Join the conversation

In the current fiscal climate, all government entities – schools most certainly included – are being asked to justify their costs. But given that they are typically measured by standardized test scores, graduation rates and other academic measures, how can schools show their cost-effectiveness?

Economist Michael Walden has provided one example, conducting a study on the impact of the Virginia Beach City Public School System on the metropolitan Virginia Beach economy. And he recently shared the experience in School Administrator (a publication of the American Association of School Administrators, AASA).

One thing I appreciated: The opening acknowledgement that while there is much rhetoric about bringing business principles to government, government is fundamentally different than business. As Walden points out, “a strong argument can be made that government exists to perform those functions that private companies can’t do and make a profit.”

But that doesn’t mean that we can’t estimate the financial benefits of public schools and share those figures with the public, both to convince them of the wisdom of their current investment and to try to persuade them to increase it. In the research, Walden (a professor at North Carolina State University) identified three ways that school outcomes are often monetized: The economic value of degrees awarded by the schools (for example, based on the difference in average lifetime earnings between a high school graduate and a high school dropout), a reduction in future public costs (given evidence that the public cost of crime control and healthcare is much lower for high school graduates than dropouts), and the economic impact of schools on local wealth (both in terms of the ripple effect of additional spending of higher wage earners (aka graduates) and in terms of property values surrounding better-quality schools).

Using these types of measures, Walden found that for this district’s annual budget of almost $700 million:

• Each year’s graduates earn between $800 and $900 million more over their lifetime (expressed in today’s dollars)
• Each year’s graduates reduce future crime control and public health care costs between $260 and $280 million over their lifetime (expressed in today’s dollars)
• Each year’s graduates add $60 million to local property values due to greater spending
• Recent improvement in student academic results is estimated to have added between $2.8 and $9.5 billion to local property values

And in analyzing the inputs into the school system, he determined that for every dollar spent by the school system, there was $1.53 in total regional spending. Every job in the district was associated with an additional 0.64 jobs in the region. (See the article for more details on how he calculated these numbers.)

Having this data gives officials in Virginia Beach an easy way to defend their expenditures – particuarly important given, as Superintendent James Merrill writes, the state and local government’s priority has become “economic development activities.” While he and other educators in the community have long argued that schools are the most important economic development tool in the city, they now have numbers to back it up.

To be sure, there are concerns about the data and the methodology, as there always are in education research. As Walden points out, there is the ever-present dilemma of how to apportion the benefits to the school system versus the innate talents of the students in the system. There are issues as to what proportion of students stay in the area where they went to school (and thus whether the economic benefits actually go to this community or to other communities that did not invest in this education system).

There are also economic arguments to consider when using data like this to advocate for additional funding. Are the benefits subject to the law of diminishing returns, for example? And as pointed out in a December Education Week article on the study, there is no mention of opportunity costs – other ways in which education funding could have been used, and the benefits that the society forfeited by not using it in those ways.  

But despite these and other concerns, the fact remains that critics nationwide are questioning (in some places, attacking) education spending. And in the current fiscal climate, appealing to the emotional side of people (be they government officials, tax payers, or even parents) is not going to cut it. That means that districts need studies like this – done by a third-party, of academic quality – to help make the case as to why they are a good investment.