In Kristin Lidstrom’s business classes at Hamilton Southeastern High School in Fishers, the finance lessons quickly become personal.

“They begin thinking about their own spending habits, future goals, or even what they’re seeing at home,” Lidstrom said. “Concepts like interest rates or debt suddenly carry weight when they realize how long it can take to pay something off or how quickly costs can grow.”

Not every student will pursue business after Lidstrom’s class. But all of them can apply the lessons they’ve learned from business class in their future career paths, she said.

And Indiana wants all high school students to start thinking about what those paths will look like beginning in high school. The state will have in 2029 that emphasize career learning and financial literacy.

Lidstrom’s own career journey started with studying marketing at Indiana University’s Kelley School of Business. But she found the path she wanted to pursue through volunteering in schools, and combined it with her passion for business to become a teacher.

Now the business department chair at Hamilton Southeastern with 22 years of experience in the district, Lidstrom has been piloting an AP Business with Personal Finance class this year, which is open to grades 9-12. The course, which is set to roll out nationwide in the 2026-27 school year, has the backing of the Indiana Chamber of Commerce and local employers.

Read more below about Lidstrom’s class at Hamilton Southeastern High, and the projects that students complete pitching business ideas and putting together a realistic budget.

These answers have been edited for length and clarity.

What does a typical day look like in AP Business with Personal Finance? How is this class different from other AP courses?

A typical day in this class is very active and hands-on. The course is intentionally designed with a project-based learning approach, so while there are occasional moments of direct instruction, most of the time students are learning by doing, working through real-world scenarios, collaborating with peers, and applying concepts in meaningful ways.

What really sets this course apart from other AP classes is that it’s less about memorizing content and more about developing skills. Students are consistently engaging in problem-solving, critical thinking, and communication, which mirrors how business actually works outside the classroom.

One of the anchor projects in this course is an entrepreneurship business plan that students build from the ground up, centered around solving a real problem.

Students start by identifying a need — something they’ve observed in their own lives, school, or community. From there, they develop a product or service to address that need and work through the full business planning process. This includes defining their target market, analyzing competitors, creating a marketing strategy, and building out basic financials.

What makes this project especially meaningful is that it’s not hypothetical in the traditional sense. Students are expected to make realistic decisions, justify their choices with data, and adapt as they encounter challenges along the way.

The project leads to a presentation where students pitch their business as if they were seeking investment. It’s a great example of a real-world scenario because it requires them to bring together everything they’ve learned.

The culminating project in the course is a financial-adviser simulation, in which students take on the role of advising a client through real-life financial decisions.

What makes this project impactful is that students have to think holistically and justify their recommendations based on the client’s situation. It pushes them to apply what they’ve learned in a realistic context and communicate their reasoning clearly.

Have you seen any moments where the material “clicked” in a real-world way for students?

One of the biggest “click” moments is around things like compound interest or saving for the future. When students see how small, consistent decisions can significantly impact their financial situation over time, it changes how they think. They start asking better questions, making more intentional choices in simulations, and connecting it to real-life decisions they’ll be making soon.

It’s in those moments you can tell it’s no longer just a class, it’s something they see as directly relevant to their lives.

What do your students hope to do after high school and has taking this course changed the way they think about money, entrepreneurship, or next steps?

My students have a wide range of plans after high school. Some are heading to four-year colleges, others to community college or trade programs, and some are eager to jump straight into the workforce or start something of their own. What this course does is give all of them a stronger sense of direction and confidence in those next steps. While not all students will pursue business after high school, they all come away with an appreciation for how business acumen can support them in any career path.

How does the course support students in meeting Indiana’s new diploma requirements?

This course directly supports Indiana’s new diploma requirements by fulfilling the Personal Finance requirement, ensuring all students graduate with a strong foundation in money management, credit, and financial decision-making.

As an AP Career Kickstart course, it also helps students begin building a purposeful pathway early in high school. It encourages them to pursue additional AP coursework, putting them on track toward earning Honors and Honors Plus Seals. By starting that progression earlier, students are more prepared and confident as they move into more rigorous AP classes, while also developing practical, real-world skills that connect to both college and career opportunities.

