Aaron Smith joins the show who is the director of education policy at the Reason Foundation. He is the co-author, along with Jordan Campbell, Christian Barnard, and Jude Schwalbach, of a new interactive report titled The K-12 Spending Spotlight.
Jason Bedrick: Hello, and welcome back to EdChoice Chats. I’m your host, Jason Bedrick, director of policy at EdChoice. This is another edition of our Big Ideas series. Today, I’m pleased to be joined by Aaron Smith, the director of education policy at the Reason Foundation. He is the co-author, along with Jordan Campbell, Christian Barnard, and Jude Schwalbach, of a new interactive report titled The K-12 Spending Spotlight, which is the subject of today’s conversation. Aaron, welcome to the podcast.
Aaron Smith: Thanks for having me, Jason.
Jason Bedrick: Our pleasure. So what is this new interactive tool, and why did you create it?
Aaron Smith: Great question. There are a lot of misconceptions about education funding, and school finance data, in particular, can be difficult to obtain and make sense of, so we wanted to create a tool for stakeholders that would allow them to have easy access to data and to be able to address the funding misconceptions for themselves. Our Spending Spotlight provides school finance data going back to 2002 in both real and nominal terms, so inflation-adjusted figures are available, so that users can explore longitudinal trends related to revenue and to expenditures over time. We have several views within the Spotlight, including revenue sources, instructional expenditures, and support services expenditures as well.
Jason Bedrick: We’re constantly hearing that spending on K-12 education has been cut, slashed, even gutted in the last couple decades. Often, you hear school choice policies are to blame. What do the data actually say about K-12 spending over the last two decades?
Aaron Smith: Well, I’ll quote my Reason colleague Christian Barnard, who says, “Education has not been defunded, and it’s not even debatable.” Over the last couple of decades, between 2002 and 2019, nationwide inflation-adjusted spending on K-12 education grew by about 24% per pupil, or about $3,005 per student. So for a classroom of 20 students, that’s about $60,000. In total, K-12 education revenues are at $752 billion annually for K-12 education. We had a few interesting findings in our analysis. Importantly, per-pupil revenues grew in every state except two. The only two states that revenues haven’t grown during the time period examined were North Carolina and Idaho, and in those states, revenues were essentially flat. I know in North Carolina, that figure was a little less than a 1% real decrease in the revenues. Importantly, 23 states, plus D.C., saw their funding grow by 20% or more. Most notably, three states saw funding increases above 50%. North Dakota, New Hampshire, and New York all saw explosive growth in their education dollars.
Jason Bedrick: Now, where is all this money going? Is it going to teachers or something else?
Aaron Smith: That’s a great question. We looked at both instructional expenditures and support services expenditures. Spending on instruction grew by about 19% per student. For support services, that was about 24%. But what’s really interesting is when you break down these categories. Instructional expenditures grew by about $1,250 per student, but salaries only accounted for about $153 of this. The real growth has been in employee benefits, which grew by about $949 per student. That’s a 76% increase in benefits versus a roughly 3% increase in spending on teacher salaries.
Jason Bedrick: What the teachers are experiencing is essentially, over the last two decades, their inflation-adjusted income is flat. They have had explosive growth on the benefit side, and that’s mostly what? Are we talking about healthcare packages, pensions, both?
Aaron Smith: All of the above. That includes teacher pensions, retiree health benefits, and health benefits for current teachers as well. Outside research suggests that the biggest growth of those categories has been in teacher pensions and retiree health benefits. Right now across the country, we have about $500 billion in unfunded pension liabilities that states are trying to deal with.
Jason Bedrick: Well, that’s a lot easier for policymakers to push, because I can give you this supposed benefit now, or at least I give you the promise of the benefit now, and then some other policymaker later is going to have to figure out how to actually fulfill that promise, right?
Aaron Smith: Right. And that time is now. In our analysis, we saw that 12 states had instructional benefit growth that exceeded 100% per pupil. States like Hawaii, Pennsylvania, and Illinois all exceeded 170% per pupil. A lot of their dollars are now going to instructional benefits. We calculated that, of the new dollars that have entered the system between 2000 and 2019, about a third of that growth has gone to instructional benefits.
