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Lesson 10.3

Educational Efficiency:
How can schools systems handle budget cuts?

Do lean budgets make schools more innovative?

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The previous lesson ("Go Big") explored what schools and districts might do if they had a lot more resources. This lesson discusses a more familiar case: could public education do with less? When life gives you lemons, you make lemonade, right?

Let's be clear: California's funding for public education is far from lush, and a chronically a too-tight belt hurts kids and society. Nevertheless, this lesson explores the opposite side of the "Go Big" idea in order to bring focus: what matters most?

Educational efficiency has increased, perhaps unfortunately

Efficiency is the art of accomplishing more (output) with less (input).

Over the last half-century, public investment in K-12 has shrunk as a percentage of the economy. This is especially true in California.

In education, efficiency gains are hard to quantify. Here are some of the challenges:

  • Complex inputs: Public education is one part of our overall societal investment in raising children. When things turn out well for kids, schools are just part of the reason why, or why not.
  • Complex outcomes: Many of the outcomes of education, such as readiness to participate in a democracy, or social cohesion, aren't measured in dollars.
  • Long payback: Outcomes of education that can be measured in dollars are very long-term in effect. For example, it takes decades for an investment in expanding public preschool to "pay back" financially in the form of additional tax receipts or reduced public costs for social services.
  • Data quality: Education data systems rarely track long-term outcomes with high fidelity.

Doing more… Our expectations of public education have substantially increased over time. For example, we expect students from every community to have access to classes that ready them for college. Schools have increasingly been expected to serve all students, including those learning English and those who have learning disabilities. And we now expect schools to connect every member of the school community with the technology required for digital participation in society. When you pay taxes in support of public education, you aren't making a cold financial calculation about payback — you are "paying it forward."

…with less. Despite these increased expectations, for decades, the public's investment in public K-12 education has significantly shrunk as a percentage of the economy. In public policy analysis, the percentage of the economy spent on an area is described as effort. As the economy grows, to sustain effort, the expenditures in that area must grow at a rate that keeps pace.

In 2021, California’s economic effort to fund public education dropped to 0.03, its lowest level since 1984. The stock market delivered good news for education funding without really trying.

California's expenditures for public education have not kept pace with the expansion of the state's economy. Some might see spending less of the economy on education as evidence of improved productivity — getting by with less. But it is hard to argue in this case that productivity is necessarily the right goal.

California is a "low effort" state when it comes to education. It expends less of its economy on education than other states do. It used to invest more, long ago.

A mere century ago, states began the work of making public education "universal." Expanding the meaning and usefulness of universal education in America has been one of the most important functions of government for at least the last four generations. The work is unfinished, of course, but opportunities for education have been gradually but steadily expanded to include girls, minorities, and children with disabilities. It has been a difficult and expensive undertaking, fueled by a shared commitment to invest in the American dream.

Teachers' pay has kept up with inflation, but not with the economy

Most of the costs of education are "people" costs, of which the largest share is teachers. fifty years ago, teachers in most states earned a bit more than double the average per-capita income. Since then, teacher pay has kept pace with inflation, but has not kept up with overall growth in average wages.

The "savings" from relatively slow growth in teacher pay has mostly been invested in hiring more teachers. This has driven down average class sizes in most states, which has helped to address the needs of English learners and students with learning disabilities. Smaller classes serve the aim of making education more universal, and they were a key response to the policy direction to "leave no child behind."

California, as usual, has been an exception; lacking funds to do otherwise, the student-teacher ratio here has remained the highest in America for decades. Pushing to go even more "lean" in this dimension would require new approaches and risks.

Can technology help teachers do more?

Technology has been the key driver behind productivity gains across other sectors of the economy, and it seems likely that education will follow the same pattern. For example, computer-based learning works well for many students, especially for learning math. Computers cannot replace teachers, but they can help them. When students want to learn something on their own, they turn to YouTube. Of course, some learning materials online are shallow, or incorrect, or commercially motivated. But some of the learning materials are good. The general subject of using technology in learning is discussed in Lesson 6.6.

Although the costs of technology are dropping steadily, it isn't free. In order to make significant and successful use of technology, schools must make significant up-front investments not only in equipment and infrastructure, but also in planning and training.

Could students finish faster?

Our education system generally operates under the pretense that students learn at the same rate. In 2007 the New Commission on the Skills of the American Workforce issued an out-of-the-box report that called for schools to abandon traditional grade level advancement. Instead, it argued that in each subject students should advance from grade level to grade level when ready. The report said that this would not only save money, but would also put students more in charge of their own destiny and release them earlier to pursue their dreams. This theme is echoed in the materials of online colleges. If you are ready to move on, why wait around? Lindsay, California is one of the few school districts to have embraced elements of this strategy.

If students finished school earlier, they would reduce costs for taxpayers. The savings involved would be pretty small, but might be enough to act as an incentive; the New Commission report called for investing the savings in tax-funded “personal competitiveness accounts.” Such accounts would provide individuals with funds to pursue higher education or other endeavors. Others have carried this idea even further, proposing that financial incentives be put in place for all children, conditional on good behavior and success in school.

