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How Money Matters for Schools

School Finance Series
How Money Matters for Schools
Recent studies have invariably found a positive, statistically significant relationship between student achievement gains and financial inputs.

For decades, some politicians and pundits have argued that “money does not make a difference” for school outcomes.See for example, Hanushek, E. (2003). The structure of analysis and argument in plaintiff expert reports for Williams v. State of California, p. 4. While it is certainly possible to spend money poorly, this viewpoint is strongly contradicted by a large body of evidence from rigorous empirical research. A thorough review of research on the role of money in determining school quality leads to the following conclusions:

Does money matter? Yes. On average, aggregate per-pupil spending is positively associated with improved student outcomes. The size of this effect is larger in some studies than in others, and, in some cases, additional funding appears to matter more for some students than for others—in particular students from low-income families who have access to fewer resources outside of school. Clearly, 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.

Do schooling resources that cost money matter? Yes. Schooling resources that cost money are positively associated with student outcomes. These include smaller class sizes, additional instructional supports, early childhood programs,For a comprehensive review of research on the effectiveness of early childhood education programs, see Barnett, W. S. (2011). Effectiveness of early educational intervention. Science 333(6045), 975–978. and more competitive teacher compensation (permitting schools and districts to recruit and retain a higher quality teacher workforce). Again, in some cases, these resources matter more for some students and in some contexts. On the whole, however, educational resources that cost money benefit students, and there is scarce evidence that one can gain stronger outcomes without these resources.

Do state school finance reforms that provide more equitable and adequate funding matter? Yes. Sustained improvements in the level and distribution of funding across local public school districts lead to improvements in the level and distribution of student outcomes (see Figure 1). While money alone may not be the answer, more equitable and adequate allocation of financial inputs to schooling provides a necessary underlying condition for improving the equity and adequacy of outcomes. The available evidence suggests that appropriate combinations of more adequate funding with more accountability for its use may be most promising.Baker, B. D. (2016). Does money matter in education? Washington, DC: Albert Shanker Institute.

This document presents a brief explanation of the goal of school finance reforms, followed by summaries of the main bodies of evidence that illustrate how equitable and adequate school funding improves student outcomes. It closes with information about how certain types of specific investments matter—especially when it comes to achieving these outcomes. (For a longer and more complete version of this report, see Does money matter in education?Baker, B. D. (2016). Does money matter in education? Washington, DC: Albert Shanker Institute.)

Money Matters Fig1
Local public school districts’ spending is driven by the amount of state and local revenue raised. The district’s budget, in turn, determines the staffing ratios, class sizes, and wages it is able to pay, and trade-offs are made between staffing ratios and wage levels: the more teachers are hired, the less each can be paid. A sizable body of research has illustrated the connection between staffing qualities and quantities and student outcomes.

How Money Matters for Schools by Bruce D. Baker is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.