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Study Puts U.S. Near Bottom on School Spending

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Washington--Seeking to refute the Bush Administration's contention that the United States spends more on education than its economic rivals, an economic-policy think tank issued a report here last week asserting that the U.S. spends proportionately less on precollegiate education than 13 other major industrialized nations.

Among other conclusions, the report by the Economic Policy Institute argues that the size of the nation's financial commitment to education is exaggerated by the inclusion of higher-education spending in making international comparisons.

That inclusion, it says, "obscures the main focus of concern about American education"--deficiencies at the precollegiate level.

Using methods that its authors say allow for more valid comparisons than others to date, the analysis ranks the United States 14th among 16 countries studied in percentage of national and per-capita income spent on K-12 education.

To bring precollegiate spending up to the average level for the other 15 countries, it says, the U.S. would have to raise spending by more than $20 billion a year--an amount roughly equal to the entire Education Department budget.

In fact, it adds, the U.S. might be expected to spend more than most other countries because its decentralized education system and diverse student population make the cost of providing similar education services higher.

Education groups and Congressional Democrats were quick to praise the report as proof that they have been right all along in arguing that the nation does not spend enough on education. Observers here agreed that it will be cited often in upcoming debates over the federal budget.

The study "graphically confirms that our national commitment to educating young people remains more rhetorical than real," Representative Augustus F. Hawkins, the California Democrat who is chairman of the House Education and Labor Committee, said in a statement. "It is embarrassing to see the U.S. in the bargain basement of international education support."

"This report demonstrates that the criticism of so-called excessive spending on education is, at the very least, overstated," added Albert Shanker, president of the American Federation of Teachers. "We are not making an effort comparable to most industrialized countries, and we should stop implying that we are."

Department's Counterattack

But the Education Department strongly contested the EPI's conclusions in a barbed statement criticizing the report's methodology.

The study "shows why economics can indeed be a dismal science," the department's statement said, charging that it "mixed apples, oranges, and moonbeams to produce an indigestible concoction."

"They're trying to move the debate back to resources, and that's bogus," Charles E.M. Kolb, the department's deputy undersecretary for planning, budget, and evaluation, added in an interview. "I'm not the least deterred by the EPI in saying that we are outspending the rest of the world, with a few exceptions."

The sharp counterattack reflects the potential political consequences of the report for the Administration, whose officials have repeatedly contended that the U.S. spends more on education than most other countries.

For example, at a news conference last year, Secretary of Education Lauro F. Cavazos said that "we are already spending more money per student than our major foreign competitors, Japan and Germany."

At last September's education summit, President Bush declared that the U.S. "lavishes unsurpassed resources" on education.

And at a December meeting of the National Conference of State Legislatures, the White House domestic-policy adviser, Roger Porter, said the nation would spend $353 billion on education in 1989.

"It is a lot in comparison with other countries," he said. "It's more per capita, more per student, it is more as a share of our gross national product."

Report's Findings

The EPI, which describes itself as a nonpartisan think tank, was established in 1986 by a group of prominent economists that included Lester Thurow and Robert Reich. The institute is liberal in its orientation, according to its research director, Lawrence Mishel.

The new study--conducted by Mr. Mishel and Edith Rasell, a staff economist--used 1985 data from the National Center for Education Statistics and the United Nations Educational, Scientific, and Cultural Organization to compare the U.S. financial effort in education with the expenditures of Canada, Japan, Australia, and 12 Western European nations.

The authors calculated national education spending as a percentage of national income, or gross domestic product. This method, they argue, bypasses the problem of directly comparing expenditures in different currencies and also provides the most meaningful measure of "the national effort which each country directs toward education."

American public and private spending on all levels of education equaled 6.8 percent of national income in 1985, a percentage that set the U.S. in a three-way tie for second place among the nations studied.

But that statistic is skewed, the researchers say, by the unusually large percentage of American students that goes on to higher education and by the unusually large number of expensive, private colleges and universities in the United States.

A more realistic comparison, they say, can be made if higher education is excluded. If only precollegiate expenditures are considered, the U.S. ties with Italy for 12th place.

