• Chart of the Week
  • May 7, 2018

Money Matters


School reformers have for decades argued over how best to close the achievement gap.

For some experts, the issue comes down to money. Without equal funding, it’s unreasonable to expect poor students to catch up to kids in wealthier districts that can afford more qualified teachers, the latest technology, and state-of-the art facilities.

Many economists have been skeptical of the focus on resources alone. Throwing money at the problem was a crude way to address an issue that required more nuanced policy.

But maybe education funding matters after all, according to a paper in the April issue of the American Economic Journal: Applied Economics.

Researchers Julien Lafortune, Jesse Rothstein, and Diane Whitmore Schanzenbach studied the school finance reforms that swept across the nation in the 1990s. They found some evidence that when poor schools are given proportionately greater funding, they can make up some ground on more resource-rich districts.

The reforms in question date back to a 1989 Kentucky Supreme Court ruling that said the state constitution required every child “must be provided with an equal opportunity to have an adequate education.” Giving schools the same amount of money was not enough. The emphasis should be on achieving equal outcomes. The ensuing reforms led to substantially higher spending in low-income districts to help them catch up.

The Kentucky decision kicked off a wave of similar overhauls in states across the nation, as they sought to bring poor schools up to par with wealthier districts. The authors found that spending increased across the board — for rich and poor districts — though the poorest districts received proportionately larger increases.


Figure 7 from Lafortune et al. (2018)


Still, would giving poor schools more money improve the educational outcomes of their students?

The evidence indicates it did, according to the authors. The figure above plots how the poorest districts performed on the National Assessment of Educational Progress exam before and after the reform. There was an immediate bump in test scores in the first few years after the policy went into effect, indicated by the vertical dotted line. Average test scores sloped upward over the following two decades.

The funding changes did, in fact, appear to accomplish reformers’ goals: They narrowed the performance gap with rich schools, for which test scores stayed about the same.

It’s difficult to say exactly how the reforms worked, or where the extra cash is best spent. Schools spent the money on a lot of different things — instructional support, reducing class size, and for capital projects. Still, the money did matter.