If you could adjust one thing about how business or personal finance education is taught nationwide, what would it be?

If I could adjust one thing, it would be to make business and personal finance education more consistently rooted in real-world application rather than theory. Students don’t just need to know what a budget, credit score, or interest rate is, they need to actively use those concepts in realistic scenarios. When students are making decisions, experiencing the consequences, and reflecting on those choices, the learning sticks in a much deeper and more meaningful way.

I’d also push for this type of learning to happen earlier and more consistently across grade levels. By the time students are making real financial decisions, they should already feel confident navigating them, not encountering the concepts for the first time. Ultimately, the goal should be to move beyond exposure and toward true readiness, so students leave school not just informed, but capable.

What’s the best teaching advice you’ve ever received, and how have you put it into practice?

The best teaching advice I’ve ever received is to never do for students what they can do for themselves. In practice, that’s shaped how I structure my classroom in a big way. Rather than stepping in with answers, I focus on asking questions, creating space for productive struggle, and designing experiences where students have to think, decide, and reflect.

It can be uncomfortable at times (for both the students and me) but that’s where the real learning happens.

In a course like this, it means students aren’t just learning concepts, they’re applying them, making mistakes, adjusting, and building confidence along the way. Over time, you can see them become more independent, more thoughtful, and more willing to take ownership of their learning, which is ultimately the goal.

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With a state mandate looming, the Los Angeles Unified School District this week joined other districts in preparing to introduce a semester of personal finance by the Legislature’s 2027-28 deadline. 

The LAUSD school board gave the go-ahead on Tuesday while stipulating that elements of financial literacy and economic justice be incorporated into the course. 

As of 2023, only 27% of the state’s high school students attended a school that offered a course in personal finance, the California Department of Education reported. But to increase access and make it a high school graduation requirement, the state passed Assembly Bill 2927 in 2024, which proponents argue could  students’ lifetime earnings by roughly $100,000. 

Twenty-nine states already require such a course. 

“If you speak to any adult, they will tell you one of two things,” said Tim Ranzetta, a co-founder of Next Gen Personal Finance. “One is, ‘It’s a class I wish I had.’ The second is, ‘Can you educate my kids?’” 

Per the , the LAUSD will be required to provide an update that includes a start date of February 2026. The course will address: 

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LAUSD’s program will also incorporate financial justice — an element that can help students understand American history, literature and government from an economic perspective. 

“During a time when the future of a family may seem uncertain, when many students and youth find themselves suddenly the heads of household, it’s all the more important,” said LAUSD student board member Jerry Yang at Tuesday’s meeting. 

Yanely Espinal, the director of educational outreach at Next Gen Personal Finance, added that including financial justice can help students understand ongoing wage gaps based on profession, gender and other factors. 

It’s “getting students to understand the reality that we live in within the financial world,” Espinal said. “It hasn’t always been so picture perfect, and while it is increasingly improving and becoming, there’s a lot of effort to try to make it more fair.”

‘Most sought-after elective courses’

Last year, Fresno Unified School District became one of the earlier California districts to offer a financial literacy elective course in the majority of its high schools. 

“We just kind of floated it out there, like, ‘Hey, if we were able to offer this elective course, who’s showing interest in it?’” said Jeff Allen, a teacher on special assignment who has been focused on implementing the course districtwide. “Overnight, it became one of the most sought-after elective courses.”

And in that year alone, the district identified 15 teachers who wanted to teach the subject and taught 998 students. 

Further south, at Olympian High School in San Diego’s Sweetwater Union High School District, Allison Saiki has been teaching financial algebra for years — and has recently worked to add financial literacy this semester. 

“We have social media where students can go and learn from … financial influencers,” Saiki said. “But I have students that say, ‘Hey, you know what? We see a lot of that outside, but we don’t know what’s real. But we can come to you and we say, ‘Hey, is this true?’… and we decipher it together.”

