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Budget & Finance Opinion

Proposals for a Cost-Conscious Era: ROI Accountability

By Rick Hess — October 12, 2010 3 min read
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Education reform has long been dominated by “this...and that” reforms, wherein the aim is for districts to keep doing everything they’ve always done, and then slather more on top. Thus, “reform-minded” teacher contracts include big raises for everyone, with extra money for the real changes. New staffing initiatives, technology investments, or pilot programs bake in existing outlays and rely on new dollars to fund the new efforts. E-Rate or computers in the classroom always entail shoving technology into schools and classrooms alongside all current staff. This is “supplement not supplant” as a mindset, rather than a statutory proviso.

For three generations, we’ve spent more dollars on K-12 schooling each year than we did the year before. We increased the ratio of teachers to students by fifty percent between 1970 and 2005. Nationally, after-inflation spending increased 250% between 1970 and 2005. In the run-up to the housing collapse, between 2004 and 2007, per-pupil expenditures grew by 17%. Schools kept spending dollars thrown off by inflated real estate assessments right until the bubble burst. Indeed, as Mike Antonucci reported the other week, schools have been adding jobs right through the “Great Recession.” Well, trends in property tax revenues, underfunded pensions, and the rest mean budgets are getting tight--and that the worst is yet to come. Scott Pattison, executive director of the National Association of State Budget Officers, notes, “This is an awful time for states fiscally, but they’re even more worried about 2011, 2012, 2013, 2014.”

Policymakers haven’t proposed much in response to any of this. Democrats have generally defended the need to maintain or boost spending, with President Obama last week attacking Republicans for plans to cut outlays. And Republicans have offered vague calls to reduce spending, without specifics or much reason to believe they’re serious. Leading thinkers offer invaluable practical suggestions in my new book Stretching the School Dollar, but what’s needed most are politically viable proposals that make it easier for local, state, and national leaders to get serious about K-12 productivity. This week, I’ll touch upon four such ideas that I’ve written about recently for National Review and (along with my colleague Olivia Meeks) for the Wisconsin Policy Research Institute. First up is the simple notion, championed assiduously by Texas’ savvy state House Chair Rob Eissler, of starting to report school performance in terms of “ROI accountability.”

While every state now features an accountability system that reports on student achievement by school and district, there’s not a single state where accountability metrics gauge cost-effectiveness or return on investment (ROI). States tell parents, voters, and policymakers a lot about student achievement, but next to nothing about which schools or districts are delivering more bang-for-the-buck.

Parents can find out how well their local school or district is doing compared to other districts, but find it frustratingly hard to calculate how that might compare in terms of bang-for-the-buck. One result is that school and district leaders have little incentive to seek out new cost efficiencies. Maintaining or even boosting school outcomes while shaving 10% off costs brings little recognition or reward, while the headaches of trimming staff or squeezing expenditures are guaranteed to make a principal’s life less pleasant. It’s little surprise then that superintendents and principals--even those recognized (or reviled) as head-knocking reformers--focus relentlessly on measurable achievement, but show hardly any interest in cutting costs or emphasizing cost-effectiveness.

Spending data should be reported in tandem with school and district achievement data. Reporting performance in terms of dollars spent, appropriately adjusted for cost-of-living and student demographics, should be a standard part of accountability systems. At the state level, this is as simple as legislators requiring the state education agency to make the necessary change. In Washington, the pending reauthorization of the Elementary and Secondary Education Act is a chance to make federal aid conditional on states reporting cost-effectiveness in the same way they are currently required to report test scores.

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