Fueled by Federal Stimulus Package, Education Spending Will Likely Increase over Next Decade despite Lack of Achievement Gains for Students

Education Next News Release

For Immediate Release: November 5, 2009
James W. Guthrie, Vanderbilt University (615) 322-7372

STANFORD — Despite an economic downturn and new data from the National Assessment of Educational Progress (NAEP) released last month that show no learning gains in math for American 4th graders, the nation’s public schools will likely have more money and a larger and better paid labor force than they had in 2009, according to education researchers James W. Guthrie and Arthur Peng of Vanderbilt University.  Their findings appear in the forthcoming issue of Education Next.

The American Recovery and Reinvestment Act (ARRA) has increased the federal government’s contribution to public education revenue from an average of 10 percent to close to 15 percent of the national total.  As recent news reports have detailed, over half of the jobs created or saved by the federal stimulus package (325,000 out of 640,000 jobs) have been in public education.

All this federal support, however, could contribute to an even higher trajectory for future spending on public education than has been the case in the past, regardless of the diminishing returns in terms of student outcomes. Based on historic spending trends and estimating that the federal government’s stimulus contribution will grow to approximately $90 billion, Guthrie and Peng project that national per pupil revenues could increase at a rate of nearly 2.5 percent annually over the next ten years.

Yet, reading scores on the National Assessment of Educational Progress (NAEP) have been level for four decades. And, for a half century, nearly one-third of the nation’s high-school students have failed to graduate with their class each year, while graduation rates for black and Hispanic students are even lower.

The $37 billion in the stimulus package that is intended to offset reduced state and local education revenues, which were down 4.6 percent for the first quarter of 2009, will cushion what would otherwise have been the first significant per-pupil spending reduction in 60 years, explain Guthrie and Peng.

Persistent claims that school districts are in fiscal jeopardy, often reported by the media, are misleading, say the researchers, driven by the fact that school-district budget cycles aren’t synchronized with state and federal legislative appropriations processes. Because it is increasingly rare for legislative bodies to enact spending bills before the beginning of the fiscal year on July 1, school districts, worried about their financial vulnerability and needing to comply with personnel notification deadlines (usually in April or May), issue layoff notices and hold mandatory public hearings, even if the probability of actual personnel layoffs is slender. Such public threats trigger a media frenzy, alarm employees and parent advocates, and fuel the public perception that schools are in financial risk.

For the past one hundred years, public schools have had more money and more employees per student in each succeeding year. Teacher salaries have increased more than 42 percent over the past 50 years and health and retirement plans have become more expensive. Moreover, school-related revenues and employment levels have continued to increase even when the economy has turned down, unlike what typically happens in sectors such as manufacturing and retail sales, where recessions trigger cutbacks in personnel and profits. Education employment has risen far faster than student enrollment in U.S. public elementary and secondary schools. Since the 1970s, employment in public education has increased more than 4 fold, rising from more than 200,000 to nearly 900,000, while enrollment has remained relatively constant, hovering above 50 million.

Public education revenue has been insulated from the direct effects of economic ups and downs by a number of politically constructed conditions, including a privileged legal status in most state constitutions, multiple state and federal revenue sources, and stable tax support, such as property taxes, at the local level. In most states, too, education employee unions have locked in extended labor contracts, often bridging or outlasting economic recessions, which effectively counter any threat to revenue levels. Additionally, the misguided practice of using spending amounts as a measure of school quality has helped protect local school-funding levels from any effort to reasonably adjust them.

“Many posh suburbs actively compete on this dimension, proudly proclaiming their per-pupil-spending status ranking relative to competitor districts,” write Guthrie and Peng. Citizens, parents, and others who have purchased homes in such districts perceive the value of their property to be linked to high spending levels.

Read “The Phony Funding Crisis” available online at www.educationnext.org.


James W. Guthrie is professor of public policy and education at Vanderbilt University and director of the Peabody Center for Education Policy.  Arthur Peng is research associate at the Peabody Center for Education Policy.

Education Next is a scholarly journal published by the Hoover Institution that is committed to looking at hard facts about school reform. Other sponsoring institutions are the Harvard Program on Education Policy and Governance and the Thomas B. Fordham Foundation.

Caleb Offley (585) 319-4541
Hoover Institution, Stanford University
Stanford, CA 94305-6010

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