If a state or the federal government gives more money to schools, will it produce better student outcomes? In 1966, James Coleman, commissioned by the United States government, published the first major study on student achievement in the U.S., “Equality of Educational Opportunity,” now more popularly known as The Coleman Report. The Coleman Report explored how a wide variety of factors impacted student outcomes in public schools, including school spending. Coleman, whose findings have come under much scrutiny as time passed, concluded that additional school funding was unlikely to produce better student outcomes. That finding set the tone for decades of education policy experts, economists and policymakers trying to better understand the link between school spending and a broad array of student outcomes.

One of the more influential voices in that debate has been economist Erik Hanushek. It is tough to overstate the reach of Hanushek’s work in the national discourse of education spending in academia and policymaking. Hanushek is a highly prominent figure who has authored or edited 24 books and more than 250 academic articles on education policy and school finance. Today, he is the Paul and Jean Hanna Senior Fellow at the conservative-leaning Hoover Institution at Stanford University. Academics and educational policymakers have hotly debated Hanushek’s studies on school spending and student outcomes because the crux of most of his findings have been that additional injections of money into school systems are not directly connected to improvements in student outcomes.

Hanushek became the face of those who argued that there was not enough evidence that additional funding would directly improve schools. He published prolifically on the subject, including an influential paper in 1997 looking at nearly 400 studies of school spending and student achievement where he found no strong or consistent relationship. He followed up with a 2003 paper where he looked at U.S. and international policies designed to bolster school resources or “input-based schooling policies.” Again, Hanushek concluded that, “…governments around the word have dramatically increased the resources devoted to them [schools]. By concentrating on inputs and ignoring the incentives within schools, the resources have yielded little in the way of general improvement in student achievement.”

His findings are important to understand because their influence continues to impact local, state and federal education spending policy. Beyond his academic work, Hanushek has served on many impactful commissions and boards at the state and federal levels since the early 1970s. He has testified in dozens of consequential trials across at least 20 states on school funding, including California’s landmark school funding case, Serrano v. Priest in 1973. He most recently testified on the losing side of a 2022 school funding trial in Pennsylvania, where the court eventually ruled that the state’s school funding system was unconstitutional because it violated the state’s guarantee of a fundamental right to an education for every child. Additionally, Hanushek has delivered testimony to both state and the federal legislatures over two dozen times on many education policy topics, but most frequently school finance.

While much of the media attention on school spending tends to reduce the argument into whether or not money matters in education, Hanushek’s work has mainly asserted that more money put into schools will not necessarily lead to improved student outcomes. For much of his career, Hanushek seems to have had an inherent distrust that if given additional unrestricted funding, school districts would spend it in ways that positively impact students. In a 1996 study, Hanushek stated, “It is tautological to say that we will get good performance if we spend the money wisely. Today, the existing knowledge base does not ensure that any added funds will, on average, be spent wisely. That is true even if some schools may spend their funds wisely.”

Is this distrust warranted? While there are examples of school districts using money in questionable ways, the most recent evidence suggests that, overall, school leaders do use increases in unrestricted money in ways that improve student outcomes — particularly for historically underserved student groups.

In the past few decades, educational economists have used more sophisticated analytical methods to tackle whether and how money matters in education. Many of these studies have centered around major school finance reforms that have significantly increased education spending in multiple states since the 1990s. Researchers such as C. Kirabo Jackson, Claudia Persico, Bruce Baker and many others have published studies that show that specific increases in spending had positive impacts on a wide range of student outcomes such as graduation rates, test scores, completed years of education, future earnings and a reduction in poverty in adulthood. In 2023, Jackson and Claire Mackevicius from Northwestern University conducted a study looking at the results from 31 separate papers on the impact of U.S. K-12 public school spending on student outcomes. They found that when students are exposed to funding increases for four years, there are positive increases in test scores and the likelihood of attending college. The intensity of those results varies by student group, with students who are economically disadvantaged experiencing the greatest impact from the reforms and more affluent students experiencing more modest effects.

Julien Lafortune, a research fellow at the Public Policy Institute of California with expertise in school finance, said that new meta-analyses of more recent studies on this topic show “a pretty compelling link between outcomes and spending.”

“Most studies are improving and show a link, especially the ones that take causality a little bit more seriously and aren’t just observational. That definitely differs from the previous conclusions and the previous research,” Lafortune said. His research has found that states like California that made big changes to their school finance systems and directed a specific additional state dollars to low-income and low-property wealth school districts improved student achievement on test scores in those districts.

