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State can improve educational outcomes by adopting performance-based funding initiatives

New York has a new state budget that increases spending to almost $25 billion for the state’s districts and schools, a historic amount that comes with few, if any, expectations that the dollars produce demonstrable academic results. Of course, improved educational outcomes is the “general” expectation, but there are almost no requirements that it actually happen.

From the “only-in-government-could-this-be” files, New York school districts know that they can count on keeping the funds if they comply with the state’s bureaucratic rules about how to spend them. But whether they produce any measurable results with their record-setting funding doesn’t seem to make any difference at all.

The Buffalo News’ April 5 editorial regarding education spending in the new state budget was the inspiration for the title of this piece; its focus on connecting education spending to actual achievement is sorely needed in debates about education funding and performance.

The total annual expenditure on U.S. public elementary and secondary education is $600+ billion – 5.2 percent of the nation’s GDP. People can disagree whether this is too much or not enough, but there are increasing signs that it is likely not sustainable at the present, relatively low levels of productivity.

Nowhere is this more true than in New York, a state that spends more per pupil than any other state, but consistently ranks near the middle in academic performance nationally (as measured by indicators like the National Assessment of Educational Progress and graduation rates).

In fact, the U.S. Chamber of Commerce gave New York an “F” for the return on taxpayer investment in education, noting that student achievement in the state is very low relative to state spending, while controlling for cost of living. Albany should have insisted that districts do more to ensure results in exchange for, at the very least, the $1.5 billion increase provided.

In this era of uncertain economies, with budgets tight across most communities, new thinking about how to fund public education is absolutely needed. The current system, which allocates funding almost entirely upon student enrollment, is an antiquated one that misaligns incentives, accepts weak performance and diminishes the imperative for better educational outcomes.

A growing number of states have moved to connect their education funding to producing results – the way most budgets in the world work. Performance-based funding, sometimes called “pay-for-success,” is a method of funding government programs, in education and other social sectors, in which public resources are directed to approaches that produce results.

Arizona, Michigan, Pennsylvania and Florida have all moved to pay-for-success funding models. Utah and Colorado utilize performance-based funding models called social impact bonds. Now the federal government is following the states’ lead. In the recently enacted Every Student Succeeds Act, the reauthorization of the 1965 Elementary and Secondary Education Act, there is surprising innovation in two pay-for-success provisions.

These different approaches share the common-sense notion that public funding should go to those programs that are clearly demonstrating their impact through rigorous, outcome-based performance measures. Funding schools based on performance can provide an effective launching pad for scaling initiatives and innovations that produce measurable results.

Details of any performance-based funding model matter, of course. For example, models that measure the academic growth of individual students over time are essential, because rewarding schools simply for snapshot proficiency rates substantially favors schools in wealthier communities where students arrive at school better prepared to learn.

The question is not whether we can afford to undertake innovative new approaches, but whether we can afford not to. Over time, funding that considers outcomes can better align critical education funding with important outcomes to incent ongoing, improved performance of schools individually and systemically. Performance-based funding has gained traction in higher education, and it is time for the state to consider how it can improve K-12 education.

Perhaps, as decision-makers at all levels of government face increasingly difficult budget processes, New York will follow the lead of its peers in federal and state governments by adopting performance-based funding initiatives. Parents and taxpayers have a right to expect more from their elected officeholders.

Doug Mesecar, a Lexington Institute adjunct scholar, is a former senior official at the U.S. Department of Education and the U.S. House of Representatives Education and Workforce Committee.