During the 2017-18 school year, for example, small, low-wealth school systems received $12,551 in state funds for each special-needs elementary school student with limited English proficiency from a low-income family.  Federal funding may add up to an additional $5,652 per elementary student, depending on program eligibility.
  • Federal No Child Left Behind/Every Student Succeeds Act funding to North Carolina public schools has remained relatively flat since 2013. Child nutrition programs received an additional $200 million in federal funds since 2012, largely to implement the 2010 Healthy, Hunger-Free Kids Act.
  • Counties are responsible for financing their own capital programs and have spent almost $12.8 billion on school construction and maintenance since 1998. The state has contributed over $1.9 billion for capital expenditures during the same period.  Taking all sources of revenue into account, school districts have spent over $14.7 billion for school capital expenditures since 1998.

Recommendations

  1. Acknowledge that empirical studies find a weak relationship between education spending and student performance. Research suggests that expenditures on classroom instruction provide the most “bang for the buck.” Even when dollars flow to the classroom, however, the fundamental principles of educational productivity still apply; that is, it’s not how much you spend but how you spend it.
  2. Discontinue the confusing practice of allocating funds using dozens of state-developed funding formulas. Instead, utilize a block-grant funding system. Give school districts the freedom to allocate education funding according to unique needs and circumstances.
  3. Alternatively, change the way that North Carolina funds public education by attaching funding to the student. Coupled with open enrollment for schools statewide, student-centered funding will ensure that schools chosen by parents will receive funds necessary to educate each child — nothing more, nothing less.
  4. Require school districts to post budgets, check registers, contracts, and other public documents online.

Data

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