New Study: In Education Money Matters, Helps Poor Districts, Raises Achievement

Jesse Rothstein of the University of California at Berkeley and the National Bureau of Economic Research and his colleagues have just posted a working paper on the importance of statewide school finance reform.  Infusions of state money, whether as the result of court decisions or legislative action, significantly improve the finances of the poorest school districts and, over time, raise test scores.

From the study’s abstract: “Using an event study design, we find that reform events—court orders and legislative reforms—lead to sharp, immediate, and sustained increases in absolute and relative spending in low-income school districts. Using representative samples from the National Assessment of Educational Progress, we also find that reforms cause gradual increases in the relative achievement of students in low-income school districts…”

Rothstein and his colleagues explain: “American public schools have traditionally been locally managed and financed largely out of local property tax revenue.  As jurisdictions vary widely in their tax bases and inclinations to fund schools, this has meant that the resources available to a child’s school depended importantly on where he or she lives.”  Some earlier studies have seemed to show that an infusion of state funding makes little difference, but Rothstein and his colleagues note that earlier school finance lawsuits emphasized equity and sometimes resulted in leveling down—distributing a relatively small pot of money more equally.  The new study tracks school finance reform since 1990, when the demand for an adequate overall level of funding was added to the expectation that the money be equitably distributed:

“We focus on the much less studied third wave of adequacy-based finance reforms.  These began in 1989 when the Kentucky Supreme Court found that the state constitutional requirement for an ‘efficient system’ of public schools required that ‘(e)ach child, every child,… must be provided with an equal opportunity to have an adequate education’ (Rose v. Council for Better Education; emphasis in original).  The decision made clear that adequacy required more than equal inputs (e.g.  ‘sufficient levels of academic or vocational skills to enable public school students to compete favorably with their counterparts in surrounding states, in academics or in the job market’).  To achieve this, spending would need to be increased substantially in low-income districts.  Indeed, subsequent reforms have often aimed at higher spending in low-income than high-income districts, to compensate for the out-of-school disadvantages of low-income students.”

Despite that the definition of “adequate” has varied from state to state, Rothstein and his colleagues explain why adequacy-based school funding reform is superior to efforts for mere equity:  “As with earlier equity-based reforms, there has been no single definition of adequacy, and states have varied in the finance systems that they have adopted.  Despite this heterogeneity, there is reason to believe that adequacy-based reforms will have different implications for the level and distribution of school funding…. One important distinction is that equity reforms often focused on inequities in property tax bases, where adequacy reforms focused on student disadvantage.  Another is that, where an equity-based court order might permit leveling down to a stingy but equal funding formula, a state cannot satisfy an adequacy mandate by leveling down.” In their study, Rothstein and his colleagues measure relative school district advantage and disadvantage by the average family income in 1990 relative to the state average.

While the body of the report is extremely technical, the conclusions are perfectly clear even for the non-expert.

The first conclusion:”Taken together, our event study models indicate large increases in the progressivity of state and total revenues following finance reform events, driven by increases in low-income districts and with no sign of declines in high-income districts or in overall means.”

The second conclusion: school achievement as measured by test scores rises—slowly but persistently.  The study describes: “gradual increases in relative scores in low-income districts.  This is exactly the pattern one would expect, as test scores are cumulative outcomes that presumably reflect not only current inputs but also inputs in earlier grades… There is no indication that the phase-in of the effect slows five or nine years after the event….”

Rothstein and colleagues do not, however, see any immediate closing of achievement gaps between economic or racial-ethnic groups of children. They explain: “(T)he average low-income student does not live in a particularly low-income district, so is not well-targeted by a transfer of resources to the latter.  Thus, we find that finance reforms reduced achievement gaps between high-and low-income school districts but did not have detectable effects on resource or achievement gaps between high-and low-income (or white and black) students. Attacking these gaps via school finance policies would require changing the allocation of resources within school districts, something that was not attempted by the reforms that we study.”

This study‘s conclusions undermine the years’ of arguments made by accountability-driven school reformers who allege that money doesn’t really matter: “We find that state-level school finance reforms enacted during the adequacy era markedly increased the progressivity of school spending. They did not accomplish this by ‘leveling down’ school funding but rather by increasing spending across the board, with larger increases in low-income districts… Reforms also led to increases in the absolute and relative achievement of students in low-income districts.”


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