Why Financial Transparency Matters

A fundamental premise of self-government is that citizens and elected officials are sufficiently informed to make sound decisions about public policy. To satisfy this condition, it is necessary that government agencies provide accurate and timely data about their activities in a manner that is accessible and understandable to the average citizen. Since K-12 public education spending is generally the largest expenditure in states' budgets, it is especially imperative that state departments of education provide complete, timely, and understandable financial data to the public.

Unfortunately, the evidence suggests that the public is woefully misinformed about the true cost of public education. In its 2008 survey on education policy, Harvard University's Program on Education Policy and Governance (PEPG) asked respondents how much they thought their public schools spent per pupil, per year. The average of respondents' estimate was $4,231 and the median estimate was only $2,000. In reality, the actual average per pupil expenditure exceeded $10,000. Moreover, contrary to the common perception, public school spending has risen dramatically over the past 40 years, even after adjusting for inflation (see Figure 1). Over the same time period, student performance on standardized tests has remained essentially flat.

Figure 1

This widespread public misperception reflects a persistent media narrative that our nation's public schools are underfunded. In the Boston Globe, Derrick Z. Jackson laments "the death of public education" claiming that the "lack of money is killing our schools."¹ In the New York Times, Billy Easton of the Alliance for Quality Education warns of "educational insolvency."² In 2010 the Los Angeles Times awarded California "a failing grade for public school funding."³ Writing in Education Next in 2010, Arthur Peng and James Guthrie of Vanderbilt University lamented, "If one relies on newspaper headlines for education funding information, one might conclude that America's schools suffer from a perpetual fiscal crisis, every year perched precariously on the brink of financial ruin, never knowing whether there will be sufficient funding to continue operating."⁴ The reality is ever-expanding public school budgets and an increasing number of employees per student.

The impact of this false narrative is profound, since voters' funding preferences vary significantly depending on whether or not they are accurately informed. When asking respondents if they thought that education spending should increase, decrease, or stay about the same, the 2008 PEPG survey randomly informed some respondents the amount of per pupil expenditures in their district. "When told how much the local schools were spending, support for increased spending dropped by 10 percentage points, from 61 percent to a bare majority of 51 percent."⁵ Likewise, in PEPG's 2011 survey, support for increased funding dropped from 59 percent of uninformed respondents to only 46 percent of informed respondents.⁶ In 2012 the margin widened further with support dropping from 63 percent of uninformed respondents to only 43 percent of informed respondents.⁷ The 2012 PEPG survey included an additional question that asked respondents whether they supported increased taxes to pay for public schools. This formulation of the question elicited the support of 35 percent of uninformed respondents compared to only 24 percent of informed respondents.8

An uninformed or misinformed electorate can have enormous real-world consequences. For example, on Election Day 2012, a majority of voters in 29 of 31 districts in Colorado supported proposed property tax or sales tax increases to pay for over $1 billion in K-12 education spending, approving 34 bond issues and operating revenue increases.⁹ Twenty of these passed with fewer than 60 percent of voters supporting the measure, and two passed by a margin of 51 percent to 49 percent. If Colorado voters resembled the national sample in the PEPG survey, and if they had correct information about local school spending, it is likely that they would have viewed these measures differently.

The above scenario is not unique. In 2012 alone, statewide ballot measures to increase taxes and education spending passed with 55.3 percent of the vote in California¹⁰ and 59.9 percent of the vote in Oregon.¹¹ Moreover, there is a high degree of likelihood that the public's inaccurate perception of education spending plays a decisive role in the local ballot measures and school board elections in the nation's 16,025 public school districts.

