Education Funding Opinion

The Productivity Imperative

By Marguerite Roza, Dan Goldhaber & Paul T. Hill — January 05, 2009 5 min read
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The current economic crisis will challenge just about every public- and private-sector institution in America. Schools are no exception: They will compete with other publicly funded obligations for precious tax dollars. Big deficits and tight budgets are likely to mean that real per-pupil spending on schools will not rise in the near term.

This is bad news in an environment in which many big-city districts are bleeding students and money, some near bankruptcy, and when schools are struggling to meet the performance expectations of the federal No Child Left Behind Act. That said, the crisis could ultimately strengthen public education if leaders set their sights not on incremental budget cuts, but rather on refocusing schools around a productivity imperative.


In the private sector, downturns force tough resource decisions that pay off later in greater efficiency. School districts have been able to duck these decisions in the past by campaigning for increased government support. But now that governments are also struggling with deficits, districts probably need to get serious about running leaner and making every dollar count.

Even under financial pressure, school districts now do many things that fulfill political bargains and keep the peace among interest groups, without producing much in return. For example, in many districts, when forced to reduce the number of teachers they employ, officials will freeze hiring and make layoffs based on seniority. This arbitrarily gets rid of some of the best teachers and keeps the most expensive ones, whether or not they are the best. It can also mean that the district reduces its teaching force more than necessary, since one senior teacher can cost as much as two junior ones.

Another expensive but unproductive practice is paying big premiums to teachers who obtain master’s degrees. Studies consistently show that teachers with M.A.s are no more effective than teachers without them. Districts also hire full-time teachers to provide some classes (such as music lessons) that could be purchased much more cheaply from existing providers in the community. These practices are often hard-wired into collective bargaining agreements. Districts that want to increase their productivity need to think seriously about what different practices cost and how else the funds could be used.

Spending in areas other than teacher compensation also is driven by rules and custom. Money is parceled out into accounts required by different laws and regulations, so that no one, not even the district superintendent or budget specialist, knows where it all is. Nearly every year, a big-city superintendent is fired because he or she had no idea that the district had spent itself into a crushing deficit.

As our studies have shown, district leaders often don’t know how much is really spent on particular students, programs, or schools. Most, for example, mistakenly think they spend extra on poor and minority students, unaware that schools in nicer neighborhoods get the lion’s share of expensive senior teachers and central-office services.

Superintendents and principals also are shocked to learn how schools spend their money. As we have discovered, some big-city high schools spend a lot more on a student taking arts electives and Advanced Placement courses than on one taking core mathematics or English courses. These expenditure differences are driven by class size, course schedules, and teacher experience (core courses are large, and younger teachers are required to teach them). But because nobody follows the money, these expenditure differences, which undercut most districts’ avowed strategies for raising students’ core competencies, have been invisible.

Too often, educators ignore costs. Sometimes this is precisely because state funding formulas give them the incentive to do just that. But it is clearly a mistake, because a focus on productivity demands an emphasis on both the benefit and cost sides of the equation.

Districts often get tied in knots when they try to determine which programs, schools, or teachers are most effective. They could use the results of student-achievement testing to help them make this determination, but all too often the testing that is done simply reflects the need to comply with No Child Left Behind requirements, rather than any real effort to learn from the results. This represents a lost opportunity, as these tests could provide important information about the benefit side of the productivity equation.

On the cost side, education leaders need frank assessments of spending in district budgets. This means knowing the price tag attached to each of the services students receive. Only then can schools understand the real cost of the purchased inputs, and ask questions about whether there are more cost-effective ways to provide educational services.

Believe it or not, most districts cannot answer these questions, because school systems generally account for districtwide line items rather than spending associated with individual schools, students, or courses.

With no fiscal windfalls in sight for the near future, any real improvements for students will mean challenging ingrained practices in a new quest for productivity. Such a focus would entail reconsidering everything that schools do: how best to boost student learning, how to use technology to raise performance and cut costs, how to improve the teaching force through more-disciplined hiring and pruning, and whether to purchase services rather than providing them via costly central-office bureaucracies.

Changes won’t come easily. Parents and teachers may worry, and sometimes may organize against new practices. Moreover, districts can’t be sure at the beginning how much money any one productivity measure will save, or exactly how it will affect student learning. But one thing is sure: The potential long-term payback in dollars saved and student achievement gained makes reform efforts worthwhile.

Districts will have to experiment, testing many new ideas on a modest scale and then scaling up the ones that work. They will also need to pay much more attention to what other districts and states are doing and what they have learned.

The states, especially their governors, have a big role to play, making sure districts both understand the financial realities and have the freedom to change their programs and policies in search of greater productivity. Mayors might also have to prod their superintendents and school boards to take action now, rather than letting whole cities suffer the consequences of educational decline.

The alternative, a slow collapse of capacity that hurts everyone, would be far worse.

A version of this article appeared in the January 07, 2009 edition of Education Week as The Productivity Imperative


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