After further adjustments to account for differences in each country's precollegiate enrollment, U.S. precollegiate spending as a share of national income drops to 14th place.

The report also includes comparisons based on per-pupil spending as a percentage of a country's per-capita income. The average per-pupil expenditure in the U.S. in 1985, $3,456, was 20.8 percent of per-capita income. Only Australia and Ireland spent smaller percentages on education.

E.D. Favors Other Measure

In its response to the findings, the Education Department argued that absolute expenditures per pupil are the appropriate standard of comparison, not percentage of national or per-capita income.

For example, ED officials said, Mississippi spent 3.9 percent of state income on education in 1986, while Minnesota spent 3.7 percent. But Mississippi's 3.9 percent amounted to only $2,350 per student, while Minnesota schools spent an average of $4,180 per pupil.

A comparison based on percentage of income "is irrelevant because it's not a reliable measure of spending on education," the department's Mr. Kolb maintained.

"If there are a number of things you need to consider when deciding what to do at a public-policy level, this is not one of them," he said. "It doesn't tell me anything useful as a policymaker on education."

Department officials asserted that the EPI researchers were wrong in stating that there is no accurate way to compare absolute expenditures by nations with different currencies. They said such comparisons are commonly done with indexes that translate the purchasing power of each currency into equivalent amounts.

Dueling Statistics

The department generated its own statistics, which Mr. Kolb said were based on the same raw data used by the EPI and were adjusted with a "purchasing-power parities" index developed by the international Organization for Economic Cooperation and Development.

The department's table places the U.S. in second place, behind only Switzerland, among 22 nations in per-pupil spending specifically identified as going to precollegiate education. Those countries include all those studied in the e.p.i. report.

One troublesome aspect of international comparisons, which both the department and the EPI researchers have acknowledged, is that the U.S. reports all its education expenditures as being for either precollegiate or postsecondary education. Other countries list significant portions of their spending in two categories labeled by UNESCO as "other" and "not distributed." Such spending cannot be readily classified by level of education.

When those categories were included, the U.S. dropped to fifth place in the department's comparisons.

The department's rebuttal also contended that the inclusion of other countries' extensive public expenditures on preschool education distorted the EPI's findings, because the researchers did not count money spent on such programs by American parents. The U.S. does not report such parental expenditures as education spending.

Income Standard Defended

In an interview, Mr. Mishel of the EPI defended the use of measures pegged to percentages of national and per-capita income. Comparing direct per-pupil expenditures, he said, does not take into account the higher costs of goods and wages in wealthier nations.

"I'm not going to argue that you don't get anything out of per-pupil spending, but to determine a country's effort, you have to consider the amount of income devoted to education," he said. "There are a lot of reasons why the cost of doing business is higher in Minnesota than it is in Mississippi."

Mr. Mishel also contended that the "purchasing power parity" indexes favored by the department for making comparisons are not widely accepted by economists and remain partially distorted by currency-exchange rates.

As an example of the distortions caused by fluctuating exchange rates, the EPI study calculated per-pupil spending for 1985 under rates in use that year, when the dollar was at its peak, and under 1988 rates. Using the 1985 rates, the U.S. ranked fourth in per-pupil spending among the nations studied; the same expenditure, in weakened dollars, placed the U.S. ninth under the 1988 rates.

On another issue raised by the department, Mr. Mishel agreed that the "other" spending categories for education used by UNESCO are ill-defined. But he said they had to be factored into the EPI analysis because they include foreign expenditures that the U.S. reports in the precollegiate or higher-education category. The study divided such spending between precollegiate and higher education based on the ratio between the two levels in each nation's "defined" spending. That method "probably is not strictly accurate," the report concedes.

Copies of "Shortchanging Education: How U.S. Spending on Grades K-12 Lags Behind Other Industrial Nations" can be obtained for $2 each, prepaid, from the Economic Policy Institute, 1730 Rhode Island Ave., N.W., Suite 812, Washington, D.C. 20036; telephone: (202) 775-8810.

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