Commentary | Budget, Taxes, and Public Investment

Lessons—Does Money Not Matter? The Data Suggest It Does

These pieces originally appeared as a weekly column entitled “Lessons” in The New York Times between 1999 and 2003.


Does Money Not Matter? The Data Suggest It Does

By  Richard Rothstein

During the trial of the recently decided New York school finance case, witnesses for the state testified that money did not really make a difference in education. Schools with more money, they said, do not necessarily do a better job.

That claim, common in recent years, is certainly counterintuitive. If money does not matter, why do wealthy suburbs tax themselves so highly for expensive schools?

Although the claim must be taken seriously — assessing the productivity of school spending is a complex task — careful analysis shows that more money for education in the last 30 years has probably had the desired effect.

In 1970, public schools spent a nationwide average of about $750 a student. In 1999, it was about $6,400. By themselves, these numbers are meaningless: real spending did not grow by nearly 800 percent. An inflation adjustment is needed to tell the cost, in 1999, of the same number and quality of teachers, textbooks and other school necessities that $750 bought in 1970. Only spending in excess of this is a real increase.

But inflation rates vary by industry (the price of medical care has shot up, while the price of computers has fallen), and there is no easy way to decide which rate applies to education. The gauge most often used is the Consumer Price Index, which shows that $750 in 1970 was worth about $3,200 in 1999. That $3,200 figure is about half of 1999 school spending, as measured in 1999 dollars, and is the origin of the conventional claim that school spending doubled in the 1970-99 period.

The Consumer Price Index is inappropriate here, however. To oversimplify a bit, the C.P.I. describes the average price change of everything typical consumers buy, like groceries, clothing, cars and housing. Because schools buy things that are different from typical consumer purchases (mostly, schools buy professional labor), a different inflation index is needed.

The Bureau of Labor Statistics does not produce one for schools, but has an index that is close, measuring inflation in banking, health care and other sectors that, like schools, rely heavily on labor. Use of this services index finds that 1970 school spending was about $4,000 in 1999 dollars, so real school spending grew by only 60 percent or so during the period.

Even that probably overstates real spending growth by schools, because they have relied more on women than have other professional service industries. In 1970, professional women were more restricted to schools than they are today. College- educated women now have more opportunities outside teaching. To meet that competition and attract the same quality of teachers they drew 30 years ago, schools must raise salaries more than other professional employers. Thus, schools have faced inflation that is more rapid than have other service industries.

But even a 50 percent or 60 percent increase in real spending in 30 years should have generated a corresponding gain in student outcomes. Only about a third of those new expenditures, however, have gone to educational programs that could lift regular achievement. The biggest chunk of new spending has been for special education — much of it for children with severe disabilities, who did not attend public schools in 1970. (Many with less severe learning disabilities attended some school then, but dropped out early.)

So, contrary to the oft-repeated view, real spending growth for regular education has been modest. Have there been modest achievement gains to show for it?

Apparently so. There are few long- term data on outcomes, but what little there are suggest distinct gains, particularly for minority students.

The only long-term test measuring achievement is the federal government’s National Assessment of Educational Progress. It shows small overall improvement in reading and math, but greater gains for minority students. In reading, 40 percent of the black-white score gap, for instance, has been eliminated among 17-year-olds since 1971; among 9- year-olds, 20 percent of the gap has been closed.

Those gains are consistent with the directing of new resources to minority students since 1971, both in compensatory programs and by retaining them in school longer.

Of course, nobody is satisfied with current achievement, for either white or minority students. And some school spending has been wasteful; indeed, skepticism about the value of increases in education spending can help force schools to become smarter about how tax dollars are used.

But there is no basis for saying that over all, money has not mattered. Over 30 years, modest new spending for regular education has apparently brought modest achievement gains. As we would expect.

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