Does Money Matter? A Look at the Age-Old Debate on the Importance of Resources in Education

Written by: Amy Auletto

Primary Source: Green & Write, April 19, 2016

In 2011-12, the U.S. spent $621 billion on education, or about $12,401 per student. Relative to other countries in the Organization for Economic Cooperation and Development (OECD), the U.S. spends 35% more on K-12 education and nearly twice as much on post-secondary education. Also, since 1970, education spending in the U.S. has more than doubled. Despite the increasing resources being poured into education, educational outcomes have remained stagnant, or in some cases, declined. College enrollment rates are dropping and the U.S. now ranks 29th in the world (down from 23rd in 2009) on the PISA, an international math, reading, and science test administered in 65 countries. Districts with some of the highest per-pupil funding rates often have the worst outcomes. For example, D.C. schools spent $29,349 on each student in 2010-11, yet only 17% of 8th graders were proficient in reading.

High spending rates coupled with lackluster results beg the question – in education, does money actually matter?

Evidence That Money May Not Matter…

Even though education spending in the U.S. is on the rise, the nation’s performance on international tests, such as PISA, is declining. Photo Courtesy of Alberto G.

 Often cited in the argument that educational resources don’t matter is the work of economist Eric Hanushek. In a 1986 paper on the economics of schooling, he concluded, “There appears to be no strong or systematic relationship between school expenditures and student performance.” This argument has been more recently supported by a 2014 report that looked at trends in educational spending across states and corresponding academic performance. This study once again found no statistical relationship between spending increases and student achievement. Additionally, as explored in a previous Green & Write piece, there is an abundance of wasteful spending in American schools.

… And Evidence That It Does

 There is plenty of evidence that education spending does matter. Bruce D. Baker, whose research focuses on school finance policy, authored a 2012 report arguing just the opposite of Hanushek. Baker found a positive overall relationship between total education spending and student outcomes. He also argued that specific resources such as smaller class sizes or increased teacher salaries matter. The argument that resources matter is further supported by looking at school finance reform. When court-mandated finance reforms occur, educational outcomes and wages improve for those attending districts whose funding increases.

Final Verdict

So, does money actually matter? Yes. However, there is a caveat to this conclusion. The extent to which it matters depends on how it is being spent. Resources will always be limited and therefore, it is critical that funding for education is used in ways that maximize student learning and minimize waste.

Investment in early childhood education may be one such way to accomplish this. The Perry Preschool Project, a preschool program randomly assigned to students from disadvantaged backgrounds, had significant impacts – raising participants’ incomes, decreasing reliance on government assistance, and decreasing crime rates long-term.

High-quality teachers matter, too. Having an effective teacher increases a student’s likelihood of attending college, making more money, living in a wealthier neighborhood, and saving more for retirement.

U.S. education spending continues to rise and far surpasses that of other countries despite mediocre student outcomes. Things just aren’t adding up. We know that money matters and now it is time to focus on identifying and pursuing the most cost-effective ways to invest in education.

Contact Amy: aulettoa@msu.edu

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Amy Auletto
Amy Auletto is a doctoral student in Educational Policy. She is interested in the impact that equitable funding and access to effective teachers have on the educational outcomes of disadvantaged student populations. Prior to beginning her studies at Michigan State University, she taught middle school math in Detroit. Amy earned her bachelor’s degree in psychology, master of Social Work, and MA in educational studies from the University of Michigan.