Does higher spending increase student outcomes?

The American education system is at a crossroads. The rise of AI, student apathy, the literacy crisis and recovery from the global COVID-19 pandemic and lockdowns are looming over the education system. American education is important.

Just as low-quality steel will lead to a lower quality chassis of a car, poorly educated American workers will lead to a drop in quality of their respective vocations. At this stage of specialization in the American economy, it is more important than ever to improve American education.

A ten-year analysis from the 2008-2009 school year to the 2018-2019 school year reveals very interesting points about education spending and outcomes. It is important to note at the outset that no state bases its primary K-12 funding on student outcomes. Idaho, Washington, Wyoming, and Montana all base their school district expenditure primarily on enrollment.

Wyoming spends significantly more per student than any other state. This is in part because Wyoming receives high levels of school funding from taxes on natural resource extraction. What is curious is that though Wyoming has always had significantly higher per-student spending and salaries for staff, its performance remained close to the other states mentioned above, as will be shown in a moment.

Wyoming, in spite of being a massive spender relative to the other states, has not outperformed 8th graders in Idaho or Washington, and marginally beats out Montana, but only recently. This intra-state comparison reveals that there is more to the story than simply spending.

Idaho and Utah are both low spenders but on the upper end of state outcomes, though Arizona clearly struggles and has low spending. Low-performing areas like New Mexico, West Virginia, and D.C. all have high spending levels but don’t have good outcomes. It is a mixed bag.

Can a state simply increase its education budget and produce better students? That does not seem to bear out in the case study between Montana, Wyoming, Washington, and Idaho. After Idaho’s per-student spending fell from 2015 to 2016, it saw increases in both 4th and 8th grade outcomes, while Washington’s large per-student spending increase was followed by a fall in 4th grade outcomes, even though 8th grade outcomes did rise.

Another good example is the case of poor urban districts, which, in spite of claims to the contrary, are not underfunded. These schools routinely perform worse than other districts. This seems to point to the fact that other factors are at play here.

One of the most important factors, if not the most important factor, to student success is teacher quality. Yet, what do most states base teacher salaries on? The answer is that most school districts use what is referred to as a steps and lanes system, which provides pay increases for each year of experience (“steps”), and higher base pay for education increases (“lanes”).

Under this system, a teacher with a bachelor’s degree who has been teaching for 10 years will make more than a teacher with a bachelor’s degree who has been teaching for 5 years, but if the latter teacher got a master’s degree, he may increase his pay more than the former.

This pay system does not reward better quality teaching. This problem is compounded by the fact that it is nearly impossible to fire a low-quality public school teacher. The process, if it is not blocked by teacher tenure, can take two to five years in a lengthy and costly legal process. Depending on the location, it becomes nearly impossible to fire anyone.

What can be done about this predicament? Improving student outcomes is possible without blindly increasing spending. It is time to turn to a final case study from New Orleans to illustrate this point.

After Hurricane Katrina hit New Orleans, the school system was so devastated that it overturned the entire education system. Almost every school was converted to a non-profit, privately run charter school with complete pay, hiring, and firing autonomy. According to the research, this reorganization worked.

The reforms were followed by significant increases in student achievement, graduation rates, college entry rates, college persistence rates, and college graduation rates. The lesson here is that improvements in teacher and school quality come from more than just funding increases, and that a fundamental part of a child’s education quality is their teacher.

Research on teacher quality, comparing the spending and outcomes in our region, and case studies from New Orleans, give compelling evidence that academic performance can be improved by giving schools greater autonomy over who they hire and fire.

It is also clear from the research that teacher quality is not improved merely by increases in teacher education levels or a one-size-fits-all salary model that doesn’t focus on rewarding excellence. Yet this continues to be the dominant formula that determines how teacher pay is determined.

Policymakers should make decisions centered around improving school autonomy to manage their staff and reward high-performing teachers rather than flooding the system with greater funds if student performance is waning.