Money Matters in Education

Money Matters in Education

I sat down to write a post about the impact of money on educational outcomes, reading articles and studies to flesh out my knowledge, and there was one researcher I kept running into, Bruce D. Baker. Rather than give a diluted version, I decided to reach out to him to see if he’d answer some of my questions over email. He graciously answered yes. – John Warner, EE Staff Writer.

Educational Endeavors: It seems intuitive that money matters when it comes to the quality of education. The most prestigious schools tend to have the most resources and the best outcomes, but there is a robust school of thought that money does not matter in education. 

Your research says otherwise, that more money is correlated with “improved or higher student outcomes.” What do we know about how money impacts outcomes in education?

Bruce Baker: My work in this particular area has been about summarizing what we know from several bodies of related high quality research, over several decades. 

Recent studies have garnered significant attention, like Kirabo Jackson, Rucker Johnson and Claudia Persico’s study, showing that infusions of funding resulting from court orders and school finance reforms lead to increased short-term (test score) and long-term (college attendance, completion, income) outcomes. There’s been a pretty significant confirmatory body of evidence to accumulate even since this study, including studies showing the harms caused by the great recession. 

But, my reviews of literature show that there was already a relatively strong body of evidence showing that money mattered. These included state-specific studies showing that school finance reforms had positive effects on a variety of outcomes, from Kansas to Michigan to Massachusetts. Also studies showing that specific resources that cost money, like reduced class size, have positive effects on outcomes. And another body of studies which show that it costs more to achieve higher than lower outcomes (usually focused on test scores and graduation rates). So, while there’s definitely been increased acceptance that “money matters” for student outcomes in response to the spate of recent studies, there was pretty good evidence across a variety of study types even before this. 


EE: It strikes me that whether or not money matters to student “outcomes” can depend on what kind of outcomes we’re talking about. What’s the difference between the outcomes you’re measuring versus those who claim that money does not matter in education?

BB: The claim that money doesn’t matter is usually attached to a common set of relatively weak arguments and data: 

1. Quality neutral vote counts: That if you count up the neutral, positive and negative correlations between spending measures and outcome measures in studies mostly from the 1960s through 1980s, and if you are willing to ignore outright that many of those studies aren’t up to quality standards in terms of data or quantitative methods, you get a mixed bag of findings. From that, one might argue that there’s no systematic relationship between school spending and student outcomes. 

But even if you isolate the studies with sufficient data quality and better methods from that period, you get a more consistent picture that there is in fact a positive relationship between schooling resources and outcomes. 

2. What I call “clouds of doubt:” Some like to make scatterplots of school spending (on the horizontal axis) and student outcomes on the vertical axis, with school- or district-level data, to show that there’s rarely a clear linear pattern between the two. Thus, money doesn’t matter! But this is hardly a sufficient method for asking that question. And again, better analyses show that it, in fact, does. 

3. The Long-term trend: One of the most common assertions is that school spending has climbed for decades but test scores, specifically NAEP, have been stagnant. Thus, increased spending doesn’t matter. The problem with this argument is that neither characterization is true and that if you zoom in on both trends, you see that spending and outcomes climbed from the mid-1990s to about 2008; then when the recession hits, both level off and dip. While this also isn’t “causal analysis,” it comports with causal analysis, which does show the adverse effects of the great recession.

 4. International comparison: Another approach of the naysayers is to say the US spends more than any other country, yet we look horrible on international assessments. First off, when adjusted for child poverty rates, we don’t look so horrible on those assessments. Second, international school spending measures simply aren’t sufficiently comparable. They contain different things. Different scope of services (coverage of health benefits, recreational programs, etc. are folded into US school spending, but not in many other nations). It’s just a stretch. An invalid, huge, unwarranted stretch. 

Interestingly, what we are seeing in the recent and growing body of national studies is that a) different kinds of spending matter, albeit differently, b) spending increases can affect positively a variety of short and long term outcomes, and c) when general, unrestricted spending is increased, additional funding tends to go toward the basics like increasing teacher compensation and reducing class sizes. Recent studies have also shown positive effects of capital investment on student outcomes, albeit with a lag following the spending increase because it takes a while to build and bring online new facilities. Also, spending on facilities and reduced class sizes may have positive effects on teacher recruitment and retention. The mechanisms of positive effects are multifaceted. 


EE: I want to talk more specifically about the debate over “small class sizes.” It seems similar to the debate over money in schools in general, with a fairly large group insisting that smaller classes do not lead to superior outcomes. My experience as a teacher is that class size has a huge effect on both the student and teacher experience. What do we know about class sizes?

BB: I see the class size debate as a subset of the money matters debate. At the core of the school budget planning equation is the tradeoff between how much we can pay our staff, and how many staff we can hire. Competitive compensation provides the path toward recruiting a more highly qualified workforce. When budgets are constrained, districts have to make tradeoffs between increased compensation and smaller classes or additional programs (which sometimes provide the option for smaller classes). 

The bottom line is that providing adequate schooling — achieving desired outcomes — requires both/and, both competitive wages and sufficiently small classes. 

There are those who would argue that high quality teachers are more important than small classes. Thus, we should just identify and pay high quality teachers to teach large classes rather than reducing class sizes. 

We really don’t have clear evidence on this tradeoff, partly because we don’t know that a teacher identified as high quality with a class of 20 or 25 would also be a high quality teacher for 50 to 100 kids in a single class as some have argued. It’s hard to believe they would. 

Further, having smaller class sizes and fewer total students provides a favorable working condition — one that allows recruiting and retaining higher quality teachers. These things interact in ways that are sometimes hard to anticipate when picking and choosing which is the better use of the additional $1. 


EE: You’ve dedicated your career to trying to measure the effects of educational interventions and then spread the word about what we’re doing in schools. How do you feel about how we’re doing? Is there progress? What would be helpful to make more progress?

BB: There’s a lot of high quality research out there on specific interventions, whether class size reduction or specific reading programs and teaching practices. Sure, we need more, but there’s a lot that focuses on specific interventions. At the other end of the spectrum, there’s a lot of research that tries to compare broad categories of schools to argue that this group does better than that, but without digging into the programs and services they offer, or how they configure and organize their human and capital resources, space and time. From the research on specific interventions, we have no way to piece those interventions together into an effective, productive, efficient school. We need to know more about how productive and efficient whole schools organize and allocate resources and how they deliver programs and services to children. And we need to better understand what mixes of programs and services, at what costs, are needed for providing equal opportunity to vastly different student populations, across widely varied school settings. 

Bruce Baker is Professor in the Graduate School of Education at Rutgers University in New Brunswick, NJ. His research focuses on state school finance systems, cost analysis in K12 and Higher Education, teacher and administrator labor markets, and charter school policy. He is author of Educational Inequality and School Finance: Why Money Matters for America’s Students from Harvard Education Press. He has consulted with state legislatures and departments of education in numerous states, including most recently in Maryland and Vermont, and has been engaged as an expert witness in litigation over the equity and adequacy of school funding in Kansas, Connecticut, New York and several other states. Since 2009, he has been involved in the production of a national report on school funding indicators, which won the 2013 American Educational Research Association’s Division L Policy Report award. His recent work involves developing methods for better understanding and estimating the full costs of providing free community college.