Eric Hanushek on Education and School Finance

Episode Summary

Executive Summary: Russ Roberts and Eric Hanushek examine how courts reshaped U.S. school finance, moving from equity-focused lawsuits to adequacy suits that often increased spending without improving outcomes. Hanushek argues that money alone does not raise achievement because schools lack strong performance incentives, and he favors accountability, choice, and performance-based funding over simply adding resources.

Main Topics: Court-Driven School Finance Reform (Priority: 5/5): The conversation traces how Serrano v. Priest and later state court cases shifted school funding from local property taxes toward greater state involvement and redistribution. Equity vs. Adequacy Lawsuits (Priority: 5/5): The discussion distinguishes early equalization lawsuits from later adequacy suits that argued funding was insufficient for a good education and therefore justified larger state spending. Large Spending Increases, Limited Achievement Gains (Priority: 5/5): Examples such as New York, New Jersey, Kansas City, St. Louis, and Wyoming are used to show that court-mandated spending increases often did not produce commensurate gains in student performance. Incentives and School Performance (Priority: 5/5): Hanushek argues that teacher and principal compensation is weakly tied to student outcomes, so extra money is frequently absorbed by adult interests rather than instructional quality. Charter Schools, Choice, and Accountability (Priority: 4/5): The pair discuss charter schools as a partial market-based alternative that can reward better schools through parent choice, though outcomes vary and quality control remains uneven. Creativity, Non-Cognitive Skills, and Public Education (Priority: 3/5): Roberts raises the possibility that U.S. schools may unintentionally support creativity and flexibility, while Hanushek notes the growing importance of non-cognitive skills alongside cognitive achievement. Policy Prescriptions for Improvement (Priority: 5/5): Hanushek recommends better information systems, accountability, direct incentives, choice, and performance-linked funding as the most promising reforms.

Key Arguments: Court intervention in school finance expanded dramatically after Serrano v. Priest, leading many states to face litigation over both equity and adequacy. Early equity cases often increased state funding shares and sometimes equalized spending, but not always by leveling up; some states redistributed from high-spending to low-spending districts. Adequacy lawsuits claimed that schools needed more money to deliver a minimally acceptable education, but courts sometimes acted like appropriators despite separation-of-powers concerns. Large spending mandates did not reliably improve student outcomes; New York City, New Jersey, Kansas City, St. Louis, and Wyoming are cited as cases where expenditures rose sharply without clear gains. The core economic problem is weak incentives: teachers and principals generally do not gain materially from higher student achievement, so extra funding does not automatically become better instruction. A system that pays more to all teachers regardless of effectiveness is likely to raise satisfaction but not achievement. Some advocates for more funding rely on the logically true but practically incomplete claim that if money is spent well, outcomes improve; the challenge is that school systems often do not allocate money well. Charter schools offer a partial solution because parental exit and school closure create some market discipline, though the sector is still young and uneven. Better accountability requires measuring student performance and value added so policymakers can identify which schools and teachers actually improve learning. The best reform path combines choice and accountability; either one alone is insufficient because choice without information and accountability without options both weaken over time.

Data Points: States with school finance lawsuits: All but four or five states - Hanushek notes the broad reach of school finance litigation across the U.S. Original California case: Serrano v. Priest (late 1960s) - Early challenge to property-tax-based local funding and inequity across districts. New York City court-mandated increase: $5.8 billion on top of $13–14 billion already spent - Campaign for Fiscal Equity v. State of New York initial remedy. New York City per-pupil spending referenced: About $19,000 per student per year - Court’s implied adequacy level at the time of the case. National average per-pupil spending referenced: Under $8,000 - Used as a comparison in the New York discussion. New York appellate reduction: Reduced to about $2 billion per year - Court of Appeals lowered the remedy while preserving the logic of judicial intervention. Wyoming funding change: Court case in 1996 led to dramatic spending increase - Used as a case where funding rose substantially without improved relative performance. New Jersey Abbott districts: 28 districts - Districts declared in special need under Abbott v. Burke. New Jersey spending level in Abbott districts: About $19,000 per student - Compared with less than $10,000 in the rest of New Jersey. Charter school share nationally: About 3–4% of the population - Hanushek describes charter schools as still a small part of the system. Charter schools in California vs. Mississippi: About 700 in California; 1 in Mississippi - Illustrates strong state variation in charter availability.

Pivotal Quotes: "If the courts required more equal spending, most states would not equalize by taking money from one district and giving it to another. But in fact, they would level up." — Eric Hanushek: Explaining the original expectation behind equity lawsuits. "The judge declared 28 districts to be in special need." — Russ Roberts: Introducing the Abbott v. Burke discussion in New Jersey. "We want to have very good systems of accountability that measure student performance and attribute the value added of schools to student achievement." — Eric Hanushek: Summarizing his main policy recommendation.

Implications: School finance reform should focus less on spending levels and more on incentives, transparency, and parental choice. Without accountability, court-ordered funding increases are unlikely to raise achievement meaningfully.