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Blog Post · June 3, 2022

Video: Understanding the Effects of School Funding

photo - Teacher Reading to School Children

Fueled by growing state revenues and billions in one-time federal aid, California public schools have seen record-high funding in recent years. The state has caught up and surpassed the national average in school spending, after lagging behind the nation for decades. “This is an influential moment in California school finance,” PPIC researcher Julien Lafortune said during the first in-person briefing for PPIC since the onset of the pandemic.

Despite California’s record funding, large gaps in outcomes persist between student groups, and addressing those gaps remains a key challenge for policymakers. Lafortune examined a broad swath of literature on school spending to determine whether money matters in closing these gaps. “If we increase spending, is it going to improve outcomes? Are we going to get improvement commensurate with the additional resources that we put into the education system?”

Studies of school finance reforms across the US and California indicate that students gain short- and long-term benefits from higher school spending. Test scores, graduation rates, and college attendance and graduation improved in the short run, while some evidence supports improved earnings, intergenerational mobility, and even higher housing prices in districts that passed school finance reform in the long term. Low-income students and low-income districts that receive additional funding show the largest impacts.

Even with these strong results, Lafortune stressed that how states target funding matters. “We need to know how funding reaches the students and schools within districts,” Lafortune said. “There’s a lot of segregation within school districts … and low-income students are spread out across a variety of districts.”

California studies of the Local Control Funding Formula (LCFF) can provide some nuance around the effect of targeted funding. Outcomes improved for districts that receive concentration grants based on high-need populations. “School spending is generally progressive when we compare schools across a district; that means we are allocating more funding to the higher-need school sites in the district,” Lafortune said.

Other factors also may influence how a district spends funds. Rising costs and a rising cost of living have led to wage increases that put upward pressure on California schools. To maintain the same level of output, Lafortune noted, costs may go up more than inflation in the education sector. And schools may face tradeoffs in staffing decisions, choosing quantity over experience and credentials.

In a similar vein, benefit costs have grown even as enrollment has fallen. Declining enrollment poses an immediate challenge—and the pandemic has accelerated trends. Schools have seen a bigger drop than projected, which means a real fiscal challenge for districts, because funding is tied to the number of students.

“We’re asking schools to take on expanded roles,” Lafortune said in conclusion. “If we really want to evaluate how effective this spending is, how effective this policy is, we need a set of outcomes that goes beyond test scores—preferably that goes longer term that could include other metrics such as student health or mental health.”


coronavirus COVID-19 enrollment K–12 Education Local Control Funding Formula Population Poverty & Inequality school finance school funding student outcomes