“Throwing money at the problem” may actually work in education

Students practice their mathematics skills at Ritter Elementary School in Los Angeles.

When it comes to tackling the United States’ large and growing achievement gap between high- and low-income children, today’s education policy entrepreneurs have increasingly adopted an accountability-and-evaluation mindset. Well-known policies including No Child Left Behind, Common Core standards, Race to the Top, and charter schools all stem from the conventional wisdom that we can’t just “throw money at the problem.”

But in the case of our national education policy, does this conventional wisdom hold true? Maybe not. New research by Julien Lafortune and Jesse Rothstein of the University of California, Berkeley, and Diane Whitmore Schanzenbach of Northwestern University finds that an increase in relative funding for low-income school districts actually has a profound effect on the achievement of students in those districts.

The researchers look at the impact of “adequacy”-based finance reforms, enacted by 27 states over the past 20 years. These reforms sought to ensure that low-income school districts had enough money to provide their students with a high-quality education, even if that meant that their costs exceeded that of high-income school districts—a focus on “adequacy” rather than “equity.” Within states that implemented the reforms, the funding gap between low-income and high-income districts was eradicated without cutting funds for wealthier school districts. Rather, across-the-board spending increases meant that by 2011, these states spent an average of $1,150 more per pupil in low-income districts compared to high-income districts. States that did not enact the reforms, however, maintained an $800 gap in favor of wealthier schools.

But did these increased funds for low-income districts reduce educational inequality? By comparing outcomes in the states that implemented these school finance reforms and those that did not, LaFortune, Rothstein, and Schanzenbach find that the reforms had a considerable impact on the achievement gap between high- and low-income school districts. They found that increasing funding per pupil by about $1,000 raises test scores by 0.16 standard deviations—roughly twice the impact as investing the same amount in reduced class sizes (according to data from Project STAR, a highly acclaimed study of Tennessee schools in the 1980s).

As seen in the figure below from an issue brief summarizing the authors’ findings, states that did not enact reforms saw the achievement gap between low- and high-income school districts widen substantially between 1990 and 2011, partially due to rising overall inequality over the same period.


Still, no single policy is a panacea. While school finance reforms made an impressive dent in the achievement gap between low- and high- income districts, the authors find that the reforms had no significant impact on the gap between individual rich and poor students. That’s because while poor students (and minority students as well) are slightly more likely to attend school in a low-income district, there are still many low-income and minority students educated in high-income districts. As a result, these reforms might not have had a sizable effect on the relative resources available to most minority or low-income students.

That aside, this research calls attention to the improvements in reducing educational disparities within the states that implemented school finance reforms, and points to a potential path forward on a national scale. As the authors note, taken together, state “school finance reforms are perhaps the largest national effort we have made to increase equality of educational opportunity since the school desegregation movement.”

While we still need to make progress as far as disparities between individual students, this research makes a compelling and evidence-based case for school finance reform on a federal level. Rather than “throwing money at the problem,” no-strings-attached funds may actually make a difference for the country’s most disadvantaged school districts.

March 17, 2016



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