Scaling the Mountain of Education Funding Reform

With the most serious efforts to date underway in Congress to revamp the No Child Left Behind Act, federal and state lawmakers should consider new approaches to crafting education policy that better encourage and systemically reward innovation and results.

Most education reform is focused on the inputs (staffing, choices, governance) or outcomes (accountability of student outcomes). Debates over education funding invariably revolve around less versus more for competing priorities. Rarely does the focus capture a more comprehensive and deeper view of improving our schools: aligning incentives around funding and outcomes.

A new funding approach that circumvents entrenched arguments and which is gaining momentum around the country is Performance Based Funding (PBF). This simple concept seeks to better align funding for schools with important student outcomes to incent ongoing, improved performance of schools individually and systemically.

At the federal level, non-fiscal education policy has been dramatically changed over the years, but there has not been an equivalent focus on reforming how federal education dollars flow to states, districts and schools.  Fortunately, federal policymakers have some excellent state examples from which to learn.

In May, Colorado Governor John Hickenlooper signed into law a plan making innovative use of social impact bonds as a variation of PBF. Colorado’s new law enables the state to partner with philanthropists and service providers to provide interventions to increase economic opportunities, including in the public education sector, seeking to instill market discipline in public funding while providing a launching pad for scaling innovations that produce results.

This bipartisan model for using limited government dollars to produce actual results in the social sector is a watershed.  It acknowledges that it is no longer acceptable to throw good money after bad because special interests manipulate government budgets to ensure ever increasing flows of money to under-performing – or outright failing – institutions.

Government budgets typically pay for only inputs, and fund the same things year after year with only incremental adjustments based on ideological rationales that ignore actual results.

Outcome measures should prominently include evaluations of the growth of individual students over time, because children from low-income backgrounds often start school behind their peers.  Rewarding schools for both achievement and improvement promotes classroom innovation, productive competition, and closure of egregiously large achievement gaps.

Our education system is likely not sustainable at its present level of productivity. The $600+ billion U.S. taxpayers spend every year on public elementary and secondary education equates to at least 5.4 percent of the nation’s GDP.  Globally, according to George Mason University’s Mercatus Center, U.S. spending per pupil is second highest among the 34 OECD (Organization for Economic Cooperation and Development) countries, while US student performance on the OECD’s Program for International Student Assessment (PISA) was 17^thin reading, 20^th in science and 27^th in mathematics.

Meanwhile, other states besides Colorado have begun making policy differently in order to achieve better results.  Arizona began a statewide performance-based funding program in 2013, called “Student Success Funding,” which expanded in 2014. Likewise, Michigan has been implementing a limited model since 2012. Pennsylvania took a different approach by providing funding flexibility in exchange for demonstrated outcomes. Florida, Wisconsin, and Oregon have all recently been exploring performance-based funding concepts.

What all these state efforts have in common is the potential to improve results, overcome barriers to social innovation, and encourage investments in cost-effective approaches.  The misalignment between funding and performance in education is at best a drag on the system and student performance, and at worst a fundamental flaw that ensures our schools will never be as successful as we need them to be.

For the U.S. Congress, there is ample opportunity to follow the states’ lead and incorporate PBF into federal education funding – especially Title I – to better align all policy levers with achievement, innovation, and action. After all, policy change without fiscal incentive is merely a suggestion.  PBF is a new approach to driving system change and improved academic outcomes. Nowhere is this more needed than in the complex and ineffective federal education funding policy.