There are 3 important things I’ve learned recently about our education system:

1. No one knows where the dollars in K-12 education are really going (we know the sources of funding, but we don’t know how those funds are spent).
2. This leads to inefficient and unintended uses of the funding.
3. There are powerful structural elements — including K-12’s various stakeholders and conditions/contingencies tied to how funding is used — that work against fixing the situation.

First, a little context about the K-12 world.

• Large: Education spending for kindergarten through 12th grade is massive, totaling $600 billion, which is about $12,000 per year per student (with WIDE variations on per student spending depending on the state and district you live in, roughly from $5K-$15K).
• Growing: Spending on K-12 education has grown 2-3x over last 30 years (even when adjusting for inflation).  Federal funding alone has doubled in the last decade.
• Funding Sources #1 – 10/45/45: The $600 billion is funded 10% from federal dollars, 45% from state (sales & income taxes), and 45% from local (property taxes).
• Funding Sources #2 – Taxes:  Education funding is the largest claim on your tax dollars except for Medicaid.

I spent some time with Marguerite Roza at the University of Washington’s College of Education who is the country’s expert on K-12 financing.  Her book, Educational Economics: Where Do School Funds Go?, is terrific — short, sweet, and clearly written — and I’ve excerpted a number of items from it below.

So, revisiting the three things I’ve learned….

1) No one knows where the dollars in K-12 education are really going (we know the sources of funding, but we don’t know how those funds are used).

How can this be true?  Well, the problem is districts don’t track what they spend on each school.  Seems like this would be pretty important, but they don’t do it.

As a result, “despite extensive financial reporting requirements, most districts cannot answer basic questions [such as]: How much does the district spend on professional development?…How much does the district spend on sports and electives? How much does Johnson Elementary receive relative to Lincoln Elementary?” (pg 47).

2) This leads to inefficient and unintended uses of the funding.

There are many examples, but let’s pick one with a particular historical connection.

In 1965, LBJ launched the War on Poverty and with it created a new federal education program called Title I.  The program was well-intentioned: it was meant to provide funds to schools with the highest concentrations of poverty.  More specifically, it was meant to provide incremental funds ON TOP of an equitable distribution of all other funds across all the schools in a district, so Title I would provide a real boost to the students most affected by poverty.

To this day, Title I is the largest slice of the $60 billion federal edu pie at $15 billion per year.  The problem is, it’s not working as intended.

How can this be?  To have any sense for where money goes in K-12, it helps to start by looking at compensation, as salaries and benefits count for ~70% of spending (we think!).

Since more experienced and therefore more expensive teachers (due to seniority vs. merit-based compensation plans) choose to teach in wealthier schools with middle & upper-class students, these schools receive more funding by way of higher salary spending.  For instance, 1 teacher in poor school tends to be less experienced so gets $40K whereas 1 teacher in a wealthy school tends to be more experienced so gets $60K.

The funding gap between schools with wealthy and poor student populations is so large that Title I dollars cannot make up for it — instead of providing a boost, it can’t even provide a level playing field.  So the highest poverty schools actually receive less than wealthier schools — completely opposite of what is intended.

Targeted Federal Funding atop Uneven Base Allocations in One School District (pg 35)

As a result, we’ve reached a world where, “one could argue that the implicit [my emphasis] strategy in spending realized at the school level is one where the system:

• is trying to increase the gaps between minorities and whites;
• reinforces the benefits realized by wealthier students;
• is working to expand the achievement gap between high and low performers” (pg 68).

3) There are powerful structural elements — including K-12’s various stakeholders and conditions/contingencies that limit how funding is used — that work against fixing the situation.  

There are numerous stakeholders who are involved in the K-12 world: school boards, superintendents, central office staff, principals, parents, and political officials at the local, state and federal level.  Why is this necessarily a problem?

Well all these chefs each vie for their own favored projects — and those better at working the system assert greater influence over where funding goes vs. programs (e.g. Title I) intended to sure equitable distribution.  For instance: “Parents band to block school closures and prevent budget cuts to cherished programs.  In one district, students marched into a [school] board meeting playing their musical instruments, thus saving the middle-school music program in a single school.” (pg 30)

In addition, more chefs lead to more rules which limit a school’s site-based discretion.   For instance: “In [one] school, the district continues to provide bus transportation to all students to the school, despite the fact that more than half could safely walk.  The principal wants to redirect the funds to other services but says the district cannot, since those funds are earmarked by the state for transportation only.”  (pg 66)

What to Do?

There is no magic solution.  But I do think there are opportunities to (a) advise districts on how to better make use of and understand their data as well as (b) create technology solutions to track spending down to the school level — not just software to enable compliance, but software to enable insight into where money really goes and whether it’s being spent in ways that drive student achievement.

There’s an increasing amount of attention being paid by tech companies to how data is used in K-12 education.  More and more start-ups (as well as larger companies, including the education publishers) are focusing on how to capture and make use of student, school, and district data to drive academic gains — e.g. capturing student performance in real-time to enable teachers to provide personalized learning, differentiated instruction, etc.

I was curious about what kind of publicly available K-12 data exists today, so I headed over to the National Center for Education Statistics (which is run by the US Dept of Ed) to see what they have.

What I found was mostly a collection of macro-level, dated info (some of the most recent data is from 2010).  More useful for policy makers than for students and teachers.  But what’s clear from the data is that while K-12 market is massive, it’s extremely fragmented — and it’s why the emerging tech companies will face distribution challenges unlike in any other tech market.

1) Big Market: Growth in K-12 Student Population

The growth of the US elementary and high school population has almost doubled in the last 60 years to 56 million.  Interestingly, much of that growth occurred from 1950-1970 with the baby boom explosion, and for the last decade, the population has remained essentially flat.   By 2019, the US DOE predicts there will be an additional 3 million K-12 students or about 60 million.

2) Fragmented Market:  Dispersion of K-12 Student Population

The 17,00 US school districts are highly fragmented:

• ~30% of districts (nearly 5,000) have only 1 school, accounting for just 3% of students
• ~99% of districts have 50 schools or less, accounting for 72% of students
• Only 0.4% of districts (just 65) have more than 100 schools.  But these account for 16% of students