Saiki, who has been awarded as the school’s teacher of the year and has been recognized districtwide, also transforms the classroom into an active economy, with its own currency, employment, pay, property and tax. Students fill out I-9 forms and learn about 401(k)s. 

Teaching the subject has also helped Saiki personally. 

“I look back and I’m like, ‘Oh my gosh, I’m an impulsive spender!’” Saiki said. 

“Professional development has given me an opportunity to look at my finances and be like, ‘Wait a minute, let’s fix some things, so that I can do everything that I am telling my students to do.’” 

Beyond the requirements 

Even though the mandate only calls for a one-semester high school course, Espinal said educators can start introducing students to basic principles of financial literacy even earlier. 

For example, at the elementary school level, she said teachers can mimic scenarios of how they might split their birthday money into different piggy banks. 

“You should decide how many of those dollars will go to saving, how many will go to spending, how many will go to charity or donations or gifting to others — and how much will you invest for the future, for bigger goals that are much beyond the next few weeks or months of your life,” Espinal said. 

Middle school can be more specific, and high school should be oriented toward students’ lifetime goals, according to Espinal. 

She stressed that many of the topics covered are already relevant for high schoolers, who may be navigating car insurance as young drivers, or looking into ways to pay for college. LAUSD school board member Kelly Gonez also stressed the importance of extending financial literacy into adult education during Tuesday’s board meeting. 

“That early exposure amounts to very specific decisions that they have to make,” Espinal said. “But you can’t really make those decisions unless you’re informed about everything that weighs into that decision-making process.”

Strangely, the subject of revenues and expenditures is never addressed in A Nation at Risk (ANAR). That omission makes the cascade of calls to increase funding for schools, often justified by reference to the message of urgency in ANAR while disregarding use of funds, ironic. By ignoring the role of funding and budgeting, the recommendations from the US National Commission on Excellence in Education are untethered from any grounding in choices and trade-offs that all public policy required. On the other side, the calls for funding that are divorced from ideas of how the funds are to be used are equally problematic.

Spending on schools is frequently used as a summary statistic of the quality of schools. And in discussions of how to make schools better and more equitable, the first order of business is frequently the necessity of increasing our investment in schools—in other words, our spending on schools. Unfortunately, history has not been very supportive of this strategy.

A conventional perspective is that legislatures and school districts should decide how much to spend based on the trade-off between the expected benefits of school spending and the taxes required for any given revenue. Once the revenue is determined, school districts would make budget allocations in order to produce the best student outcomes.

However, this picture is complicated in the case of schools, since states—which have primary responsibility for schools—are concerned not only with overall student outcomes but also with the equity of public provision. Two factors enter into the equity discussions. First, education is not entirely a function of schools but has components of families and circumstances that enter into student outcomes. Thus, children from more educationally disadvantaged households, English language learners, and children with various handicaps need more from the schools if they are to pull even with students not facing such difficulties. Second, because local funding is heavily reliant on local property taxes, the size of the district tax base will directly influence the ability of a school district to raise revenues. Students who happen to reside in districts where the value of residential property and the presence of commercial and industrial properties are high have an advantage in raising revenues for their schools.

The legislature in each state is charged with making political decisions about both the level of spending and how statewide education and funding differences are addressed. How to reach decisions that weigh the underlying trade-offs is vigorously debated, and every state has its own solution to this.

Legislatures are not the only actors in these discussions. Various parties who have not liked the legislative outcomes have gone to the courts to try to change the legislative decisions. Starting in California in 1968, courts in all but two states (Hawaii and Utah) have had litigation about school funding. The early cases in the 1970s and 1980s focused on equity issues largely related to differences in property tax bases and spending differentials across school districts, but the cases evolved throughout subsequent decades to focus more on the overall adequacy of funding to meet educational objectives.

The largest difficulty with the pattern and outcomes of revenue decisions is, however, the lack of a clear relationship between added spending and student outcomes. In simplest terms, the division of decisions between how much to spend and how to spend it has historically led to highly variable and quite disappointing results in terms of student outcomes. Specifically, it appears that how funds are spent is crucial—and generally more important than how much is spent. This does not say that more resources are never important for student outcomes. Nor does it say that more resources cannot be important for improved student outcomes. It does say that divorcing decisions on “how much” from “how” has not been successful within the current structure of school decision-making.

