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Show them the money to improve student outcomes

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It’s been controversial but new information from the US indicates that the amount of money spent on schooling actually does improve outcomes but is dependent on how and where the money is spent.

The US National Bureau of Economic Research undertook a review of the literature but with increased sophistication around causation and statistical methods and published their findings in December concluding that “… any claim that there is little evidence of a statistical link between school spending and student outcomes is demonstrably false”.

The new review examines two categories of studies – the older literature which was largely descriptive and based on observed correlations and a newer literature that employs advanced statistical methodologies which provide more credible conclusions about causation.

The influential study by Eric Hanushek of Stanford University in 2003 examined the findings of 163 studies relating school expenditure to student achievement that were published prior to 1995. It concluded that there is little association between expenditure and outcomes. This study is still cited by many commentators critical of increased funding for schools.

However, the new review says the Hanushek study employed faulty statistical reasoning in which the results of multiple-state studies were combined with single-state studies and this had the effect of muting positive results. Another study conducted a meta-analysis of the studies used by Hanushek and concluded that, contrary to Hanushek’s finding, they suggest a strong association between school spending and student outcomes.

The review canvasses a number of multi-state (or national) studies that examine the effects of these changes. Twelve out of 13 multi-state studies found a positive and statistically significant relationship between school spending and student outcomes. This was the case across studies that used different data-sets, examined different time periods, relied on different sources of variation, and employed different statistical techniques. The review concludes from these studies that “the evidence points to a causal positive impact of increased school spending on outcomes on average”.

The review also considered several single state studies of increases in expenditure that were not restricted in terms of their uses. Eight out of nine studies found a positive and statistically significant relationship between school spending and student achievement. The review concluded that “this suggests that budget increases (that are unrestricted in the use of funds) will tend to improve student outcomes in most contexts”.

In contrast, changes that restrict expenditure increases to particular uses appear to have mixed effects on student outcomes. One study of increased textbook funding found significant positive effects on school-level achievement in elementary schools. Of seven studies of the impact of capital spending in different states, four found positive effects on student outcomes and three had null impacts.

Similarly, studies of what is called Title 1 spending had mixed results. The Title I program provides financial assistance to schools and districts with high numbers or high percentages of children from low-income families. Three studies of increased Title 1 expenditure in New York City found no effect on student achievement, but studies in other states and cities have found positive effects. It may be that the New York City program does not work as well as Title 1 programs in other cities or districts.

David Gonski said in response to criticisms of his plan by Abbott’s National Commission of Audit: ‘... the essence of what we contended, and still do, was that the way monies are applied is the important driver. Increasing money where it counts is vital. The monies distributed over the 12-year period to which the commission refers were not applied on a needs based aspirational system.’


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