POLICY ISSUE: Education
A Short Primer on Per-Pupil Spending
Total Spending | State Per-Pupil Spending | District Per-Pupil Spending | Conclusion
End Notes | About the Authors
One of the most contentious issues in education is the debate over per-pupil spending. In California, many education officials have publicly lamented the states supposedly low level of per-pupil spending. Yet, as in the debate over the states dropout rate, where the numbers used by the California Department of Education (CDE) were misleadingly underestimated, the per-pupil-spending figures used by CDE and other officials are also low and misleading.
State spending on K-12 education is guided by the requirements of Proposition 98, the 1988 voter-approved state constitutional amendment that established a minimum funding level for K-12 schools and community colleges. Prop. 98 K-12 education funding is calculated as the sum of State General Fund dollars allocated by state government to K-12 public schools plus local property tax revenues devoted to schools. In 1999-00, the Prop. 98 education funding total is estimated to be $33.6 billion.
Although the Prop. 98 spending total is commonly used to describe California education spending, there are many other sources of education funding that do not make it into the Prop. 98 calculation. For example, the federal governments 1999-00 contribution of nearly $4.4 billion to education spending in California isnt counted, even though it accounts for 10 percent of total K-12 revenues. Big-ticket items included in this federal contribution: approximately $1 billion in Title I money for poor and disadvantaged students, $513 million for special education, and $129 million for class size reduction.
Also omitted are hundreds of millions of dollars in state and local funds allocated annually to pay for school capital costs, i.e. debt service on state and local school construction bonds. This omission is curious given that every time a state or local school construction bond makes the ballot, supportive politicians and education officials always claim that a vote for the bond is a vote for childrens education. How, they ask, can Johnny or Jenny learn if he or she is sitting in a run-down overcrowded classroom? Yet, once those bonds are approved, the annual cost of those bonds is not included in how much California spends to educate Johnny or Jenny.
In addition, $786 million in State Lottery money, $2.6 billion from various local fund sources, and $65 million from various other state fund sources are not counted in calculating 1999-00 Prop. 98 K-12 funding.
All these uncounted education revenue sources add up to about $10.7 billion. Add this amount to the $33.6 billion in Prop. 98 K-12 funding and one gets a total of $44.3 billion in total K-12 revenues in California. This amounts to more than a 10-percent increase over the $40.1 billion of total revenues devoted to K-12 in 1998-99.
State Per-Pupil Spending
When Governor Gray Davis signed the state budget, the San Francisco Chronicle reported that, "Although the amount spent per pupil will rise by $274 to $6,025, state spending remains far lower than the national average of $7,583 in the 1999-2000 school year."1 The states per-pupil spending figure, however, is misleading.
The official per-pupil spending rate of $6,025 cited by the Chronicle is derived by dividing Prop. 98 K-12 revenues (i.e., the sum of state General Fund dollars for K-12 education plus local property tax contributions) by the average daily number of students attending school in California (otherwise known as average daily attendance or ADA). As noted above, however, Prop. 98 revenues ($33.6 billion) grossly understate the true amount of K-12 funding.
If one were instead to divide total 1999-00 K-12 revenues (which includes federal money, lottery money, and other funds) of $44.3 billion by the states average daily attendance of just under 5.6 million students, one would get a per-pupil funding figure of $7,937, nearly $2,000 higher than the CDE estimate.
To be fair, not all money for education is actually designated for K-12 students. Some of these funds are used for adult education, adult vocational education, and pre-kindergarten child-development programs. At the time of the preparation of this paper, the figures available for these spending categories were contained only in the 1999-00 requested budget not in the eventually approved final budget. The requested budget had somewhat lower figures than what was eventually approved by the Governor and the Legislature. Thus, the total revenues in the requested budget for 1999-00 was estimated to be $42.8 billion rather than the eventual $44.3 billion. Subtracting the known adult education, adult vocational education and child development dollars from the $42.8 billion figure gives a total K-12 spending figure of $40.6 billion. Divide $40.6 billion by the average daily attendance of 5.6 million students and one gets a state per-pupil funding figure of $7,272.2 (See Figure 1). Thats approximately 20 percent higher than the per-pupil funding figure of $6,025 which is given out by state officials and used by the media.3
It should also be noted that, contrary to the popular belief that per-pupil funding has decreased since Prop. 13 (the 1978 property-tax-limitation initiative), per-pupil funding in California has actually increased over time. For example, an American Legislative Exchange Council study calculates that between 1976-77 and 1996-97 per-pupil funding in California in inflation-adjusted dollars rose 27 percent.
California, thus, is not penny-pinching education as much as some officials would have the public believe. Caution should therefore be exercised in blaming the poor performance of schools and students in the state entirely on the all too common complaint that not enough money is being spent on public education. Indeed, many studies show that there is little correlation between education spending and student achievement.
After examining decades of academic research, University of Rochester Prof. Eric Hanushek, the nations leading education economist, found that, "there is little systematic relationship between school resources and student performance."4 The point, says Hanushek, is that "how money is spent is much more important than how much is spent."5
In other words, no matter how much is spent on education, unless those funds are channeled into programs that work (e.g., teacher training emphasizing subject-matter competence, implementation of the states rigorous academic content standards, and introducing competition into the system through school choice), dont expect any change or improvement in California public education.