The source of the public's misperception about education spending can often be traced back to the government. Too often, state departments of education fail to provide timely and accurate financial data in a manner that is easily accessible and understandable to the public. Even when such data is provided, it is often incomplete or, worse, misleading. When reporting the most important measure of education spending, per pupil expenditures, 24 states report a figure that leaves out big budget items like capital spending (and Alaska does not report them at all). These partial expenditure figures, so-called "current" or "operating" expenditures, significantly understate the actual cost of K-12 education. A 2010 Cato Institute study of reported education spending in five of the nation's largest metro areas and Washington, D.C., found that the "gap between real and reported per pupil spending ranges from a low of 23 percent in the Chicago area to a high of 90 percent in the Los Angeles metro region."¹²

The media rely on these misleading figures, creating a false perception among the public. Jackson's aforementioned Boston Globe column, printed in 2010, bemoaned that the national average per pupil expenditures were "only" $9,800. Though he did not cite his source, he was likely relying on the National Center for Education Statistics, which reported that "current" per pupil expenditures were $9,778 in 2005–06 (the most recent available data at the time).¹³ However, total per pupil expenditures were actually $11,338 that year.¹⁴ Nationwide, the difference between current and total expenditures was nearly $80 billion. In the most recent data available (2008–09), the difference is nearly $90 billion.¹⁵

Missing and misleading data undermine democracy itself. A misinformed electorate makes different choices than a well-informed one. It is impossible to determine what the appropriate amount of K-12 education spending should be without accurate information about what is currently spent. This report shines a light on the expenditure data that each state education department website makes available to the public. A detailed explanation of the scoring process can be found on the Grading Criteria page.

Notes

1 Derrick Z. Jackson, "The Death of Public Education: Lack of Money Is Killing Our Schools," Boston Globe, April 10, 2010. http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2010/04/06/the_death_of_public_education/

2 Billy Easton, "Albany's Unkindest Cut of All," New York Times, May 25, 2012. http://www.nytimes.com/2012/05/26/opinion/the-danger-in-school-spending-cuts.html?_r=1&

3 "A Failing Grade for Public School Funding," editorial, New York Times, June 1, 2010. http://articles.latimes.com/2010/jun/01/opinion/la-ed-funding-20100601

4 Arthur Peng and James Guthrie, "The Phony Funding Crisis," Education Next 10, no. 1 (Winter 2010). http://educationnext.org/the-phony-funding-crisis/

5 Howell and West.

6 Education Next—PEPG Survey 2011, Complete Polling Results. Questions 3a and 3b. http://educationnext.org/files/EN-PEPG_Complete_Polling_Results_2011.pdf

7 Education Next—PEPG Survey 2012, Complete Polling Results, Questions 7a and 7b. http://educationnext.org/files/EN_PEPG_Survey_2012_Tables1.pdf

8 Ibid., Questions 7c and 7d.

9 Todd Engdahl, "Turnaround Election for School Districts," EdNews Colorado, November 7, 2012. http://www.ednewscolorado.org/2012/11/07/51935-turnaround-election-for-school-districts

10 California Secretary of State, "Statement of Vote, November 6, 2012, General Election," page 66. http://www.sos.ca.gov/elections/sov/2012-general/sov-complete.pdf

11 "Oregon 2012 Election Results, Ballot Measures," The Oregonian, http://gov.oregonlive.com/election/2012/Measures/

12 Adam Schaeffer, "They Spend WHAT? The Real Cost of Public Schools," Cato Institute Policy Analysis no. 662, March 10, 2010. https://object.cato.org/sites/cato.org/files/pubs/pdf/pa662.pdf

13"Digest of Education Statistics," National Center for Education Statistics, Table 188, "Total and Current Expenditures per Pupil in Public Elementary and Secondary Schools: Selected Years, 1919–20 through 2008–09." http://nces.ed.gov/programs/digest/d11/tables/dt11_188.asp

14 For a similar analysis of a New York Times column, see Andrew J. Coulson, "Okay . . . Then Give Us Back the Extra $90 Billion," Cato at Liberty (Blog), Cato Institute, September 14, 2012. https://www.cato.org/blog/okay-then-give-us-back-extra-90-billion

15 "Digest of Education Statistics," Table 188