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Major New Study Confirms that Money Matters

Court orders requiring states to reform their educational finance systems play a significant role in increasing school funding levels for low-income students; these cases also increase these pupils’ opportunities for high school graduation and adequate wages during adulthood, according to a new study published by the National Bureau of Economic Research (NBER). The study, by C. Kirabo Jackson, Rucker Johnson, and Claudia Persico, from Northwestern University and UC Berkeley,  looks at the school finance reforms that commenced in the 1970s and assesses the effects of these reforms on school district spending. The study then analyzes the effect of the increases in funding stemming from the court orders on the students’ educational and economic outcomes in adulthood. The authors analyzed data from 15,000 children born between 1955 and 1985.

The study covered the impact of state supreme court decisions in 28 states between 1971 and 2010.  It assessed both increases in total spending in low income school districts and reductions in the gap in spending between low and high income districts. It concluded that school finance reforms stemming from court orders have tended to both increase state spending in lower-income districts and to decrease expenditure gaps between low and high income districts. The study adds to existing literature by differentiating between equity and adequacy cases in its analysis of court impact on education finance. It concludes that equity-based court-mandated reforms successfully reduced spending gaps between high- and low-income areas, but they accomplished this mostly by redistributing existing levels of funding. Adequacy-based litigations also effectively reduced spending gaps, but they tended to do so by increasing school spending over all and without reducing spending levels in higher spending districts.

In the second part of the paper, the authors discuss the positive effects of court ordered funding reforms on students’ long-term success. The researchers found that a 20 percent increase in annual per-pupil spending for K-12 low income students leads to almost one more year of completed education. In adulthood, these students experienced 25 percent higher earnings, and a 20 percentage-point decrease in adult poverty. The authors posit that these results could reduce at least two-thirds of the achievement gap of adults who were raised in low and high income families.

The authors note, however, that the spending changes they analyzed occurred during a period in which average school funding levels were much lower than they are at present. It is possible, therefore, that increases in education spending could have diminishing marginal impacts, meaning that that to obtain learning gains of the same magnitude, even higher increases in spending might be required.

June 17, 2014

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