January 22, 1997 12 min read
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OBJECTIVE: Adequate funding distributed equitably and focused on student learning.

Money is a problem. Nationally, we spend about $244 billion annually on public education. And education usually is the largest cost item in state budgets. Yet as our state summaries how, educators in virtually every state worry about getting enough money to do the job. And that is especially true for many thousands of inner city and poor rural schools.

Among the 48 contiguous states, the average amount spent per student range from a high of about $8,100 in New Jersey to a low of about $3,500 in Utah. Those numbers are adjusted for geographic cost differences, so New Jersey spend $4,600 in real dollar more than Utah. To its credit, Utah spends a higher percentage of its dollars on classroom instruction--about 66% compared with New Jersey’s 60%. But it still spends only $2,300 per student on classroom instruction compared with New Jersey’s $4,860.

This inequity exists among school districts within states as well. In New York, for example, some of the wealthiest districts spend as much as $5,100 per student more than some of the poorest districts. One study of school districts in the state concluded that about 75% of the disparity gap is accounted for by cost differences from one district to another, by differences in the number of special education students in a district, and by spending inefficiencies. The remaining 25% represents additional value added by the extra funding. That comes to a difference of $1,275 per pupil, which would mean an overall gap of nearly two-thirds of a million dollars between two schools with 500 students each.

Whatever its level of spending, every state has districts that are impoverished. Most state have been used at least once in the past 30 years for funding inequities, and many funding plans have been declared unconstitutional by state courts. Legislatures have struggled for decades to find formulas that would distribute funds equitably. In general, they have failed. Funding plans in 13 states are currently unconstitutional; lawsuits are pending in 12 others.

At the heart of these suits is the inescapable fact that the quality of children’s education depends largely on where they live. Such inequity is a violation of the states’ legal obligation and an injustice for millions of America’s children.

Only the most optimistic think that state budgets for education are likely to increase significantly in the foreseeable future. An aging population, less likely to have children in schools, is becoming more and more negative toward higher property taxes--the primary method of funding education. Tax-limitation bills are regularly introduced in a number of states and have been enacted in several. Proposition 13, enacted in California in 1978, is deemed to have been a major factor in the precipitous decline of what was once widely considered one of the nation’s best public education systems.

In this climate of parsimony, bond issues to raise money to build or repair schools get shot down more often than not, leading to major deficiencies. A recent study by the U.S. General Accounting Office found that about a third of the nation’s schools, serving 14 million students, need to replace or extensively repair at least one building. The cost of bringing the nation’s school buildings into overall good condition is estimated conservatively to be $112 billion.

Some researchers, like Eric A. Hanushek at the University of Rochester, argue that money doesn’t matter very much in schools’ success. They cite numerous studies that find no correlation between higher pending and higher student achievement. We’ve spent a lot more money on education over the past couple of decades, they say, but productivity (i.e., student achievement) has not increased.

Other researchers, like Ronald F. Ferguson and Richard J. Murnane of Harvard University, offer compelling evidence that higher pending is linked to higher achievement. Researchers in this camp say that both the amount of money and the way it is spent are important. (See story, page 58.)

An analysis, “Where’s the Money Gone?” by Richard Rothstein of the liberal Economic Policy Institute in Washington with Karen Hawley Miles, examined how school districts allocated money from 1967 to 1991. Using a “net services” index developed for such service industries as education, instead of the Consumer Price Index, the study found that “real” spending did not triple or even double as other studies suggested. It actually only increased by 61%.

More to the point, the study found that only a quarter of that growth went to regular education. During that period, the proportion of funds spent on the 12% or so of children in special education increased fourfold, from 4% to 17%. In contrast, the share of per-pupil expenditures spent on the 88% of children in regular education actually declined by nearly 21%.

Clearly, both the amount of money and how it is spent matter. A significant portion of the spending gap among districts within a state, according to research studies, can be attributed to inefficiencies in the higher-spending districts. Money spent for classroom aides and pull-out programs, for example, would more likely improve student achievement if it were spent to reduce class size and to hire more highly qualified teachers.


