Report: Throwing Money at Education Isn't Working

Maine spends 27.% on education, slightly under the national average
Maine spends 27.% on education, slightly under the national average

By Kristen De Pen

State Budget Solutions

Executive Summary of “Throwing Money at Education Isn’t Working:”

Education funding remains a major issue in the United States. One controversial aspect is whether increasing funding for education guarantees better student performance. Download the full report here.

State Budget Solutions examined national trends in education from 2009-2011, including state-by-state analysis of education spending as a percentage of total state spending, and a comparison of average graduation rates and average ACT scores per state. The study shows that states that spend the most do not have the highest average ACT test scores, nor do they have the highest average graduation rates.

The State of State Education: National Trends

Each year, the United State spends billions of dollars on education. In 2010, total annual spending on education exceeded $809 billion dollars. Although it is unclear whether that figure is adjusted for inflation, that amount is higher than any other industrialized nation, and more than the spending of France, Germany, Japan, Brazil, the United Kingdom, Canada, and Australia combined. From 1970 to 2012, total average per pupil expenditures in the U.S. has more than doubled.

Despite higher levels of funding, student test scores are substantially lower in the United States than in many other nations. American students scored an average of 474 on a 600-point scale, performing only slightly better in science, with an average score of 489. By comparison, Canadian students scored an average of 527 and 534 on the same tests, and Finnish students scored 548 and 563, respectively.

The problem of generally low performance on standardized tests in the U.S. is in addition to the problem of budget shortfalls that both states and the federal government continue to face. The federal deficit for the first ten months of the 2012 fiscal year (ending Sept. 1, 2012) totaled $974 billion. The federal budget deficit increased $70 billion in July 2012 alone, and is on track to top $1 trillion for the fourth straight year. Likewise, a State Budget Solutions report revealed that aggregate state debt exceeded $4 trillion in 2012. Hundreds of thousands of students rely on education funded by states with the largest deficits, including CaliforniaNew YorkNew Jersey, and Illinois.

Maine spent 27.2% of its budget on education in 2012


The ACT (American College Testing) standardized test is a national college admissions examination that consists of subject area tests in: English, math, reading and science. The ACT is an achievement test, measuring what a student has learned in school. ACT results are accepted by all four-year colleges and universities in the U.S.

High Spending, Below Average Performance in Texas, New York, & California

TexasNew York, and California consistently spend the most on education, well beyond the amount of any other state. This year (2012), California is spending $108.3 billion, Texas is spending $76.6 billion, and New York is spending $72.8 billion. The national average is $17.7 billion.

Between 2009 and 2011, all three states fell below the national graduation rate averages every single year. Although California and New York consistently scored above the national ACT average score, Texas fell behind again, scoring below the national average for three consecutive years.

Low Spending, Split Performance in Alaska

In 2006, the Alaska legislature approved the Alaska School Performance Incentive Program (AKSPIP) to combat consistently low student performance in education. The program served as an incentive for school employees to create a learning environment where student achievement substantially increased.

In the 2008-09 school year, the state paid $305,875 in bonuses to principals, teachers, and support staff for students’ success in eleven different schools. During the 2006-07 school year, the program paid $1,850,493 in bonuses, followed by $1,061,944 in 2007-08. According to the state, the program failed to win significant support because the targets were too challenging and teachers believed that bonuses should not be based exclusively on student performance.

Despite the initiative, Alaska consistently spent the least amount in the nation on education as a percentage of the state’s total spending over the three years studied. The state’s graduation rates were consistently below the national average. In 2009, the graduation rate was just 66.5 percent, followed by 69.1 percent in 2010, and 69.1 percent in 2011.

Analysis & Solutions

To successfully educate students, sustainable, reliable, and adequate educational funding is necessary. Less clear are the particulars of the spending, especially with regard to other factors that influence student performance. “Throwing money at the problem” is a commonly suggested solution to improving education; in fact, 60 percent of Google results for the search “throwing money” refer to education. But despite vastly increasing levels of funding, money alone does not change education or help to achieve our national education goals.

Better Allocation of Funds

Allocation of funds most certainly plays a role in student success. According to the results of this study, however, the amount of government spending alone does not dictate student performance outcomes. One reason for this inconsistency is that federal funding is tied to federally developed performance standards, which results in two major problems.

First, as a result of centralization, states have less authority to develop state-specific metrics to accurately measure education initiatives. Localized control results in more narrowly tailored metrics and a better understanding of failure and success based on those metrics. Oversight at a local level is more practical and more effective than federal oversight.

Second, tying federal funding to “performance-based” standards rarely results in the allocation of funds to the students and schools with the highest needs. Instead, schools that perform well get additional funding and schools that do not perform well are financially punished, making it more difficult for underperforming schools to improve their status.

Furthermore, states, school districts, and school boards all allocate funding in different ways, making it difficult to know where the money is going and what it is funding. For example, in March 2012, the Arizona Department of Education mistakenly allocated funds to schools across Arizona after the Department interpreted a state law incorrectly. The DOE did not make the districts return the money that they incorrectly received, even though it deprived other districts from adequate funding. Increasing state and school district transparency will increase accountability and encourage responsible spending.

Avoiding Waste & Fraud

Increasing educational spending transparency helps ensure that funding is reaching the right hands. In 2009, the nonpartisan Government Accountability Office (GAO) issued a report concluding that the Department of Education lacks a common system to track and manage potential misuse of funds. According to the Congressional Education and Workforce Committee, the GAO report comes on the heels of documented failures by the White House to properly account for how the DOE spent ARRA funds, particularly regarding oversight of $100 billion administered by the DOE.

These shortcomings ultimately result in the failure to effectively serve students. States prioritizing transparency and oversight initiatives often do better than states that fail to do so. In 2009, 2010, and 2011, Minnesota ranked in the top five states with the highest graduation rates. An evaluation of the ten largest school districts in Minnesota by Sunshine Review resulted in an overall “B” grade in transparency. Every single district published an annual budget and an annual audit, giving students, parents, teachers, and policymakers a clear idea about where and how education dollars are spent.

In comparison, Nevada had the worst average graduation rate in the nation from 2009 to 2011. Sunshine Review’s evaluation of the seventeen largest school districts in Nevada resulted in an overall “D” grade in transparency. Just nine of the seventeen school districts posted an annual budget, and only ten school districts posted an audit. More importantly, only two school districts published information informing the public about how to request public records unavailable on the schools websites. The lack of transparency and internal and external oversight at the state and federal levels directly contributes to wasteful and fraudulent spending, and ultimately deprives students of an adequate education.

Scratch Performance-Based Rewards

In the ten years since No Child Left Behind became federal law, it is clear that one-size-fits-all testing, sanctioning under-performing schools and rewarding high-performing schools, undermines actual education efforts. Critics of the policy, and of other performance-based policies such as the ASKPIP program (see Alaska), persuasively argue that these standards damage true education (a result of “teaching to the test”), narrowing the effects most severely on poor children in failing schools. Because so much emphasis is placed on student performance on standardized tests, teachers are forced to narrow the curriculum to focus primarily on the limited skills that these tests measure. Test-based incentives also do not increase the average academic performance of students.


Based on the findings in the full study, higher levels of funding do not ensure higher graduation rates, nor does it directly correlate to higher test scores on the ACT. Improving education requires multifaceted efforts, not solely increasing funding.

Maine’s average ACT score was 23.3. A perfect score is 36.



  1. You can write all you want; but the bottom line is a mob of angry teachers led by a battalion of professional union organizers and followed by legislators who were elected or otherwise subsidized by the teachers’ union.

    This is not a rational discussion; as we all saw in Wisconsin.


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