When a business applies for a loan, the bank needs to know the business’s operating expenses as well as its overhead to make an informed decision about whether to grant the loan. A business that acquired a loan while understating or hiding some categories of its expenses would be in serious trouble. However, the government seems to operate by a different set of rules.
A new report from the Cato Institute finds that state departments of education routinely understate the cost of public schools and often fail to report key spending categories. This may be contributing to the public’s vast underestimation of the true cost of public education.
The report, “Cracking the Books: How Well Do State Education Departments Report Public School Spending? ” assigns A-to-F grades to all 50 state education departments for the completeness, timeliness, and accessibility of the spending data that they make available to the public on their websites. The report reveals that very few state education departments provide complete and timely financial data that is understandable to the general public.
The most useful figures to compare school districts of varying sizes are the annual per pupil expenditures (PPE). However, half of all state education departments report a PPE figure that leaves out major cost items such as buildings, interest on debt, and pensions, thereby significantly understating what is actually spent. This is like a business reporting operating expenses to the bank but hiding its overhead. Alaska’s department of education website does not even report PPE figures at all.
Other important spending categories are omitted entirely. Eight states fail to provide any data on capital expenditures. Ten states lack any data on average employee salaries and 41 states fail to provide any data on average employee benefits.
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Moreover, states too often report spending data that are hard to find and interpret. For example, the average citizen is unlikely to know that the term “current expenditures per ADA” means “operating expenditures per pupil as measured by average daily attendance.” “Current” sounds like “recent,” not “operating,” which can give the false impression that it merely refers to timely data rather than indicating that the figure excludes some major categories of spending. Also, without defining or at least spelling out acronyms like “ADA” or “ADM,” the average citizen will have a hard time deciphering the data presented.
This financial opacity may be contributing to the widespread misperceptions about public education spending. Despite tremendous and persistent spending growth in the last half-century, the public vastly underestimates the true cost of public education. The 2013 Education Next/Harvard University Program on Education and Governance (PEPG) survey found that the public’s average estimate of the annual cost per student in American public schools was only $6,680. The true cost is more than double the public’s estimate. According to the most recent data from the National Center for Education Statistics, the average total cost per pupil was $13,692 in the 2009-10 school year, adjusted to 2012 dollars.
The two most recent EdNext/PEPG surveys also examined how misconceptions about education spending affect support for spending levels. The survey randomly divided respondents into two groups. The first group of respondents were simply asked, “Do you think government funding for public schools in your district should increase, decrease, or stay about the same?” Respondents in the second group were first told what the annual per pupil expenditures were in their school district.
In each year’s survey, informed respondents were significantly less likely to support increased spending. In 2012 EdNext/PEPG survey, 63 percent of uninformed respondents supported increasing spending compared to only to 43 percent of informed respondents. In 2013, the support for increased spending among uninformed respondents was 10 percentage points lower than the previous year at 53 percent, while informed support remained steady at 43 percent. Informed respondents were also more likely to support decreasing public school spending.
The public’s vast underestimation of education spending has real-world consequences. For example, on Election Day 2012 in Colorado, a majority of voters in 29 of 31 districts voted to increase K-12 education spending by over $1 billion, approving 34 bond issues and operating revenue increases. Nearly two-thirds of the ballot questions passed with less than 60 percent of the vote. As the EdNext/PEPG surveys suggest, a fully-informed public would likely have voted differently.
An informed public is a necessary condition for self-government. When the government agencies provide incomplete or misleading data, they deprive taxpayers of the ability to make informed decisions, undermining democracy itself. A bank cannot make a loan without access to a business’s complete and accurate financial statements. Likewise, it is impossible to determine what the appropriate amount of K-12 education spending should be without accurate information about what is currently being spent. At a time when state and local budgets are severely strained, it is crucial that spending decisions reflect sound and informed judgment.
Jason Bedrick is a policy analyst with the Cato Institute’s Center for Educational Freedom. He is the author of “Cracking the Books: How Well Do State Education Departments Report Public School Spending?”