Return on Educational Investment
A District-by-District Evaluation of U.S. Educational Productivity
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This report contains a correction. See page 31 of the PDF.
This report is the culmination of a yearlong effort to study the efficiency of the nation’s public education system and includes the first-ever attempt to evaluate the productivity of almost every major school district in the country. In the business world, the notion of productivity describes the benefit received in exchange for effort or money expended. Our project measures the academic achievement a school district produces relative to its educational spending, while controlling for factors outside a district’s control, such as cost of living and students in poverty.
Our nation’s school system has for too long failed to ensure that education funding consistently promotes strong student achievement. After adjusting for inflation, education spending per student has nearly tripled over the past four decades. But while some states and districts have spent their additional dollars wisely—and thus shown significant increases in student outcomes—overall student achievement has largely remained flat. And besides Luxembourg, the United States spends more per student than any of the 65 countries that participated in a recent international reading assessment, and while Estonia and Poland scored at the same level as the United States on the exam, the United States spent roughly $60,000 more to educate each student to age 15 than either nation.
Our aims for this project, then, are threefold. First, we hope to kick-start a national conversation about educational productivity. Second, we want to identify districts that generate higher-than-average achievement per dollar spent, demonstrate how productivity varies widely within states, and encourage efforts to study highly productive districts. Third—and most important—we want to encourage states and districts to embrace approaches that make it easier to create and sustain educational efficiencies.
This report comes at a pivotal time for schools and districts. Sagging revenues have forced more than 30 states to cut education spending since the recession began. The fiscal situation is likely to get worse before it gets better because the full impact of the housing market collapse has yet to hit many state and local budgets. At a time when states are projecting more than $100 billion in budget shortfalls, educators need to be able to show that education dollars produce significant outcomes or taxpayers might begin to see schools as a weak investment. If schools don’t deliver maximum results for the dollar, public trust in education could erode and taxpayers may fund schools less generously.
The Wisconsin school systems of Oshkosh and Eau Claire are about the same size and serve similar student populations. They also get largely similar results on state exams–but Eau Claire spends an extra $8 million to run its school system.
While some forward-thinking education leaders have taken steps to promote better educational efficiency, most states and districts have not done nearly enough to measure or produce the productivity gains our education system so desperately needs. Some fear that a focus on efficiency might inspire policymakers to reduce already limited education budgets and further increase the inequitable distribution of school dollars. To be sure, our nation’s system of financing schools is unfair. Low-income and minority students are far more likely to attend schools that don’t receive their fair share of federal, state, and local dollars. But while the issue of fairness must be central to any conversation about education finance, efficiency should not be sacrificed on the altar of equity. Our nation must aspire to have a school system that’s both fair and productive.
Our emphasis on productivity does not mean we endorse unfettered market-based reforms, such as vouchers allowing parents to direct public funds to private schools. Nor do we argue that policymakers should spend less on education. Indeed, we believe neither of these approaches can solve the nation’s pressing education challenges. Transforming our schools will demand both real resources and real reform. As Education Secretary Arne Duncan recently said: “It’s time to stop treating the problem of educational productivity as a grinding, eat-your-broccoli exercise. It’s time to start treating it as an opportunity for innovation and accelerating progress.”
Productivity 101: Embracing transformational change
When successful businesses want to improve performance and boost efficiencies, they focus on creating the conditions for organizational change. They use data to identify problem areas, create short and long-term goals, and engage their employees to sustain transformations and nurture further innovation. Such approaches have long worked for the private sector, and there’s clear evidence that the techniques can help drive better performance in large, public organizations as well.
But schools and districts have long been effective at deflecting or watering down meaningful change in order to protect entrenched bureaucracies and interests. And even reform-minded school administrators often confuse merely novel techniques with successful ones and dash from one educational fad to the next without tracking their efficacy. To increase productivity, school leaders will need to fundamentally reinvent the way that they do business and create an outcomes-based school culture that sets high goals—and gives employees the strategies to achieve them.
That will entail doing away with obsolete traditions and ineffective programs, to be sure. But it will also require schools and districts to embrace transformational ways of delivering a cost-effective education that reduces spending while boosting performance. The goal must be nothing short of a breakthrough in performance that guarantees that every dollar produces high achievement for all students.
Accompanying this report is an interactive website that allows anyone to compare the relative productivity of thousands of school districts and find out more about their spending and achievement. Because we cannot control for everything outside a district’s control when calculating its productivity evaluation, the site makes it easy to compare similar districts based on their demographics and enrollment. It also allows users to see how districts fare under different approaches to measuring productivity. The site was created in partnership with the nonprofit advocacy organization OMB Watch and the geo-information services company Esri.