California’s switch to the Local Control Funding Formula (LCFF) in 2013 is an example of a state-level reform that resulted in an influx of education dollars. LCFF was a monumental shift away from the state’s previous reliance on categorical programs and has resulted in the state committing an additional $18 billion over six years to K-12 education. Much of this funding is specifically targeted toward high-needs students. Still, the bedrock principle of LCFF was to give local districts a wider range of flexibility on how to use the new funding. Subsidiarity, or the idea that those closest to students know how to spend money best, is a cornerstone of the law.

What has been the impact of this increased funding on students — particularly high-needs students — since the reform? Berkeley Professor Rucker Johnson has been studying the effects of LCFF since its inception. His latest work, School Funding Effectiveness: Evidence From California’s Local Control Funding Formula, published by the Learning Policy Institute, examined the impacts of LCFF-induced increases in student spending on student achievement and behavioral and attainment outcomes.

Johnson found that LCFF:

1. Improved students’ math and reading achievement
2. Reduced the probability of grade repetition
3. Increased the likelihood of high school graduation and college readiness
4. Decreased suspensions and expulsions
5. Improved student achievement through investments in instructional inputs (such as class size reductions, teacher salary increases and reductions in teacher turnover)

Johnson’s findings largely echo those of other researchers who have looked at the impact of LCFF. Lafortune, who has also studied the effects of the formula, said, “It’s a lot more progressive in a sense that we’re providing a lot more funding for these districts with a lot of high-need students. That in and of itself has the potential to move the needle a little bit on achievement gaps, in theory.”

In a 2021 study with PPIC, Targeted K–12 Funding and Student Outcomes: Evaluating the Local Control Funding Formula, Lafortune found that LCFF had led to resources and outcomes being distributed more equitably across districts. However, he suggests that policymakers should be monitoring concentration grant funding (funding districts receive if more than 55 percent of students qualify as high need) to ensure it gets to the students it is intended to reach.

Hanushek’s latest work, with lead author Danielle Handel, examined 43 newer, more robust studies on school spending and a range of student outcomes. Of the 16 U.S. based studies on increased spending and student achievement, the authors found 14 that showed evidence of a positive relationship between increased spending and achievement. None of the studies showed a negative relationship. Of the 18 studies that looked at graduation rates and increased spending, all showed a positive relationship. While they find mixed results when looking at specific spending outcomes, such as reducing class sizes, the magnitude of the positive effects from straight spending increases is meaningful.

However, even these strong results were not enough to convince the study’s authors, who concluded that, “The historical research found little consistent or systematic relationship of spending and achievement…” and that “More recent work has re-opened the fundamental resource-achievement relationship with more compelling analyses that offer stronger identification of resource impacts. A thorough review of existing studies, however, leads to conclusions similar to those in the historical work.” This conclusion, however, is at odds with the overwhelmingly positive relationships presented throughout the study.

Hanushek’s work has been used extensively in education policy. It has been cited by legislatures and every level of the court system, all the way to the U.S. Supreme Court. Now that his latest work finds that most studies show a positive relationship between school spending and student achievement, how will the policies based on his prior work catch up? For example, despite evidence to the contrary (see CSBA’s 2022 survey report Beyond the Spreadsheets), there have been scores of skeptics who felt that the federal government’s COVID aid packages were too large for districts to spend and question whether district leaders are making impactful decisions around their use.

However, early examinations on the use of COVID funding have shown that most district leaders are using the funding and are targeting the local needs of their students through important programs such as tutoring and mental health. Hanushek has undoubtedly driven some of the skepticism surrounding how school districts spend increased funding. At the core of his argument is a fundamental lack of trust in the ability of local decision-makers to spend more money in impactful ways.

Policymakers, researchers and district leaders should always be investigating and evaluating the most effective types of spending for students. However, there should also be an acknowledgment that, overall, evidence suggests that districts have spent additional funding in ways that have improved students’ lives. There should be some degree of trust that local districts, including governance teams, can assess their local needs and spend additional funding accordingly. Without those extra resources, districts are forced to shuffle existing assets in ways that might not be beneficial to their student populations.

On the 10th anniversary of LCFF, many policymakers, scholars, educational leaders and educational partners are thinking through the impact of the reform and offering suggestions for future improvements. One aspect of the law that evidence shows has been overwhelmingly positive for students is the increased base funding that came with the formula. Based on this evidence, it is time to move on from the scholarly debates over whether more money matters in education. Those who reduce the question to whether money matters or not and resist increased student funding often abuse this debate in the political sphere.

Through his review and analysis of the most recent, robust literature, the nation’s most prominent skeptic of the impact of unrestricted increased funding has found significant links between increased spending and student outcomes. The evidence strongly suggests that increased base funding to districts can directly improve student outcomes, particularly among historically disadvantaged students. Given this work, policymakers may consider designing funding to be flexible and encourage districts to identify expenditures that would most help their students at the local level.