This chapter documents these overall conclusions. It then discusses alternative perspectives on funding for schools.

A short history of funding

In order to frame the school finance discussion, it is helpful to describe briefly the nature of financing of schools in the United States. The overall picture of enrollments, structure of the schools, and funding shows significant changes over time. Further, the aggregate picture hides significant variation across the states. The variety provides an important backdrop both for the analysis of school finance issues and for decision-making in the schools.

An overview of U.S. schooling

Public school enrollment in the United States, while rising during the 1990s, reached fifty million students in 2013 and stabilized there until the COVID-19 pandemic hit in 2020. The full impact of the pandemic is not yet known, but public school enrollment fell by 3 percent from fall 2020 to fall 2021 and remained at the lower level through fall 2022.

These students are spread very unevenly across states and, within states, across separate local school districts. At the state level, Vermont had a total of 82,000 students while California had six million. The prime operating level is the school district, of which there were 13,452 in 2019, down from 117,408 in 1940. Moreover, the states are broken up into widely varying numbers of local districts. While Hawaii and the District of Columbia each have only one school district, five states had more than one thousand districts.

But even these aggregate variations understate the degree of heterogeneity in the schools, because the growing importance of school choice leads to even more decentralized operation of education. The public school district is the prime operating unit, but it does not cover the full provision of education services. Charter schools were first established in Minnesota in 1991, and the model spread across the country. Charter schools are public schools that operate with varying degrees of autonomy, depending on the state. Typically, they are free to operate outside of many of the education regulations in a state, and importantly, they can set their own requirements for teacher preparation, salary schedules, and personnel rules independent of local teachers’ unions. They receive public funding, and they are almost always required to take all applying students or to randomize admissions if more students apply than they can accommodate. They are also required to participate in the state student assessment systems.

Students can also attend private schools or be homeschooled. While this is changing, private schools almost always receive no direct public funding, as is the case for homeschooling. These parts of the system are generally very unregulated, and they can set their own curricula, standards, and hiring rules. They generally do not participate in state student assessment systems, and little is known about their performance except as indicated by parental choices.

Figure 1 shows the substantial changes in the structure of US schools in the twenty-first century in terms of parental choices that interact with school finance. There has been a steady rise in charter school attendance with relatively stable homeschool attendance and some decline in private schooling. The private school attendance is one-quarter nonsectarian and three-quarters religious based, with the religious component evenly split between Catholic and other denominations.

Note, however, that these data are pre-pandemic. With the pandemic, traditional public school attendance fell, while the other choice options increased. Within the public school sector there was also a shift from the traditional public schools to charter schools. The longrun distribution of students remains unclear at this time.

Revenues for U.S. education

The structure of the education sector and the attendance patterns that were highlighted relate directly to school finances. Because private schools and homeschooling are not publicly supported (to any significant degree), any increased attendance in these sectors relieves state and local governments of resource demands.

Figure 2 traces revenues for the public schools from 1960 to 2019. The bulk of funding comes from state and local revenues, which each correspond to roughly 45 percent of per-pupil funding. The federal share, which began rising in the 1960s as the federal government assumed a larger role in financing schools for disadvantaged students and subsequently for special education students, rose around the 2008 recession and then returned to its historic levels. While not shown, the federal government also contributed large additional amounts of temporary funds with the onset of the pandemic in 2020.

The steady increase in per-pupil funding over the entire period puts public school revenues per student in 2019 at more than four times that in 1960 in real terms. In fact, except for the dip in school revenues after the end of federal support for the 2008 recession, real per-pupil spending (i.e., adjusted for inflation) has risen continuously for more than one hundred years.

State revenues come from a variety of sources that differ across the fiscal structures of the different states. At the same time, with few exceptions, property taxes are the dominant source of local revenues.