Could "red tape" be reduced?

California's education funding system, the Local Control Funding Formula (LCFF), involves a fair amount of red tape — but it replaced a system that was considerably worse. The old funding system allocated money to specific programs, and required extensive compliance reports. These ate up valuable school site administrator time and created barriers to local strategies for school improvement.

Allowing administrators to do more with the time and money they already have might help to create better student outcomes.

Particularly in California, districts may also choose to invest more of their resources in educational leadership. From a distance, investing in the principal's office might seem counterintuitive, but a primary and overlooked role of school leadership is to bring out the best in other people. California's school system is not administration-heavy. In 2020-21 the total administrative expenses of schools, districts and county offices of education amounted to just 11% of total K-12 expenditures in the state. (SACS codes 7000 and 2700.)

Could the cost of teaching be reduced even further?

As discussed above, teacher pay in America has fallen relative to other employment over the long term. Nevertheless, teacher salaries comprise the largest portion of the cost of education.

Teacher salaries are determined through collective bargaining between school districts and unions. Some argue that collective bargaining drives up the cost of education by paying uniform wages to all teachers at a level higher than the market would command without union involvement. There is considerable evidence to support this claim; as discussed in Lesson 7.5, collective bargaining has slowed the erosion of teacher pay relative to other jobs requiring similar preparation. Some efforts to "do more with less" in education look to reduce the scope of collective bargaining, or to differentiate teacher pay in ways that would make teacher salaries more responsive (or vulnerable) to market conditions.

Part of the idea behind such pay differentiation is attractive: it would enable schools to offer additional pay to attract and retain teachers who can take on exceptional roles, or who demonstrate exceptional skills. Unions hesitate to embrace such exceptions for a variety of reasons. In the zero-sum math of school funding, if salaries increase for some, others must get less. No one really knows how that would play out over time. Optimists claim that communities would rally to pay teachers wages more in line with their high value. Pessimists worry that their high social value might not be reflected in "market" value. Already, market wages for substitute teachers are much lower than those for full teachers. (Ask a teacher how much substitutes are paid at your school. You'll probably be shocked — or maybe not, because the going rate spiked in the pandemic.)

For those whose blood pressure just rose a little bit at the thought of reducing teacher pay, note that the original question was: "could the cost of teaching be reduced even further.” That is quite a different question than should the cost be reduced. The financial attractiveness of the teaching profession has already declined relative to other employment. District and union leaders are proceeding only with great caution.

Change can seem very slow in education. As students or parents, it often appears that the system is completely intractable, frozen in carbonite like Han Solo. A glance at the history of education makes clear that widespread change does occur, under certain conditions. The next lesson examines those conditions.

Updated July 2018
April 2019
October 2021
December 2022


Compared to the state economy, California invests:

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Questions & Comments

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user avatar
Carol Kocivar June 14, 2022 at 8:27 pm
Average Teacher Salary Lower Today Than Ten Years Ago, NEA Report Finds
Salaries are not keeping up with inflation, which could push more educators out of the profession.

Teacher Salaries Aren't Keeping Up With Inflation.
Apr 27, 2022 — But when adjusted for inflation, the average teacher salary actually decreased by an estimated 3.9 percent over the last decade.

user avatar
Susannah Baxendale March 28, 2019 at 11:02 am
My involvement with Head Start has shown me time and again how important reaching children even in the womb (!) onwards increases success all the way along. That is a truly good investment for children, for their families, and ultimate for society and our future.
user avatar
Jeff Camp January 31, 2017 at 10:14 am
Pivot Learning (a former Full Circle Fund grant recipient) has created a "Smarter School Spending" process that helped San Francisco Unified identify ways to focus its budget in ways that matched the district's priorities. Slides from a joint presentation can be found here:
user avatar
_ptaprz April 29, 2015 at 7:26 am
Teachers pay has not kept up at all my husband just got his first percentage raise of 4 per cent in the last 5 years. And he still has to pay for all his expenses for the class room
user avatar
Tay Fe April 24, 2015 at 9:59 am
I saw in our district substitute teachers get paid less than $19k even if they work everyday of the school year. This is horrible.
user avatar
Sherry Schnell April 16, 2015 at 1:57 pm
I think the public would be more receptive to raises for teachers if, as for all other professionals, teacher pay was based on performance rather than seniority. I don't mean based on test scores, but based on an evaluation of their performance by their boss. It's not easy to evaluate professionals. It's subjective. Bosses are not always fair. But that's the way it works in the real world and it's the best way we've found yet.
user avatar
Jeff Camp - Founder April 16, 2015 at 7:02 pm
Sherry, you might also be interested in the "Alternative Approaches" section of Lesson 3.8, which explores pay design options that have been proposed and/or implemented. Evaluation of teachers, a related but separate topic, is explored in Lesson 3.9.
user avatar
cnuptac March 26, 2015 at 1:40 pm
Teachers need better pay better up to date items to work with in their classrooms it makes me sad to see school district get new computers every two years and iPads. When the teachers in the classrooms have computers that are 10 years old and breaking down.
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