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Does Money Matter in Education?


January 2012

Over the past few years, due to massive budget deficits, governors, legislators and other elected officials are having to slash education spending. As a result, incredibly, there are at least 30 states in which state funding for 2011 is actually lower than in 2008. In some cases, including California, the amounts are over 20 percent lower.

Only the tiniest slice of Americans believe that we should spend less on education, while a large majority actually supports increased funding. At the same time, however, there’s a concerted effort among some advocates, elected officials and others to convince the public that spending more money on education will not improve outcomes, while huge cuts need not do any harm.

Our new report, written by Rutgers University professor Bruce Baker and entitled “Revisiting the Age-Old Question: Does Money Matter in Education?” reviews the body of research on spending and educational quality.

Baker concludes that, despite recent rhetoric, “on average, aggregate measures of per-pupil spending are positively associated with improved or higher student outcomes,” while “schooling resources which cost money, including class size reduction or higher teacher salaries, are positively associated

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with student outcomes.” Finally, reviewing the high-quality evidence on the effect of school finance reforms, he asserts: “Sustained improvements to the level and distribution of funding across local public school districts can lead to improvements in the level and distribution of student outcomes.”

The executive summary is pasted below.

Download the report (PDF)

Executive Summary

This policy brief revisits the long and storied literature on whether money matters in providing a quality education. Increasingly, political rhetoric adheres to the unfounded certainty that money doesn’t make a difference in education, and that reduced funding is unlikely to

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harm educational quality. Such proclamations have even been used to justify large cuts to education budgets over the past few years. These positions, however, have little basis in the empirical research on

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the relationship between funding and school quality.

In the following brief, I discuss selected major studies on three specific topics; a) whether money in the aggregate matters; b) whether specific schooling resources that cost money matter; and c) whether substantive and sustained state school finance reforms matter. Regarding these three questions, I conclude:

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  1. Does money matter? Yes. On average, aggregate measures of per-pupil spending are positively associated with improved or higher student outcomes. In some studies, the size of this effect is larger than in others and, in some cases, additional funding appears to matter more for some students than others. Clearly, there are other factors that may moderate the influence of funding on student outcomes, such as how that money is spent – in other words, money must be spent wisely to yield benefits. But, on balance, in direct tests of the relationship between financial resources and student outcomes, money matters.
  2. Do schooling resources that cost money matter? Yes. Schooling resources which cost money, including class size reduction or higher teacher salaries, are positively associated with student outcomes. Again, in some cases, those effects are larger than others and there is also variation by student population and other contextual variables. On the whole, however, the things that cost money benefit students, and there is scarce evidence that there are more cost-effective alternatives.
  3. Do state school finance reforms matter? Yes. Sustained improvements to the level and distribution of funding across local public school districts can lead to improvements in the level and distribution of student outcomes. While money alone may not be the answer, more equitable and adequate allocation of financial inputs to schooling provide a necessary underlying condition for improving
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    that appropriate combinations of more adequate funding with more accountability for its use may be most promising.

While there may in fact be better and more efficient ways to leverage the education dollar toward improved student outcomes, we do know the following:

  • Many of the ways in which schools currently spend money do improve student outcomes.
  • When schools have more money, they have greater opportunity to spend productively. When they don’t, they can’t.
  • Arguments that across-the-board budget cuts will not hurt outcomes are completely unfounded.

In

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short, money matters, resources that cost money matter, and more equitable distribution of school funding can improve outcomes. Policymakers would be well-advised to rely on high-quality research to guide the critical choices they make regarding school finance.

Download the entire report (PDF)

Journalists interested in the report can contact Professor Baker directly – bruce.baker [at] gse.rutgers.edu

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