Public school spending incorporates both traditional public schools and charter schools. For a variety of political and institutional reasons, charter school spending is systematically below that for traditional public schools, although there is debate about the exact magnitude of differences.

The aggregate revenue data hides the wide variation that is seen at the state level. States differ significantly in how revenues are raised and in the level of spending. Table 1 shows the extent of compositional differences in school funding. Typically, most of the revenue is derived from state and local sources with the federal government contributing a smaller portion, but the federal share across states differs from 4 percent to 15 percent of funding because the federal revenues are driven largely by poverty rates and special education classifications that differ across states. States like Hawaii, with its one district, and Vermont provide almost all funding at the state level, while funding for schools in Washington, DC, is provided almost entirely at the local level. For Alaska schools, 15 percent of the funding comes from the federal government, the highest percentage of all states.

Figure 3 illustrates the distribution of state per-pupil spending levels in the 2018–19 academic year. Northeastern states spend more than $15,000 per student, significantly higher than the $9,000 to $11,000 per pupil spent by the majority of southern states.

Student performance

The United States has reliably assessed student performance with the National Assessment of Educational Progress (NAEP), otherwise known as the Nation’s Report Card. The long-term trend (LTT) assessment of NAEP makes it possible to get representative national data for math and reading performance of students aged nine, thirteen, and seventeen since the 1970s. Beginning in 1992, a second version of NAEP, called Main NAEP, was started with testing of math and reading in grades four and eight.

Table 2 provides data on NAEP testing results both in terms of changes in standard deviations (SD) and in terms of these changes relative to school expenditure. The pre-pandemic results fall into two distinct clusters. There are strong gains in the level of math performance for younger students—age nine (grade four) and to a lesser extent age thirteen (grade eight). But there are much more modest gains for age seventeen math and for reading at all ages.

The scores cover different periods of time, so it is also useful within this discussion to place them in comparison to the spending on schools. When normalized by spending over the relevant time periods, the younger cohort math gains are all greater than 0.07 SD per 10 percent larger spending, while the remaining gains are all less than 0.03 SD per 10 percent larger spending.

The results were, unsurprisingly, dramatically altered by the COVID-19 pandemic. The MainNAEP had testing in spring 2019 (included in Table 2) and spring 2022. In math and reading for both grade four and grade eight, average scores fell dramatically with the largest declines being recorded for math performance (Table 3). Grade eight (grade four) gains from 1990 through 2022 were down to 0.33 SD (0.72 SD). For reading, virtually all gains since 1992 were erased by the pandemic; the 1992–2022 gain was 0.01 SD for grade eight and 0.02 for grade four. It is of course difficult to know how to interpret the scores after the pandemic. Clearly, the substantial added funds over the pandemic period were insufficient to overcome the learning disadvantages of the pandemic period.

The achievement gains in Table 2 are unconditional changes in student performance. In interpreting this performance data, it is important to note that, because achievement is a function not only of schools but also of parents, peers, and neighborhoods, the data do not indicate the causal impact of schools or spending, but they do provide an important backdrop to finance discussions.

One related pattern that does consider some of the nonschool factors is the historical evolution of achievement gaps by socioeconomic status (SES). Concerns have been raised that the widening of the US income distribution led to expanding SES achievement gaps (Reardon 2011). That concern is unfounded because test information that is linked over time shows a slow shrinking of gaps for birth cohorts born between 1961 and 2001 (Hanushek et al. 2022).

Court involvement

While the federal courts were involved in school funding issues for a while after the school desegregation ruling in Brown v. Board of Education, the US Supreme Court in 1973 declared school finance outside the federal role (Rodriguez v. San Antonio), effectively moving all litigation to state courts.

Litigation in the state courts is filed under the state’s equal protection clause or the state’s education clause as covered by individual state constitutions (see Hanushek and Lindseth 2009). The equity cases under the equal protection clause argue that state efforts to ameliorate either cost of education differences (e.g., for English language learners) or differences in property tax bases are insufficient. The adequacy cases under state education clauses argue that the current level of funding is insufficient to meet the constitutional obligations of the state.

