A recent study in The Review of Economics and Statistics looks at changes in school funding over the last several decades, a period when courts ordered states to remedy the huge funding inequalities that had resulted from local funding of education by allocating additional state funds to poorer districts.
So how did districts spend these new funds, which were earmarked for education? It might seem that a new, dedicated funding source implies that money for schools must increase. But in reality, because the older funding sources aren’t dedicated, funding doesn’t necessarily have to rise at all. In many cases lawmakers reallocate the money that was already being spent, increasing spending in other areas or returning the money to taxpayers.
The authors of the study had an interesting hypothesis. They believed that teachers union strength—determined by a measure developed here at Fordham—might have an important effect on whether the new dollars actually resulted in increases to education spending in general, and teachers’ salaries in particular. They further hypothesized that those differences in funding levels might impact student achievement.
The results of the study provide evidence consistent with all of these hypotheses, and the study has three key takeaways.
First, the strength of teachers’ unions really does correlate with whether state aid actually leads to increased education spending. School districts in states with the strongest unions increased education expenditures nearly dollar-for-dollar with increases in state aid. But in districts in states with the weakest unions, local funding fell, and education expenditures increased less than twenty-five cents for each dollar of state aid.
Second, union strength also correlates with how the new dollars are spent. Districts in states with strong teachers unions allocated more of the additional spending toward increasing teacher salaries, while districts in weak-union states spent the money primarily on increased teacher hiring. Also, spending in non-instructional areas like capital outlays, administration, and classroom support increased more in strong teachers union states than in states with weak teachers unions.
Third, they find that the larger expenditure increases in strong teachers union states translates into increased student achievement: Ten years after the increases in state funding, students test scores in low-income districts had risen across the board—but in those districts in weak teachers union states, students scored 8 percent of a standard deviation higher, while in strong teachers union states, that increase doubled to 16 percent of a SD.
These results are fascinating because they touch on important issues for equity and raise questions about how additional school funding is best spent. Fordham has long discussed America’s skyrocketing per-pupil expenditure that, rather than being directed towards teachers’ salaries, has instead gone towards efforts to reduce class sizes and hire more support staff. This study again raises the question: Would we be better off just paying teachers more with all that extra money?
SOURCE: Eric Brunner et al., “School Finance Reforms, Teachers’ Unions, and the Allocation of School Resources,” Review of Economics and Statistics (March 2019).
