More Money or More Charter Schools?

By 02/14/2017

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It’s a common mantra of education reformers: money does not explain why so many at-risk students in our country lack educational opportunity.

But recent research calls this claim into question.

In reviewing two school funding studies in the New York Times, Kevin Carey endorses their conclusions: money really does matter in education.

The authors of these studies, who thoughtfully use sudden changes in school spending levels generated by school finance lawsuits to construct quasi-experimental comparisons, very well may be right.

But when it comes to spending tax dollars wisely, the “more money solution” is massively inefficient.

@myeyecandi via Twenty20

@myeyecandi via Twenty20

As a country, we can choose to increase spending by billions of dollars for very modest results – or, for a small fraction of the cost, we can achieve much more by simply letting great educators open up schools.

A 10% Increase in Spending Doesn’t Get You Much

Only one of the two finance studies looked at impacts on student test scores. The authors estimate that a 10% increase in annual spending increases test scores by .18 standard deviations over a 10-year period, for an annual gain of .018 stand deviations per year.

Now compare this to CREDO’s urban charter school study, which found that urban students enrolled in charter schools gained .07 standard deviations relative to their peers in district schools in one year.

In the course of a year, urban charter schools increase student achievement 4X as much as increasing public funding by 10%.

In New Orleans, converting essentially all the city’s traditional public schools into charters led to a ~.4 standard deviation improvement in the early years of the reform. In roughly 2-3 years, New Orleans was able to increase student learning twice as much as a 10% funding increase accomplishes in ten years.

All of these studies attempt to control for student selection effects, and the New Orleans results are particularly compelling on this issue in that charters have grown to serve nearly every student in the city.

Increasing Funding by Even 10% is Insanely Expensive

Consider a hypothetical town with 50,000 students, all of them who are in poverty, and a per-pupil allocation of $10,000.

Over ten years, increasing per-pupil by 10% will cost the town a half a billion dollars.

To put the costs in context: on average, it costs around $1,000,000 to launch a new charter school that serves 500 students.

This puts the cost of the charter intervention at roughly $100,000,000.

Also: the charter costs are one-time costs.

So over a ten-year period, the total bill for increasing funding by 10%: $500 million.

The total cost for scaling urban charters to serve all 50,000 students: $100 million.

For a fifth of the cost, you probably get 3-5X the achievement impact.

And note that this hypothetical is based on the generous assumption that all students in the town are poor. The authors of the funding study report that the school finance reforms they studied actually did not reduce socio-economic and racial gaps in test scores because low-income and minority students are not very concentrated in the districts that enjoyed spending increases. In other words, funding reforms focused on district spending levels are likely to be even less efficient as a strategy to help at-risk students, as the money will flow to middle class and wealthy students as well.

Test Scores Aren’t Everything: Examining Adult Outcomes

When it comes to test scores, urban charters are a much more efficient policy intervention than increased educational funding.

However, the second of the two new finance studies tracked long-term outcomes and found more compelling results. The authors found that, for children in low-income families, a 10% increase in per-pupil spending led to:

• A 13% increase in adult hourly wages.

• A 6% reduction of the annual incidence of poverty in adulthood.

These are noteworthy results, suggesting much larger effects of increased spending on economic outcomes than would be expected based on test-score effects of the size documented in the first study.

Research on charter schools and non-tested outcomes is sparser, but two recent studies examined long-term effects of charter school attendance on students in Florida and Texas.

In the Florida study, the authors found that enrolling in a charter school increased earnings by 12%.

The Texas study found similar results though they were not statistically significant. For low-income students enrolled in No Excuses charter schools (which are admittedly more effective than the median urban charter school) the authors found a statistically insignificant 1% in earnings increase for every year of attendance, or roughly 12% for a child enrolled throughout their K-12 career.

While both these charter studies roughly track the effects found in the school funding study, I don’t think we know enough about adult outcomes for urban charters. Both studies had pretty significant limitations, and we don’t yet have a good national study of this issue.

But remember: funding interventions will cost us billions of dollars more than expanding urban charter schools.

Even if the impacts end up being roughly the same, urban charter schools achieve these results at a small fraction of the cost.

Why Fight Something that Helps Children at Very Little Cost?

Urban charter schools have an incredible track record of increasing student achievement, while increasing school funding by as much as 10% yields very modest test score effects, and these effects come at a very high cost.

Moreover, initial research indicates that adult outcome effects for funding increases and urban charters are roughly within the same range.

In public education, it is unfortunately rare to find something that truly helps children in need, and in urban charter schools we have found something that works at basically no additional cost.

This is not to say that we should never increase public funding to schools; numerous states in this country allocate paltry sums of money to children who need it the most, and in these instances funding should be increased.

But these children will also need great schools led by amazing educators, and urban charter schools are among the most cost-effective way to provide these children the schools that they deserve.

—Neerav Kingsland.

Neerav Kingsland is Senior Education Fellow at Laura and John Arnold Foundation.

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