The Price of Potential: Unpacking the Link Between School Funding and Student Success

For decades, the debate over American public education has often been reduced to a single, polarizing question: Does money matter?

On one side, you have those who point to skyrocketing education budgets over the last half-century alongside stagnant test scores, arguing that simply throwing cash at the problem is futile. On the other side, advocates argue that you cannot expect champagne outcomes on a beer budget, especially when that budget is riddled with inequities.

The Teacher Pipeline

Let’s start with the single biggest line item in any school district's budget: the teachers.

Research has consistently shown that teacher quality is the most significant in-school factor affecting student achievement. But quality costs money. When we look at the data, we see a strong correlation between higher teacher salaries and better student outcomes. This isn't necessarily because paying a specific teacher more immediately makes them better at explaining algebra. Rather, it is about the pipeline.

Higher baseline salaries attract a deeper pool of high-quality candidates and, crucially, keep them in the profession. Low pay is a primary driver of teacher turnover. When schools become revolving doors, students suffer from a lack of continuity and the constant presence of inexperienced educators. In states where teacher pay is competitive with other college-educated professions, we see higher retention rates and, subsequently, stronger test scores and graduation rates.

Cost of Living and Purchasing Power

However, comparing salaries—and school funding in general—requires a massive asterisk: the cost of living.

It is a common mistake to look at a per-pupil spending chart and assume that New York, which spends over $30,000 per student, is simply "trying harder" than Idaho, which spends closer to $10,000. But a dollar in New York City buys significantly less space, service, and staffing than a dollar in Boise.

When researchers adjust for regional costs—factoring in local wages, housing markets, and utility costs—the funding gaps often narrow, or sometimes flip. A high raw dollar amount might actually represent a "resource-poor" environment if the local cost of living is exorbitant. The most accurate studies don't just count dollars; they measure "purchasing power parity." When schools actually have higher purchasing power, they can afford lower class sizes and support staff like counselors and reading specialists, which correlates positively with student success.

The Equity Equation

This leads us to the most critical variable in the equation: the students themselves.

"The relationship between funding and performance is not linear; it is progressive. In other words, money matters more for students from low socioeconomic backgrounds."

Wealthier students often have a safety net of resources outside the classroom—tutors, stable housing, and enrichment activities. For low-income students, the school system is often the sole provider of these academic supports. Recent major studies, including work by economists C. Kirabo Jackson and Rucker Johnson, have found that sustained increases in per-pupil spending lead to significant improvements in graduation rates and adult wages—but primarily for low-income children.

For affluent students, extra funding has diminishing returns. For a student in poverty, a 10% increase in funding can be life-changing, correlating with a significantly higher chance of escaping poverty as an adult. This is why "equal" funding is rarely "equitable." If a district spends the same amount on a child with high needs as it does on a child with low needs, the academic outcome gap tends to widen.

The Impact of School Choice

Now, we must address a factor that is rapidly changing the financial landscape: the diversion of tax dollars to private options.

Mechanisms like school vouchers and Education Savings Accounts, or ESAs, allow parents to take the state per-pupil funding allocated for their child and use it for private school tuition or homeschooling.

Proponents argue this competition forces public schools to improve. However, the academic data on vouchers is mixed to negative. Recent large-scale studies in states like Louisiana and Ohio have shown that students who use vouchers to leave public schools often see their math and reading scores drop.

From a funding perspective, this creates a specific strain. When a student leaves a public school, the revenue for that student leaves with them, but the school's fixed costs—keeping the lights on, the bus routes running, and the principal paid—remain largely unchanged. This leads to what is called "fiscal strangulation," where the remaining public school students, often those with the highest needs who private schools may not accept, are left with fewer resources per capita.

Defining "Outcomes"

Finally, we have to ask: How are we measuring "outcomes"?

If we only look at standardized test scores, the correlation between funding and success can appear weak. Test scores are noisy; they fluctuate based on how a kid slept the night before or what is happening at home.

However, when we shift the lens to long-term outcomes, the picture sharpens. Higher school funding correlates strongly with higher high school graduation rates, lower incarceration rates, and higher lifetime earnings. If the goal of education is to produce functional, employed, and law-abiding citizens, then the return on investment for school funding is robust.

In summary, money in education is like fuel in a car. It doesn't guarantee you'll reach your destination—you still need a good driver and a working engine—but without it, you aren't going anywhere. The data suggests that when we pay teachers like professionals, adjust for the real cost of living, target resources toward those who need them most, and measure success by life outcomes rather than just bubble sheets, the investment in public education pays dividends.