Summary of findings
- Many school districts could boost student achievement without increasing spending if they used their money more productively. An Arizona school district, for example, could see as much as a 36 percent boost in achievement if it increased its efficiency from the lowest level to the highest, all else being equal.
- Low productivity costs the nation’s school system billions of dollars each year. This figure is an estimate; our study does not capture everything that goes into creating an efficient district. But the approximate loss in capacity is substantial.*
- Without controls on how additional school dollars are spent, more education spending will not automatically improve student outcomes. In more than half of the states included in our study, there was no clear relationship between spending and achievement after adjusting for other variables, such as cost of living and students in poverty. These findings are consistent with existing research: How a school system spends its dollars can be just as important as how much it spends, at least above some threshold level.
- Efficiency varies widely within states. Some districts spent thousands more per student to obtain the same broad level of academic achievement. After adjusting for factors outside of a district’s control, the range of spending among the districts scoring in the top third of achievement in California was nearly $8,000 per student.
- More than a million students are enrolled in highly inefficient districts. Over 400 school districts around the country were rated highly inefficient on all three of our productivity metrics. These districts serve about 3 percent of the almost 43 million students covered by our study.
- High-spending school systems are often inefficient. Our analysis showed that after accounting for factors outside of a district’s control, many highspending districts posted middling productivity results. For example, only 17 percent of Florida’s districts in the top third in spending were also in the top third in achievement.
- Students from disadvantaged backgrounds are more likely to be enrolled in highly inefficient districts. Students who participated in subsidized lunch programs were 12 percentage points more likely to be enrolled in the nation’s least-productive districts, even after making allowances for the higher cost of educating lower-income students.
- Highly productive districts are focused on improving student outcomes. We surveyed a sample of highly productive districts to learn more about their principles and practices. The districts that performed well on our metrics shared a number of values and practices, including strong community support and a willingness to make tough choices.
- States and districts fail to evaluate the productivity of schools and districts. While the nation spends billions of dollars on education, only two states, Florida and Texas, currently provide annual school-level productivity evaluations, which report to the public how well funds are being spent at the local level.
- The quality of state and local education data is often poor. In many instances, key information on school spending and outcomes is not available or insufficiently rigorous, and this severely impedes the study of educational productivity. For instance, we did not have good enough data to control for certain cost factors, such as transportation. So a rural district with high busing costs might suffer in some of our metrics compared with a more densely populated district.
- The nation’s least-productive districts spend more on administration. The most inefficient districts in the country devote an extra 3 percentage points of their budgets on average to administration, operations, and other noninstructional expenditures.
- Some urban districts are far more productive than others. While our main results are limited to within-state comparisons, we were able to conduct a special cross-state analysis of urban districts that recently participated in a national achievement test. After adjusting for certain factors outside a district’s control, we found that some big-city school systems spend millions of dollars more than others—but get far lower results on math and reading tests.
Summary of recommendations
Policymakers should promote educational efficiency
We hope this report launches a broad dialogue about educational productivity. Education policymakers should encourage further research in this area, as well as convene a national panel to recommend how state and federal governments can better support policies and programs that promote efficiency.
States and districts must reform school management systems
Education policymakers should create performance-focused management systems that are flexible on inputs and strict on outcomes. State and federal governments should also provide educators with the tools, technology, and training required to succeed with limited school dollars.
Education leaders should encourage smarter, fairer approaches to school funding
Education policymakers should develop funding policies that direct money to students based on their needs, so that all schools and districts have an equal opportunity to succeed. Federal policymakers should also continue to support competitive funding programs that create opportunities for reform and innovation.
States and districts should report far more data on school performance
States and districts should develop data systems that report reliable, high-quality information on educational outcomes, operations, and finance.
America’s ingenuity and dynamism have helped make it one of the most prosperous countries in the world, and these traits will be key to boosting the productivity of our school system. Efficiency reforms will not come fast or easy, but they must come soon because our nation can no longer afford schools that fail to make the most of their limited resources. We hope that our interactive website together with the findings and recommendations in the following pages—will prompt a new way of thinking about educational success, one that does far more to guarantee that all schools and districts have the necessary data, tools, and incentives to be efficient with their school dollars.
*Correction, May 4, 2015: This report incorrectly stated the cost of low productivity to the nation’s school system. Based on new CAP calculations, the correct estimate is approximately $18 billion. To reflect these new calculations, the report has been corrected to reflect that low productivity costs the nation’s school system billions of dollars and that the loss in capacity is substantial.
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