Show Us the Money

A bank would never grant a loan to a business that failed to disclose its overhead. So why do taxpayers and state legislators consistently vote to increase spending on public schools without knowing their full cost?

A new report from the Cato Institute finds that state education departments routinely understate the cost of public schools and often completely fail to report key spending categories. This may be contributing to the public’s vast underestimation of the true cost of public education.

The report, “Cracking the Books: How Well Do State Education Departments Report Public School Spending?,” assigns A-to-F grades for the completeness, timeliness, and accessibility of the spending data that the departments publish on their websites. The report reveals that very few state education departments provide complete and timely financial data that are understandable to the general public.

The most useful figures for comparing school districts of varying sizes are the annual per-pupil expenditures (PPE). However, half of all state education departments report PPE figures that leave out major cost items such as buildings, interest on debt, and pensions, thereby significantly understating what is actually spent. Alaska’s Department of Education website does not report PPE figures at all.

Other important spending categories are often omitted. Eight states fail to provide any data on capital expenditures, ten states lack any data on average employee salaries, and 41 states lack any data on average employee benefits.

Few states manage to publish timely spending data. By the end of the last calendar year, only 13 states had published per-pupil spending data for the 2011–12 school year. Most states’ data were a year behind, and for a handful of states the most recent spending data were two or three years old.

In addition, states too often report spending data that are hard to find or interpret. For example, the commonly used term “current expenditures” gives the false impression that it refers to data that are recent, which is not necessarily the case.

The average citizen is unlikely to know that “current” refers to “operating” expenditures, indicating that the figure excludes some major categories of spending, such as capital expenditures. Moreover, state education departments often use undefined acronyms that are practically impossible for the average citizen to decipher.

This financial opacity may be contributing to widespread misperceptions about public-education spending. Despite tremendous and persistent spending growth in the last half-century, the public greatly underestimates how much is spent on public schools.

A recent survey by Harvard University’s Program on Education Policy and Governance found that the public’s average estimate of the annual cost per student in public schools nationwide was only $6,680. The true cost is more than double that estimate, at nearly $14,000 per student annually, according to the most recent inflation-adjusted data from the National Center for Education Statistics.

The Harvard survey also examined how misconceptions about education spending affect support for spending levels. The researchers randomly divided survey respondents into two groups. The first group of respondents were simply asked, “Do you think government funding for public schools in your district should increase, decrease, or stay about the same?” Respondents in the second group were first told what the annual per-pupil expenditures were in their school district.

The survey found that informed respondents were significantly less likely to support increased spending. While 53 percent of uninformed respondents stated that they wanted to increase spending on public schools, support fell to only 43 percent among informed respondents, while 57 percent wanted spending to stay the same or decrease.

The public’s gross underestimation of education spending has real-world consequences. For example, on Election Day 2012 in Colorado, a majority of voters in 29 of 31 districts voted to increase K–12 education spending by a total of over $1 billion, approving 34 bond issues and operating-revenue increases. Nearly two-thirds of the ballot questions passed with less than 60 percent of the vote. If the Colorado voters resembled the Harvard survey’s national sample, it is very likely that a fully informed public would have voted differently.

An informed public is a necessary prerequisite for self-government. When government agencies offer incomplete or misleading data, they deprive taxpayers of the ability to make informed decisions. At a time when state and local budgets are severely strained, it is imperative that state education departments provide the public with accurate, timely, and accessible spending data.

— Jason Bedrick is an education-policy analyst with the Cato Institute’s Center for Educational Freedom and the author of “Cracking the Books: How Well Do State Education Departments Report Public School Spending?”

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