The judicial branch has been asked to assess the level and pattern of school spending in 205 separate court cases adjudicated across forty-eight of the fifty states. There is no distinct geographical pattern to where these court cases have been found. The prevalence of cases is almost evenly split between below-average and above-average spending states, but the success of defendants in maintaining the existing finance structures is relatively greater in low-spending states. Perhaps surprisingly, decisions in cases focused on adequacy tend to be more successful in states that are already at above-average achievement levels as measured by NAEP.

Interestingly, while the court cases are focused on school spending, there is no overall relationship between spending growth and either decisions that favor the plaintiffs or the number of cases in any state. States with mandates from the courts to increase spending average somewhat larger immediate growth (within five years of the decision) than states where there is no such court mandate, but these short-run changes do not lead to differences in long-term growth of spending. Thus, the school finance litigation has occupied the attention of state legislatures across the country, but it has not changed the overall funding outcomes across the states.

The spending-achievement dilemma

Since the first major study of school resources and student achievement (Coleman et al. 1966), there have been questions about the strength and consistency of any relationship between the two. This very influential study, the Coleman Report, suggested that school resources were not closely related to student outcomes; instead, families and peers had the primary influence. While the study was not well executed by current scientific standards, it evoked a huge response, with many researchers pursuing related questions about the determinants of student achievement.

The early research confirmed the doubts about whether strong impacts on student achievement would follow added spending (Hanushek 2003). But the early research was marked by studies of highly variable quality, and many would not meet current empirical standards. There are a variety of problems faced by this research, but the main problem is that insufficient attention is given to finding the “causal impact” of added funding. In other words, the correlations of resources and achievement could well be affected by other unmeasured factors that bias any empirical analysis.

A more recent body of research has developed that emphasizes careful identification of the causal impact of resources on student outcomes. The ideal approach to investigating the causal impact of resources is a randomized controlled trial where some group of schools is randomly chosen to receive more resources while another group does not. Such a research design is, of course, not really feasible with schools (or in many other circumstances). As a result, a variety of other approaches that are designed to mimic randomized controlled trials have been developed. These approaches have two common elements: the existence of a change in resources that is not correlated with other factors that affect student outcomes and the availability of a control group that can indicate what would happen in the absence of the added resources.

Finding circumstances that meet the requirements for these quasi-experimental approaches is not easy. Observations of most actual school operations do not meet these stringent requirements. In fact, the relevant scientific conditions are relatively unusual. But over the past two decades a number of such circumstances have been uncovered by researchers, lending the possibility that evidence on the causal impact of added resources can be more thoroughly investigated.

The studies falling into this category come from a variety of circumstances, ranging from added funding that results from court decisions in finance cases to the impact of budget decreases following the 2008 recession. Because these studies reflect such a wide range of circumstances, it is difficult to provide a direct comparison of the various estimates, but there are now two reviews of the work over the past two decades (Jackson and Mackevicius 2021; Handel and Hanushek 2023b).

Two general conclusions come from the recent studies:

• With high probability, adding resources to schools has a positive effect on student outcomes.

• The estimated impact of resources is highly variable and depends on the context and constraints on the spending.

The first conclusion largely underscores the contentious political nature of the research in this area. Nobody believes that adding resources to schools is likely to harm students and learning, but because parts of the research enter directly into legislative and judicial decisions about funding, there has been some effort to make this the focus of attention. By phrasing the issue as “does money matter?” the intent is to set the low hurdle of “no harm.” Of course, rational public decision-making would not fund all public programs that don’t harm the recipients.

The second conclusion of the research is much more relevant. The estimates of spending impacts range from too small to reject the possibility of no impact to very large effects on both student achievement and attainment of more schools. The small estimates would not justify added public expenditure because the costs would exceed the social benefits. The large results, on the other hand, would justify considerable commitment of added public funds.