States receive separate grades for adequacy, equity, and allocation of resources, and the indicators in each category are weighted equally.

Adequacy of Resources. 1. Per-pupil expenditure, adjusted. Because this figure has been adjusted to reflect differences in education costs from state to state, it can be used for purposes of comparison. Although higher spending does not necessarily correlate with higher quality, studies show that instructional expenditures are positively related to student achievement. Wealthier districts tend to spend more on education, and when all else is held constant, districts with lower spending have lower test scores. States were graded on the level of expenditure with $7,000 and above receiving an A, or 100%; $6,000- $6,999 receiving a B, or 85%; $5,000-$5,999 receiving a C, or 75%; $4,000-$4,999 receiving a D, or 65%; and below $4,000 receiving an F, or 50%.

2. Change in adjusted per-pupil expenditure, 1985-95. We included this indicator as a measure of a state’s commitment to ensure that education spending at least keeps pace with inflation. Virtually every state has proclaimed that it wants to improve its school and increase student achievement. That would be hard to do if schools lose purchasing power to inflation. Just keeping up with inflation is not enough when greater demands are being made on the system, a’ is now the ca e. In our survey, 94% of teacher, 92% of principals, and 78% of superintendent agree that state and district should be required to increase expenditures for education at least at the rate of inflation. States that increased education expenditures by 20% or more beyond inflation got an A, or 100%; those that increased 15% to 19% got a B, or 85%; those that increased from 10% to 14% got a C, or 75%; those that increased 5% to 9% got a D, or 65%; and those that did not increase expenditures by at least 5% got an F, or 50%.

3. Relative fiscal effort. How much states spend on education is a matter of both how affluent they are and how willing they are to spend for schools. Some wealthier states don’t spend as high a percentage of their income on schools as poorer states do. We included this indicator to measure “effort.” The GAO has developed an index that measures each state’s relative spending compared with its unique economic circumstances. For ease of use, we converted that index into percentages. The percentage were then used in calculating the states’ final scores.

Allocation of Resources. 4. Percent of expenditures spent on instruction.. “Instruction” includes salaries of teachers and instructional supplies. A state could increase instructional expenditures by hiring more teachers, raising teacher salaries, or spending more on supplies. There is a correlation between increased spending on classroom instruction and increased student achievement. In our survey, 85% of teachers, 66% of principals, and 69% of superintendents agree that states should work to increase the percentage of public school funding that goes for classroom instruction, even if it means reducing spending for administration and special services.

To determine a benchmark for grading states, we considered the percentage spent nationally on instruction and the percentage spent by other developed nations.

The U.S. average for classroom instruction is just over 61% of current expenditures. A number of other industrialized countries spend more than 70%. Considering that New York leads the nation with nearly 68% of its expenditures going for classroom instruction, we deemed 70% to be a fair and reasonable benchmark. Instructional expenditures equaling 70% or more of total current spending earned an A, or 100%; 60% to 69% earned a B, or 85%; 50% to 59% earned a C, or 75%; 40% to 49% earned a D, or 65%; and below 40% earned an F, or 50%.

5. QED technology measure. Although many state have made progress in incorporating technology into their education systems, most still have a long way to go. Any effort to assess states on this indicator would necessarily include not only the availability of hardware and software, but al 0 how well integrated it is into the curriculum.

Lacking complete and comparable information of that kind, we relied on an index developed by Henry Becker of the University of California at Irvine for Quality Education Data, a research company in Denver. The index rates states as high·, medium-, or low-tech based on the availability to students and teachers of hardware such a new computers, modems, videodisc players, VCR, CD-ROMs, and so forth. The index takes into account a number of factors, such as grade level, school enrollment, and district spending. High-tech state received 100%, or an A; medium, 75%, or a B; and low, 50%, or an F.

6. Percentage of schools with at least one inadequate building. A GAO report released last summer concluded that about one-third of the nation’s school, serving about 14 million pupils, need extensive repair or replacement of one or more buildings. About 60% of the schools surveyed reported at least one major building feature in major disrepair, such as heating or plumbing. And half reported at least one unsatisfactory environmental condition such as poor ventilation.

