2005 May 16 Monday
Per Pupil Spending In Arizona Public Schools Underreported

Susan Aud of the Milton and Rose Friedman Foundation and Vicki Murray of the Goldwater Institute have found that per pupil spending in Arizona public schools is widely unerreported.

Twenty years ago, TurboTax revolutionized income tax preparation.1 This analysis and accompanying database will bring the same simplicity, transparency, and accuracy to Arizona public school finance that Turbo Tax brought to the United States Internal Revenue Code by presenting complex Department of Education financial data in a clear and understandable way. Currently, the state does not synthesize the department’s multiple accounting systems, making it difficult for the public to know how much is actually being spent on students. This also makes it difficult for policymakers to obtain accurate figures to create informed education policy. For instance, the National Education Association, the country’s largest teachers union, says the state spends $5,009 per student, and Education Week’s annual Quality Counts ranking claims Arizona spends $5,487.2 With so many conflicting figures, how can Arizona policymakers and taxpayers know the cost of educating a student in an Arizona public school?

For the first time, with the database accompanying this study (available on the Goldwater Institute website at www.goldwaterinstitute.org), policymakers and the public can readily access the most accurate per-student expenditures—by both student and district type—for all 218 regular Arizona public school districts. This database will also be updated as new information becomes available. This analysis explains Arizona’s base equalization formula funding and suggests an alternative education finance model. It focuses on the state base equalization funding tied to students to determine the net change in district revenue if a student transfers to a school outside the district.

Total per-student funding consists of two types—those that vary according to the number of students in a district and those that are fixed.3 The first type is referred to in Arizona as equalized base funding. This is the amount the state has determined is tied to students when they enter the public school system, when they leave it, or when they change districts. The second type, omitted from most published reports, includes local, county, non-equalized state, and federal funding. This is the portion of perstudent funding that is fixed, or not based on student counts, and remains with school districts if students leave.

This analysis finds that the average state base equalization funding per student ranges between $4,200 and $4,600, and the average per-student portion of nonequalized district funding is $4,309. Thus, the average total spending for an Arizona public school student is between $8,500 and $9,000. These are minimum averages because they apply to students who do not have special educational needs, such as learning or physical disabilities and English language learner status, and who do not attend schools in districts that are small and/or located in rural areas.

Thus, policymakers and the public can now see how much education funding is directly tied to students and how much stays with school districts. The online database breaks down state equalization base funding for students according to four categories and non-equalized district funding into per-student amounts according to local, county, state, and federal funding categories.5 With that data, policymakers can readily calculate the fiscal impact to school districts and the state if students were given education grants to attend private schools. For instance, if five percent of public school students in Arizona, roughly 40,000, transferred to private schools using elementary education grants worth $3,500 and high school education grants worth $4,500—both less than current state base equalization funding—the net savings to the state and local districts would have amounted to $32 million in fiscal year 2003.6 Total funding in half of the school districts would have remained unchanged, and in the other half it would have decreased by less than one percent.

The incorrect low estimates for per pupil spending have been used by political groups to justify increases in government funding of education.

In fact, citing the 2004 Quality Counts per-student spending figure, Arizonans for Voter Rewards and Education Funding, headed by Mark Osterloh of Tucson, filed an initiative mandating “the Legislature to pour nearly $2 billion more into the public school system to bring per-pupil education spending up to the national average. Arizona ranked 49th in spending in the most recent Education Week Quality Counts ranking at $5,487 per pupil. The initiative does not indicate how lawmakers should pay for a spending increase to the national average of $7,524 per student.” See Robbie Sherwood, “Feeling Lucky? Plan Would Reward Voting,” Arizona Republic, July 31, 2003.

If the numbers being bantered around for Arizona's per pupil public schools spending can't be trusted then what about other states? Are per pupil spending levels underreported in other states? Public schools bureaucrats have two incentives to underreport spending. First off, they can point to low per pupil spending and claim that any failures of their students to learn a lot are due to a lack of money. Second, a widespread public image of cash poor schools eases the task of getting more money appropriated for education.

Just as school systems have an incentive to underreport funding they also have an incentive to overreport performance. For example, a recent Harvard/Urban Institute study found much higher Hispanic and black drop-out rates than the school systems have been reporting. Also, standardized test cheating by teachers has been discovered in many school districts.

Standardized test results can not be trusted unless the tests are administered by proctors who are independent of the school system being tested. School financing needs to be made more transparent as well. We shouldn't have to wait for a free market think tank to pour over the books of a state to figure out how much is really being spent. But a big increase in transparency may not have the effect of improving the average quality of education. My guess is greater transparency will have the unintended consequence of segregating students more by cognitive ability. See my post "Housing Prices Increasingly Driven By SAT Scores".

Privatization probably can't improve school performance much either. However, privatization would be more cost effective.

Share |      By Randall Parker at 2005 May 16 10:58 PM  Education

V. Ko said at May 17, 2005 8:45 AM:

First time commenting on your site, though I have been visiting it for a while. If only the mainstream media reported items and analyzed them as thoroughly as you did....keep up the great blogging!

John S Bolton said at May 17, 2005 4:45 PM:

AZ is a low cost state for public services. If per student costs are that high there, this indicates how far things have got out of hand.

john said at October 6, 2008 3:05 PM:

Lets not go apples and oranges here. Indeed there is a funding problem whether you choose to believe it or not. Before anyone makes an assumption one should ask indeed how the rest of the country is counting their "beans" as suggested by the author. Living in the state of Florida for over 25 years I have lived in a state with low funding for education. Like it or not it does impact the economy. Not for the snow birds, and retirees who have their nest eggs socked away, but for those who are trying desperatly to find a place in a dwindling job market with a mediocre education. I have paid my taxes with the hope that they will go to educate our children and will continue to do so with pride even though my stepson is now a grown man. If we spent one tenth as much on education as we do on war maybe we would no longer see the need for war.

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