Making the Case for Cutting Education Spending

In Fiscal 2010, Massachusetts state and local governments spent $10 billion on public school education, or $11,068 per student — about $1.3 billion more than the minimum “foundation budget” required by state law. The authors of a new study, “Why Massachusetts Should Spend Less on Education,” ask an important question: Has that extra spending generated commensurate improvements in student performance?

The answer, in short, is, “No.” Write the authors: “We find that a marginal increase or decrease in spending in Massachusetts has only a very small effect on school performance, as measured by results [on standardized tests] for the 4th, 8th and 10th grade.” (Assess their statistical methodology for yourself. I can’t understand it.)

I’m not advocating that we cut education spending in Virginia ($10,930 in the 2008-2009 school year), which is roughly equal per student to that of Massachusetts. But I would urge policy makers to question the conventional wisdom that more spending is the antidote to stagnating educational achievement. The authors, who hail from the Beacon Hill Institute, make a very important point: While the social return on investment on educational spending tends to be very high overall, the incremental impact from either increasing or decreasing spending from current levels is very small.

Economists use the phrase “diminishing returns” to describe the phenomenon. The first $1,000 per student spent on education — teaching children how to read, write and add numbers, say — has extremely high social benefit. Successive sums of money have positive benefits, too, but those benefits shrink with each increment. In theory, at some point we reach a point where spending more money yields no positive benefit whatsoever. The Beacon Hill study suggests that Massachusetts may have reached that point.

For Massachusetts state government, which faces a structural deficit exceeding $4 billion, it is not unreasonable to argue that cutting educational spending by 10% to save hundreds of millions of dollars is worthwhile if the impact on student achievement is de minibus. We haven’t reached the same level of fiscal distress here in Virginia so it would be difficult to make the case that education spending should be cut, but the long-term outlook is grim enough that it is worth thinking about curtailing future increases.


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