An Education Reform No One is Talking About – But Should Be

Real Clear Education

An improving economy is showing promise for America, but new thinking about how to improve education – the economy’s core – is sorely needed as policymakers gear up for legislative warfare over existing policies.

Most education reform is focused on the grittier issues: staffing, operations, governance, or the accountability of schools and districts. Debates over education funding usually revolve around less vs. more. Very few focus on a more comprehensive and deeper view of improving our schools: aligning incentives around funding and outcomes. State legislatures, which typically spend more money on education than any other government function, too often rely on doling out more money in the hopes that somehow this will lead to different outcomes.

Today, U.S. taxpayers spend at least 5.4 percent of the nation’s GDP funding elementary and secondary education. Our education system may not be sustainable at its present, low level of productivity. Legislators of all stripes need to start policymaking in new ways in order to achieve better outcomes: Rewarding schools for both achievement and improvement can promote classroom innovation, competition, and student performance.

The current practice of funding schools based almost exclusively on attendance is a fundamentally flawed model that misaligns incentives, rewards sub-par performance, and diminishes the imperative for significant and sustained educational outcomes. School funding, as Michigan Governor Rick Snyder wrote in a 2011 special message to the Michigan legislature, “should be based upon academic growth and not just whether a student enrolls and sits at a desk.”

The idea that gets little attention by the states is Performance-Based Funding. This simple concept seeks to better align funding for schools with important student outcomes to incent ongoing, improved performance of schools individually and systemically. Unlike some federal initiatives that mix the concept of allocating funding for results in a milieu of competitive grant-making and complicated administrative structures, PBF provides an opportunity to make strategic investments in schools at the state level by a straightforward focusing of school funding on desired results.

PBF is being implemented in some higher education settings and even more in vocational education, but so far there have only been a few experiments in K-12 schools. One such example is the Florida Virtual School, a state operated online school that provides school districts with online learning options for students in grades K-12 where the school doesn’t get fully reimbursed unless students complete their courses.

On a systemic level, there have also been efforts by various governors and states to implement PBF statewide for all public schools going back to 1984. Arizona began a statewide PBF program for districts and charter schools in 2013, which it expanded in 2014. Likewise, Michigan has been implementing a PBF model since 2012. Pennsylvania took a slightly different approach, providing funding flexibility in exchange for performance based outcomes. In each case, the amounts of funding are modest, but the potential impact could be significant over time.

The concept does not need to be an all or nothing proposition; in Arizona and Michigan, PBF is applied to new funding over and above existing funding schools are already receiving or applied to existing funds already received. While these experiments are too new to make a statement about outcomes, in neither case are basic operational budgets compromised; PBF is an incentive structure in addition to basic school and district funding.

The problem of misaligned incentives is a well-researched topic in numerous fields.  But it has not been a topic of deep research and reflection in education, where the misalignment between funding and performance is at best a drag on the system and student performance, and at worst, a fundamental flaw that ensures our schools will never improve sufficiently for this country to be competitive internationally and to live up to our founding ideals of equality and opportunity.

Performance-based funding is a first step in breaking the current funding structure that delivers dollars to all schools regardless of performance. In a similar fashion, merit pay for teachers is seeking to align teacher compensation with student performance. While such merit pay efforts are an important reform, they do not address the organizational level misalignment still in place. PBF can address the educational incentive misalignment and drive student performance higher in a scalable way that has system-level implications.

Allocating dollars based on educational results is gaining traction because of its potential to drive student performance higher at scalable level that has system-level implications. Rewarding schools for both achievement and improvement (i.e., longitudinal growth) can promote innovation and achievement. In addition, PBF is a model that integrates easily with competency based learning approaches.

PBF is a policy innovation that is deserving of more attention and analysis, and which can provide a new approach to improving academic outcomes outside the traditional reform approaches, while addressing systemic inefficiency. It will not be surprising to see other states move in this strategic education direction as well.