District Per-Pupil Spending
It should also be noted that the per-pupil revenue funding numbers for many school districts are much higher than the statewide figures. Figure 1 illustrates per-pupil revenue funding for representative school districts in the 10 largest metropolitan areas in California in 1999-00. Also included is the per-pupil revenue funding for the Sausalito Elementary School District.6 As one can see, the per-pupil revenue funding amounts are very considerable.
For example, Oakland will have $7,933 in revenues to spend per student, Fresno $7,994. San Jose will have revenues of $8,372 per student, Los Angeles $9,028, and San Francisco $10,021. Most amazing, though, is the Sausalito Elementary School District in Marin County which will have a whopping $16,555 in revenues per student.
Despite the high revenues of these districts, students in these districts have, for the most part, performed poorly on state achievement tests. Table 1 lists the 1999 SAT-9 reading and math test results in grades 2, 6, 9, and 11 for the 11 districts. The SAT-9 test, which is part of the states STAR assessment system, is a nationally normed standardized multiple-choice exam. District scores are reported by the percentage of students who score at or above the 50th percentile. As shown in Table 1, many of the district scores are below or well below the 50th percentile. For example, in Sausalito, where per-pupil spending is thousands of dollars higher than the highest per-pupil-spending state, large majorities of students in the listed grades scored below the 50th percentile.7
High funding and low test scores are not the only problems afflicting these districts. During the data gathering, one of the co-authors of this report encountered incompetence, obfuscation, and byzantine bureaucracy.8 Although public schools claim that their financial records and planning documents are fully open to public inspection, such was not always the case.
The cost accounting data needed to figure out how much government at all levels spends on students for the current school year are virtually non-existent. Further, the financial data needed to construct even the most basic cost data are difficult to elicit and even harder to interpret.
Further, instead of providing the supposedly publicly available data without question, district personnel consistently asked for justification for the requests. San Bernardino City Unified required a form to be completed and routed for approval before staff would send data. San Francisco Unified, which is under investigation by the state for irregular and unorthodox financial practices, was so unresponsive that a personal visit to its administrative offices was necessary to get requested public data.
Even when information was supplied, it was often incomplete. When asked about the total dollar amount of a particular programs budget, a San Francisco County Office of Education staff member claimed that neither he nor the programs manager knew what the total program budget was, nor could they locate the document that contained the total program budget. San Francisco Unifieds massive 412-page budget contained less than half the data necessary to understand costs at the district level.
Given all these hurdles, it would be virtually impossible for the average voter, who lacks the time to gather the required financial data and the accounting training to interpret them, to fulfill his or her theoretical role of holding the public schools accountable. A financial manager with Los Angeles Unified admitted that he had been "counseled" to use financial euphemisms when speaking about accounting matters so as to conceal or downplay what is actually going on in the district. With a public totally uninformed about the real state of public school finances, real accountability is illusory.
Several things are clear. First, California as a whole, and many of its largest districts in particular, are spending more money on education than the public has been led to believe. Yet, despite this spending, student achievement still lags behind most of the nation. Finally, it is impossible to hope for any real accountability when the financial data of the public schools are so inaccessible, inaccurate, and incomprehensible. A better system is needed.
Instead of todays complex funding system which involves a myriad of funding sources funneled through various layers of bureaucracy, a school-choice opportunity scholarship/voucher program offers taxpayers a much simpler and clearer approach to funding education. Under most voucher proposals, revenues to cover the tuition at voucher-redeeming schools would normally come from only one or two sourcesthe state and/or possibly the parentand only one thin layer of bureaucracy at the state level would be needed to administer the program.
So far, school-choice proponents have based much of their case on the improved student achievement of those students participating in the limited school-choice programs in Milwaukee and Cleveland. Competition, however, also fosters accountability. As the lack of public-school accountability revealed in this report underscores, public education is in dire need of competition. Only through competition will the public regain control over the public schools.
"Governor Signs School-Friendly Budget," San Francisco Chronicle, 30 June 1999: A1.
Carl Brodt calculates that the figure would be in the $7,500 range using the higher $44.3 billion approved budget figure and making estimates as to the amount likely spent on adult education, adult vocational education, and child development. See the Appendix for Mr. Brodts methodology in calculating the state per-pupil spending figure.
As a methodological point, the $7,272 figure is based on an earlier time calculation than the $6,025 figure. The comparable Prop. 98 funding total for the earlier time period is $32.8 billion.
Eric Hanushek, "Making Americas Schools Work," Brookings Review, Fall 1994.
Eric Hanushek, "Measuring Investment in Education," Journal of Economic Perspectives, Fall 1996: 9.
For an explanation of the methodology used to calculate the district per-pupil funding levels, see the Appendix at the end of this paper.
It should be noted that although San Franciscos test scores appear high, it has been well publicized that San Francisco Unified has prevented potentially low-scoring students from taking the SAT-9 test.
Carl Brodt was responsible for gathering the financial data for this report.
About the Authors
Lance T. Izumi is co-director of the Center for School Reform at the Pacific Research Institute for Public Policy. Carl Brodt, a certified management accountant, is a commercial bank vice president and treasurer of California Parents for Educational Choice. Alan Bonsteel, M.D., is an emergency and family physician and president of California Parents for Educational Choice.