Throwing Money at a Problem Is No Fix

Newsroom

Newsroom

Arguing for greater spending per pupil as a way to increase academic performance is like arguing for higher production costs on a car. Why would you want to make a process less efficient by increasing the cost per unit?

We should be focusing on productivity per dollar and not net spending. The people who benefit from higher spending are those who receive the money — and it’s not the students. Using the car analogy, it would be similar to the way higher costs for making the same car translate into more money in the supply chain and lower margins for the maker — with no discernable benefit to the driver.

Children, of course, are not products — unlike an education. In fact, an education is one of the most valuable products a child can consume to help determine their future. Those who receive a “good” education, which usually leads to earning a college degree, will likely earn 40 percent more than their non-degree-earning counterparts.

Want to see the overall unemployment rate recede to 4.5 percent again? Just look at the current unemployment rate for people with a college degree; it’s about half the national average. (As of July 2011, the U.S. unemployment rate stands at 9.2 percent, according to the U.S. Bureau of Labor Statistics.)

Education is important for our economy, as well. Reducing the nation’s high school drop-out rate by half in 2010 is estimated to have a medium-term impact of creating more than 50,000 new jobs, adding $5.6 billion in increased spending, $19 billion in more home sales and $713 million in increased tax revenue.

A recently published study highlighted a novel metric that education reformers should use to gauge success: efficiency of dollars spent. How much academic achievement does a public school district get for the money it spends per pupil? (It may surprise some that this idea comes from the left-leaning Center for American Progress.)

The results show that academic achievement is not directly linked to dollars spent. Nor is it related to poverty in the district.

The Michigan public school district with the highest spend-per-pupil rate, Bloomfield Hills Public Schools, generates a State Academic Achievement Index of 90 and spends $13,300 per child. Northville Public Schools scores one point higher — and spends 30 percent less per student.  While the best performing school district in the state, East Grand Rapids, scores three points higher than Bloomfield Hills, it has double the percent of low-income students and spends only $8,700 per child.

In the North Huron School District, 99 percent of the students are low income, yet the school district is one of the most efficient in the state, producing an achievement index number of 69 with an expenditure of $6,800 per pupil. In comparison, Alcona Community Schools spent $8,400 to get the same level of achievement.

Closer to home, Southfield spends $9,800 to get a 60. Farmington Hills spends a touch more and achieves a score of 80. But Ewen-Trout Creek Consolidated, in the far west of the U.P., spends a bit less than Southfield, has a higher percent of low-income students, and generates an 84.

Amidst all these numbers is a consistent theme: The importance of looking at efficiency. And if that sounds like the same way we run business, you’re right.

Education is too important not to dedicate the same mental discipline and effort we spend on trying to run a business. At the end of the day, a business produces a thing or a service; and an education produces a future.

The business world drives creative minds to be innovative, seek new opportunities and to spend a buck wisely.  The academic world should be driven to do the same. I know some educators who think this way, and they are highly effective (and inspiring).

The answer, however, is not necessarily to increase competition. There is too large of an entrenched bureaucracy fighting against it. There’s nothing an inefficient manager likes more than an enemy on which to blame their lack of success. Parents and taxpayers need to lead the charge by making their expectations known. Each community’s needs are different. Drive administrators and lawmakers to figure out how to most efficiently use the money in each district to get the maximum educational outcome.

What makes one district more efficient, more effective at spending, than another? How can we improve the quality of education we’re providing for the same dollar (or, in the near future, for even fewer dollars)? Perhaps it has to do with infrastructure or parent expectations.

Don’t let the debate on educational reform be dominated by those who would receive the money or decide where it should be spent. This reform needs to be driven by stakeholders and sponsors (parents and taxpayers) who demand more for their money.

Mark Phillips is an economist and former Wall Street analyst. He holds an M.S. in applied economics from the University of Michigan and a B.S. in economics and philosophy from the London School of Economics.

  • No comments