Perspectives: Show Me the Money

Why Increasing Funding To Schools Must Couple With Improved Financial Management Capabilities For Leaders

Ask anyone what kids need for a quality education, and the immediate answers are obvious: good teachers, current textbooks and technology, safe buildings, extracurricular activities, and so on.

K12 school finance is the foundation underlying all of these needs. There are no textbooks and computers without purchase orders. There are no buildings or playgrounds without construction loans. Teachers may have hearts made of gold and rainbows, but even they won’t report to work without any salary or benefits. All of these inputs cost money!

At Edstruments, we’re committed to making K12 finance less of a black box. Regardless of whether you’re a current student or haven’t set foot in a classroom in decades, it is important to be informed about how public schools receive funding, and why that funding matters for educational outcomes. 

In this post, we’ll be focusing on the latter concept. There is extensive research showing consistent, increased spending on K12 students has effects long after those students toss their caps at graduation. To summarize an 83-page study (you’re welcome), additional education resources have the power to change lives of children for the better. Specifically, spending 10% more per-pupil from 1st to 12th grade leads to 7% higher wages and a 3.6 percentage-point decrease in prevalence of adult poverty. These effects are especially true for low-income children, who have a much better chance of breaking the cycle of poverty with better-funded schools. Even though money alone will not solve all issues in education, the evidence suggests it’s a necessary factor in improving student outcomes for those who need it most.

The above study drew from data collected from children born between 1955 and 1985, who were followed longitudinally through 2011. It goes without saying that things have changed dramatically in education in the last decade; the Every Student Succeeds Act replacing No Child Left Behind, a new national tax code, and the explosion of education technology are just a few that immediately spring to mind. However, a co-author of the original study released a 2019 paper that reaches the same conclusion: more money means better student outcomes, particularly in schools serving low-income students.

With that debate settled, a new question arises: what kind of spending increases are most impactful on student outcomes? Should we hire more teachers so schools can have smaller class sizes? Should we invest in the latest, research-based, culturally relevant curricula? Or should we buy wi-fi and a laptop for every student?

At Edstruments, we believe there isn’t a one-size-fits-all answer, but that districts and schools should carefully weigh the tradeoffs between such choices. Too often, it is easiest for leaders to accept their budgeting process “as is” rather than evaluating what’s worked and what could improve under review from a fresh pair of eyes. The specific goals a school system has (such as improving literacy or increasing graduation rates) will require targeted investments and critical evaluation of the efficacy of those investments. Simply put: If schools want to create the best opportunities and outcomes for students, they need to be willing to innovate and learn from their prior choices regularly.

This is why we advocate for increasing the capacity of K12 leaders to be wise financial managers. Empowering decision-makers closest to students (like principals) can go a long way in making sure the limited funding available to schools is going towards the right services and interventions. Unfortunately, the outdated methods with which education organizations handle their budgets make this far harder than necessary. Imagine dozens of people working on a single spreadsheet to keep track of millions of dollars: it may seem like a nightmare, but it is actually a common way school leaders, who often receive no financial training when making the switch from the classroom to the administration, handle money. This leads to expiring funds, overspending, or hasty year-end purchasing due to lack of a clear financial picture.

Streamlining finance management and training K12 leaders are ways to make sure schools can optimize their resources, no matter what policy decisions affect school funding at the local, state, and federal levels. To build internal capacity for financial decision-making within organizations, Edstruments combines our flagship budget management software with expert-back finance professional development for K12 administrators.

Ultimately, it all comes down to this: better K12 finance management means school resources work more equitably, efficiently, and transparently on behalf of students. It is a necessary complement to increasing total school funding; merely adding more money to schools without empowering leaders to be stronger managers of that money will inevitably result in misspending. The combination of more funding and better financial management will lead to better student outcomes, and better student outcomes mean better futures for us all.