As highlighted in CRC’s recent report, Distribution of State Aid to Michigan SchoolsMichigan’s 1994 school finance reforms significantly increased the per pupil funding amounts for the schools that spent the least prior to the reforms.  The large revenue increases for these schools raises an obvious question:  Did the increased spending lead to increased student performance?

Economics professor Leslie Papke, Ph.D., Michigan State University, looked at this question in a series of papers, and found a positive and large spending effect on pass rates for standardized tests following implementation of Michigan’s finance reforms.  Her findings have been confirmed by others looking at Michigan-based test scores following Proposal A.  She found that “a rough rule-of-thumb would be that 10 percent more real spending increases the pass rate by between one and two percentage points, and more for initially underperforming schools.”

Prof. Papke notes that while all districts improved student performance since the implementation of Proposal A, the effects were greatest for the initially lowest–revenue districts, which received the largest annual per-pupil increases after Proposal A.  In other words, initially low-revenue districts improved more than high-revenue districts. This finding provides support for policies that target resources to low-performing schools.

It is important to note the relatively large funding increase (e.g., 10 percent in real terms) needed to achieve very modest gains in student performance.  Specifically, the increase in pass rates (2.5 percent) is equivalent to improving the performance of 1 child out of 40.  It is also worth noting that the research did not test whether the reverse would hold, in other words whether large real reductions in funding would lead to a fall off in student performance.  (Such funding reductions did not occur during the time period examined by Papke.)

As policymakers consider changes to Michigan’s school finance system, they should consider Professor Papke’s research, especially if the goal is to improve the performance of low performing schools in Michigan.  While resources are constrained at the present time, when additional resources become available, it may be prudent to target more funding to low performing schools rather than focusing on the goal of greater per-pupil funding equalization, which has been the primary focus of funding increases for some time.

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