Money Matters in Education, Part 2-- "The Cost Cutting Crusade"

One of the most deceptive strategies of education reform over the past 20 years has been to sow doubt about the importance of school funding.  The approach has been advocated by those that do not want to increase the financial investment in public education as well as those who say the public schools are inefficient or ineffective. To sow doubt, they sold an outcomes based approach--using high-stakes standardized tests as evidence that public schools are failing.  This has been an effective mirage to bring the focus away from inputs and redirect efforts away from increased funding for schools. Authors Jack Schneider and Jennifer Berkshire describe this "cost cutting crusade" in their aptly named book Wolf at the School House Door (2020).

The perpetuation of this myth has led many states to slash education funding as a way to experiment with tax cuts-- with little success. The most notorious case is Kansas, where Governor Sam Brownback promised that a moderate tax cut for individuals and a big tax cut for businesses would stimulate the economy. They cut top personal income tax rate from 6 percent to 4.5 percent in 2012, projected to reduce revenue by $920 million in FY 2017, income tax as share of state revenue fell from 50 percent to 40 percent.

Since the 2012 tax cut, however, Kansas’s economy has lagged behind neighboring states, and the state’s budget has been in tatters. In the face of poor growth and spending needs, the Republican-led state legislature reversed much of Brownback’s original tax cut. 

The irony is that the consultant hired by the state to produce a study to prove they could survive with less funding completely blew a hole in their theory.  Lori Taylor, the school finance expert from Texas A&M, hired by the state concludes that money most definitely matters in students' educational attainment. Her analysis showed that the state needed to spend a whole lot more if it wanted to meet its goals for student graduation and college readiness.

Reams of evidence from other states are equally unsupportive of the supply-side notion that tax cuts boost growth. Minnesota provides an interesting contrast to Kansas. They raised income taxes in 2013, investing heavily in education. Where jobs evaporated in Kansas, the chart clearly illustrates how Minnesota experienced job growth by fully investing in education and infrastructure.

There is now a growing body of research that debunks these myths, showing that when it comes to school spending, money does matter, especially for low income students.  In a 2016 study by the National Bureau of Economic Research found that school districts that received more funding as a result of court-ordered spending reform saw graduation rates for low income students rise by 10 percent.  More impressively, increases in spending also produced 10 percent increase in students' lifetime earnings.  

Research is also very clear about the return on investment for education funding. The states which have made the greatest investment in building the capacity of their public-school system to meet the educational needs of all their children, from the poorest on up, have experienced stronger economic growth than states that did not.

Indeed, the high-investing states also had larger increases in worker wages over the same time period, as well as a statistically meaningful advantage in state level GDP growth.

As it turns out, investment in K-12 education, higher education and public infrastructure are the only policy decisions at the state level which have a statistically meaningful correlation to economic outcomes, according to research conducted by the Center for Tax and Budget Accountability. 

Money not only matters in education.  The evidence clearly shows that investment in education matters for both the short-term and long-term economic future of everyone in the state.