The estimated cost of bringing our education facilities into good condition over the next three years is at least $112 billion. By any measure, the states have failed to monitor the districts’ maintenance needs to provide necessary funding. Only 15 state have monitored the condition of schools on an ongoing basis--and, in some cases, apparently took little or no action to correct what they found.

Experts in physical plant management told us that the benchmark should be 100% of schools in “good” condition, meaning that only routine maintenance or minor repair is needed.

On that basis, every state would have failed. It seemed unreasonable at this point to hold the states to that standard of perfection. Instead, we chose to recognize states that have done better in keeping facilities in decent shape. We used the actual percentage in this column to arrive at a letter grade for each state. States with no schools needing to replace or repair extensively at least one building got 100%, or an A, those with 1% to 10% of schools in need of repair or replacement got 85%, or a B; those with 11% to 20% got 75%, or a C; those with 21% to 30% got 65%, or a D; and those with more than 30% got 50%, or an F.

Equity of Resources. 7. Relative equity in per-pupil spending across school districts. The often enormous gap between per-pupil spending in poor and rich districts has been the basis of lawsuits against states for four decades. In our survey, 76% of teachers, 69% of principals, and 51% of superintendents agree that per-pupil expenditures should be the same in all districts, regardless of local wealth or poverty. We consider this a very important indicator but an extremely complex and difficult one to assess with any precision. We used a new GAO index that took into account differences in costs and special needs and calculate how close each district’s expenditure is to the average of all districts. We converted the index into percentages, which we used in figuring the state’s final score. A 100% would indicate complete equity; Hawaii, therefore, with only one statewide district, got 100%. Adequacy affects equity. For example, some states--like Alabama and Mississippi--scored high on the GAO index, but only because school districts are so underfunded in general that the dollar disparity from one to another is relatively low. New Hampshire scored a B- in equity only because poorer districts have taxed themselves at extraordinary rates. The state contributes a paltry 8% of total education spending. The GAO has developed a more-refined index, which was not available at the time of this report. It plans to release new figure later this year.

The most recent district finance data available were from 1992. Since then, as nearly as we can determine, the following states have significantly revised their school-funding formulas: Alabama, Arizona, Arkansas, Colorado, Idaho, Illinois, Kansas, Louisiana, Maine, Massachusetts, Michigan, Missouri, Montana, Nebraska, New Jersey, North Dakota, Oregon, South Dakota, Tennessee, Texas, and Wisconsin. However, it is impossible to measure whether these changes have resulted in a more-equitable distribution of funds until new school-finance data are available.

For Information Only. 8. Per-pupil expenditures (unadjusted). This is the current amount the state spends per pupil on average (not including capital expenses). The amount spent varies by district and even by school. More is spent on secondary school students than elementary students. More is spent on special-needs students.

9. Amount spent on education for every $1,000 in per capita income in 1995.

10. Dollar gap between expenditures in the 5th and 95th percentiles. This column shows the difference in spending between higher- and lower-spending districts.

11. Average teacher salary, adjusted for cost of living. We could find no state-level data to permit us to judge how teachers fare in comparison with comparable professionals on a state-by-state basis, which might indicate how teachers are valued in a state. Although we have no evidence that raising teachers’ salaries improves student achievement, raising teachers’ salaries eventually would help attract talented young people into the profession.

12. Teachers as a percentage of staff. Since teacher salaries tend to be the largest expenditure in instructional costs, this indicator largely mirrors the percentage of current expenditures on instruction.

13. Number of pupils per multimedia computer. Many of the computers available in schools are obsolete and incapable of running the latest educational software or tapping into the resources of the Internet. Nationally, there are about 35 pupils for every multimedia computer. Experts suggest that if each student is to have sufficient access, no more than five children should be served by one computer station. At this point, it is unreasonable to judge states against a benchmark of five students per multimedia computer.

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