By Bob Luebke, John Locke Foundation

Carolina public schools are some of the worst-funded schools in the country and will need more money to adequately and fairly fund our schools in the future. That’s the conclusion of a well-publicized recent study from the Education Law Center — a study that is frequently referenced by progressive teacher groups, Democrat politicians, and others who want to drastically increase the state’s education spending.

But are the claims true?

That’s a question that certainly crosses the mind of every reader.

As with anything in the field of research, results are a product of the methodology, and every methodology has strengths and weaknesses.

The study, Making the Grade, is published annually by the Education Law Center. The front cover asks THE question the study is centered around: How fair is school funding in your state? The study analyzes the fairness of school funding in 50 states and looks at three components: funding level, funding distribution, and funding effort. The report purports to measure fairness but leaves a lot of other important questions unanswered.

What is “fair” funding?

Fair funding is defined “as the funding needed in each state to provide qualified teachers, support staff, programs, services, and other resources essential for all students to have a meaningful opportunity to achieve a state’s academic standards and graduate from high school prepared for citizenship, post-secondary education and the workforce.”

Is this clear? What are the resources “essential “ for all students to a have a “meaningful” opportunity to achieve a state’s academic standards? Another issue, who defines these words, and who determines if conditions have been met? This is no insignificant task. North Carolina has spent years deciding what does or does not qualify as an opportunity to a sound, basic education.

The study has other substantive problems.

The report has some uncomfortable results that have put conservatives on the defensive. According to the report, North Carolina’s change in funding level from 2008 to 2020 ranks 48th in the country. Moreover, the study places North Carolina dead last among the states in tax effort. While state residents certainly won’t like those results, what’s not discussed is the bias and shortcomings in the study’s methodology.

The study utilizes annual U.S. Census school finance and poverty surveys from 2008-2020 to determine changes in funding level, funding distribution, and funding effort. A logical question is: why did the study select 2008? Why not 2009 and not 2012 or 2014?

It’s no coincidence that 2008 was the high-water mark of education spending before the Great Recession. As such, declines compared to the high-water mark of education spending would be particularly pronounced. Bottom line: choosing a year after 2008 would not produce the same differential. Researchers have a word for setting up timelines favorable to achieving the desired result. It’s called cherry picking.

Tax effort?

The study talks a lot about tax effort. Tax effort is the category where North Carolina has its worst ranking — 50th among the 50 states. Tax effort is measured by the percentage of the state’s economic activity or Gross Domestic Product (GDP) allocated in support of K-12 public education. It includes state and local funding as a percentage of GDP at the state level.

The definition sounds clean, but is it? Is a state really a high tax-effort state if a high percentage of the revenue essentially derives from wealthy school districts raising a lot of money locally? That’s the case in Pennsylvania, Connecticut, and Maine, which all have high funding levels driven by high local property taxes in select areas. (see page 19 of the report).

However, do the high taxes of a few areas make a state a high tax effort state? Bill Gates may move to Mississippi and may theoretically increase the average income of the state. However does his presence significantly improve the income of people in the state? That’s more a function of a super-rich person increasing the average income of everyone else — at least on paper. Just as Bill Gates’ presence doesn’t make the average citizen rich, neither do the high property taxes of a few wealthy communities necessarily make a state a high-tax state.

But tax effort has other problems. Built into the formula to calculate tax effort is an implicit bias that the greater the tax effort, the better. Better for whom? What’s the basis of the belief that says increasing amounts of revenue for schools will result in increasing student outcomes? The bias is really a political statement that ignores the reality of how individuals and organizations change their behavior in response to tax changes and how these changes impact short-term and long-term economic growth.

Why Making the Grade fails

Numerous shortcomings mar Making the Grade’s results. The study’s biggest shortcoming, however, is in the assumptions it makes.

The study is laser-focused on school funding and providing a framework for answering the question: Will states step up when federal COVID relief runs out? In doing so, the study totally ignores any discussion of outcomes. The study blithely assumes the best way to address the crisis is via fair-funding systems that deliver additional funding.

Some researchers are already asking for more federal funding — up to $500 billion, believing $190 billion isn’t enough to address the impacts from the pandemic.

The assumption implicit in the study is that more funding is needed. Is it?

In the last two years, federal aid to K-12 public schools exploded. Nationally K-12 schools received $190 billion in COVID funds. North Carolina alone has received $6.2 billion in COVID relief funds, almost $4,000 per student.

Did researchers ignore federal funds because of lagging test scores or problems with spending — or because many were not spending COVID funds?

A March 3 article in the Wall Street Journal detailed how federal auditors reviewing a sampling of expenses made from federal pandemic funds found double payments, faulty awards, and improper contracts made by states and local school districts.

North Carolina has not been immune from these problems. The misuse of COVID funds in North Carolina is something I’ve been writing about for the last few years. See here and here.

Moreover, the study is laser focused on inputs and how those inputs are derived. However, in doing so, the study totally ignores any discussion of outcomes.

What about results?

Asking for more money would make sense if there is a strong linkage between funding and student outcomes. Is there?

If you take a list of what states spend on schools and compare it to results on the National Assessment of Educational Progress, you find there is no correlation between spending and academic outcomes.

Why does Utah get better outcomes than New York when it spends considerably less money than the Empire State? The same discrepancy is present in North Carolina. High spending districts like Hyde County ($27,920/pupil) and Tyrrell County ($21,844/pupil) don’t generate favorable outcomes, while lower spending districts like Union ($10,745) and Davidson Counties ($10,756) produce more favorable outcomes. Since 2007, inflation-adjusted per-student spending in North Carolina has increased 25%. Have student outcomes increased proportionately?

The study suggests North Carolina is ill-prepared to respond to the needs of the pandemic.

The $16.7 billion North Carolina spends on K-12 public education provides each student with about $12,345 in funding. Any system where 50% or more of students in grades 3 through 8 lack proficiency in math and reading, however, has problems. The biggest of them is not funding.

Conclusion: Making the Grade fails to give fair picture on state education

Making the Grade is all about fair funding and generating more money for schools. But it has significant shortcomings.

When a system is underperforming, lacks a strong linkage between funding and outcomes and has misspent millions in COVID relief, the case for fairness and more education spending is neither clear nor compelling.

These developments should remind everyone that how schools spend money is just as important as how much they spend. Skewed data, questionable metrics, and fallacious assumptions produce dubious results. Until these issues are fixed, policymakers should ignore Making the Grade.