Education Next: Fueled by Federal Stimulus Package, Education Spending Will Likely Increase Over Next Decade Despite Lack of Achievement Gains for Students

STANFORD, Calif.--(Business Wire)--
Despite an economic downturn and new data from the National Assessment of
Educational Progress (NAEP) released last month that show no learning gains in
math for American 4th graders, the nation`s public schools will likely have more
money and a larger and better paid labor force than they had in 2009, according
to education researchers James W. Guthrie and Arthur Peng of Vanderbilt
University. Their findings appear in the forthcoming issue of Education Next.

The American Recovery and Reinvestment Act (ARRA) has increased the federal
government`s contribution to public education revenue from an average of 10
percent to close to 15 percent of the national total. As recent news reports
have detailed, over half of the jobs created or saved by the federal stimulus
package (325,000 out of 640,000 jobs) have been in public education.

All this federal support, however, could contribute to an even higher trajectory
for future spending on public education than has been the case in the past,
regardless of the diminishing returns in terms of student outcomes. Based on
historic spending trends and estimating that the federal government`s stimulus
contribution will grow to approximately $90 billion, Guthrie and Peng project
that national per pupil revenues could increase at a rate of nearly 2.5 percent
annually over the next ten years.

Yet, reading scores on the National Assessment of Educational Progress (NAEP)
have been level for four decades. And, for a half century, nearly one-third of
the nation`s high-school students have failed to graduate with their class each
year, while graduation rates for black and Hispanic students are even lower.

The $37 billion in the stimulus package that is intended to offset reduced state
and local education revenues, which were down 4.6 percent for the first quarter
of 2009, will cushion what would otherwise have been the first significant
per-pupil spending reduction in 60 years, explain Guthrie and Peng.

Persistent claims that school districts are in fiscal jeopardy, often reported
by the media, are misleading, say the researchers, driven by the fact that
school-district budget cycles aren`t synchronized with state and federal
legislative appropriations processes. Because it is increasingly rare for
legislative bodies to enact spending bills before the beginning of the fiscal
year on July 1, school districts, worried about their financial vulnerability
and needing to comply with personnel notification deadlines (usually in April or
May), issue layoff notices and hold mandatory public hearings, even if the
probability of actual personnel layoffs is slender. Such public threats trigger
a media frenzy, alarm employees and parent advocates, and fuel the public
perception that schools are in financial risk.

For the past one hundred years, public schools have had more money and more
employees per student in each succeeding year. Teacher salaries have increased
more than 42 percent over the past 50 years and health and retirement plans have
become more expensive. Moreover, school-related revenues and employment levels
have continued to increase even when the economy has turned down, unlike what
typically happens in sectors such as manufacturing and retail sales, where
recessions trigger cutbacks in personnel and profits. Education employment has
risen far faster than student enrollment in U.S. public elementary and secondary
schools. Since the 1970s, employment in public education has increased more than
4 fold, rising from more than 200,000 to nearly 900,000, while enrollment has
remained relatively constant, hovering above 50 million.

Public education revenue has been insulated from the direct effects of economic
ups and downs by a number of politically constructed conditions, including a
privileged legal status in most state constitutions, multiple state and federal
revenue sources, and stable tax support, such as property taxes, at the local
level. In most states, too, education employee unions have locked in extended
labor contracts, often bridging or outlasting economic recessions, which
effectively counter any threat to revenue levels. Additionally, the misguided
practice of using spending amounts as a measure of school quality has helped
protect local school-funding levels from any effort to reasonably adjust them.

"Many posh suburbs actively compete on this dimension, proudly proclaiming their
per-pupil-spending status ranking relative to competitor districts," write
Guthrie and Peng. Citizens, parents, and others who have purchased homes in such
districts perceive the value of their property to be linked to high spending
levels.

Read "The Phony Funding Crisis" available online at www.educationnext.org.

James W. Guthrie is professor of public policy and education at Vanderbilt
University and director of the Peabody Center for Education Policy. Arthur Peng
is research associate at the Peabody Center for Education Policy.

Education Next is a scholarly journal published by the Hoover Institution that
is committed to looking at hard facts about school reform. Other sponsoring
institutions are the Harvard Program on Education Policy and Governance and the
Thomas B. Fordham Foundation.

Vanderbilt University
James W. Guthrie, 615-322-7372
or
Hoover Institution, Stanford University
Caleb Offley, 585-319-4541
www.hoover.org

Copyright Business Wire 2009