Jason Bedrick: Now, circling back to the school choice angle, is there any merit to this claim that educational choice policies are draining the district school coffers?
Aaron Smith: No. In fact, it’s actually laughable when you look at the actual data. First, I think you would want to look at the revenue trends in school choice states. We actually isolated, I think, 25 choice states, plus D.C., and all choice states have seen increased revenue since 2002, except for North Carolina, which I mentioned before. Their revenues were essentially flat. So education revenue is going up in school choice states. Then when you actually look at what states are spending on school choice, research from EdChoice shows that less than half a percent of all education expenditures in the U.S. go to school choice programs. What we did is we matched these data provided by Drew Catt and researchers at EdChoice, and we put them into per-pupil terms. Basically, what we found is all but six of the 26 school choice states examined, including D.C., spent less than $100 per pupil on choice programs, including eight that fall below $10 per student. So in the context of state education budgets and total per-pupil expenditures, school choice is truly a drop in the funding ocean.
Jason Bedrick: Yeah. I’ll say there was a corresponding piece that you put up at the Reason Foundation website. Our listeners can find it. It’s called Benefit Costs, Not School Choice Programs Are the Real Drain on Public Education Spending. This was published on September 30th of this year. You have this one fantastic chart, actually, several fantastic charts, but chart number two, School Choice vs. Public School Funding in 2019. On the right side, you just have a forest of mighty oaks, very, very tall, showing public school spending per pupil; and then on the other side, you’ve got these little acorns of school choice funding per pupil that are absolutely dwarfed. So anybody looking at this chart and hearing the argument that, “Oh, our fiscal woes are because of school choice,” it’s absolutely laughable.
Aaron Smith: Right. Even in the highest spending states on school choice, like Florida and Wisconsin, that’s still less than $400 per pupil in 2019, so it’s a very small sliver of the overall funding pie. It makes you wonder why all of these policy battles are taking place, all of the lawsuits and the handwringing around choice programs, when the amount that’s actually being spent on school choice is such a small share, especially in the context of how much education revenues have grown over time.
Jason Bedrick: Were there any other interesting things that you found in the K-12 Spending Spotlight when you were digging through and looking at all the data?
Aaron Smith: A couple things stand out. One would be that debt has actually increased substantially over the past couple of decades. Spending on capital has rebounded since the Great Recession and is essentially flat over time, but debt has skyrocketed by about 51%, going from about $6,800 per pupil to just north of $10,300 per student. That’s about $495 billion in both long-term and short-term debt that districts have. Importantly, we’ll also note that federal revenue has increased over time. Between 2002 and 2019, it went up by about $985 per student, a 22.3% increase. Title I is likely a main driver of this, as the federal government has enlarged their footprint in K-12 education. One thing I would point out is that there’s a lot that gets lost in the data, so it’s important to know what’s not seen here. As you might know, at Reason, we do a lot of work on school funding reform. We work with state policymakers on overhauling their funding formulas. And one thing that does get lost is how these dollars work for parents and also work for educators. By that I mean, how flexible are the $752 billion that we spend each year on K-12 education? Specifically, there was one good study that showed that school principals only have about 8% autonomy over education dollars. Most of the spending decisions are made by school districts, state legislators, and federal bureaucrats. There’s actually very little autonomy at the school level, and that gets lost when you’re looking at school finance data. Then, also, as we discussed before, families control a very small share of education dollars. Less than half a percent of all education expenditures go to families via choice programs. That stands out, and I would urge policymakers and school choice advocates to think about whether these dollars are flexible and working for parents and educators.
Jason Bedrick: Our guest today has been Aaron Smith, the director of education policy at the Reason Foundation. You can find this fantastic and very user-friendly new interactive tool, The K-12 Spending Spotlight, at the Reason Foundation website. Aaron, thank you so much for joining us today.
Aaron Smith: Thanks for having me.
Jason Bedrick: Thanks so much for joining us. This has been another edition of EdChoice Chats, the Big Ideas series. If you have any ideas for authors you’d like us to interview for the Big Ideas series, please send them to email@example.com. And be sure to subscribe to our podcast. Follow us on social media @edchoice. And don’t forget to sign up for our emails on our website, edchoice.org. Thanks so much. We’ll catch you next time.