Table 4 provides a summary of the results from the separate studies of student outcomes that meet modern empirical standards for estimating the causal impact of funding. All estimates represent the expected improvement in outcomes for a 10 percent increase in funding. The preferred estimates relate to achievement test scores. While most are positive and nine of sixteen are statistically significant, they vary widely. Part of the variation just represents normal sampling errors that are present in all studies, but most of it represents true differences in the underlying impact of funding. The estimates for test scores range from a reduction in achievement of −0.24 SD (not statistically significant) to +0.54 SD (statistically significant). This large range leaves substantial uncertainty in what can be expected from added funding. Clearly, averaging across these estimates to get a predicted impact would be misleading: in addition to having a small number of estimates in the sample, we could not be confident that they are typical of the full set of funding decisions that have not been measured.

While all of the results for school attainment (high school graduation, not dropping out, and continuing to college) are positive, they also cover a very wide range. They, too, have the same challenges for interpretation.

The major difficulty is that it has not been possible to describe when funds are particularly effective or ineffective (Handel and Hanushek 2023a). The estimated impacts of resources, as noted, come from very different circumstances. They do not reflect differences in the underlying methodology, in whether funds are targeted at a particular group such as disadvantaged students, whether they come from court directives, or whether they reflect differences across states in policies. To date, little headway has been made in describing the features of the particular contexts or the particular use of funds that yields significant learning gains.

In many ways, it is not surprising that the underlying methodology does not provide clear information about the underlying structure of effectiveness. The appeal of randomized controlled trials and quasi-experimental designs is that it is possible to provide causal impact information without knowing or being able to specify the full range of factors that enter into determining the outcomes. But this does not mean that the specific impact estimates are unaffected by the circumstances or even the design of the specific use of resources. The combination of the use of resources and the context within which they are applied is in how funds are used. The current research underscores the importance of how funds are used if student achievement is to be improved.

An ideal funding policy

Education policy has two broad goals: reach high levels of achievement and do this in an equitable manner. The way that we fund schools should clearly relate to meeting these goals. The overall level of funding is a political decision, not a scientific decision. Legislatures decide on funding levels on the basis of both their judgments about reaching the desired learning standards of the state and their views on the trade-offs with other public expenditures and with private expenditures (as related to tax rates). But because the outcomes of the funding depend on how the funds are used, the education policy surrounding any funding cannot be ignored.

A fundamental problem is that we do not have a set of simple policies that can be put in place and that have a high probability of successful impact on student achievement. We know some things that have an impact, but it is often not clear how they can be put in place at scale.

For example, there is extensive information about the importance of effective teachers (e.g., Hanushek 2011; Chetty, Friedman, and Rockoff 2014; Bacher-Hicks and Koedel 2023). Knowing how important teachers are is different from having a clear set of policies that can be legislated and put into place. There are examples of the application of teacher policies that work in some locations, such as Washington, DC (Dee and Wyckoff 2015, 2017) and Dallas (Hanushek et al. 2023). It is nonetheless difficult to legislate adoption of these complex plans that have been honed to the circumstances of the individual areas.

There are institutional structures that tend to promote better achievement—and that are likely to work in part through promoting better teachers. For example, recent evidence points to good overall performance results from allowing the greater flexibility and parental choice that come with charter schools (see CREDO 2023). Yet the details remain difficult to legislate.

In discussing guiding principles for an effective funding system, Hanushek and Lindseth (2009) proposed seven general principles:

• If the objective is to improve outcomes, the system should focus on outcomes. Accountability for performance should be substituted for restrictions on local decision-making. 

• The system should reward those who contribute to success—that is, those who bring about high achievement.

• Rewards should be based on each person’s contribution to success and not on external factors such as the education inputs of families and neighborhoods.

• School funding formulas should minimize unproductive “gaming” by avoiding rewards for things that are easily manipulated by school personnel.

• School funding policies must recognize the underlying heterogeneity of students and their education challenges and ensure that all schools have the means to succeed. 

• School authorities must gather relevant programmatic and performance data and use it to refine and improve performance. 

• New policies or programs should be introduced in a manner that enables direct evaluation of their results.

These principles can, of course, be filled in a variety of ways, but they revolve around setting up incentives so that the decision-makers take actions that lead to better student outcomes. An example of the application of these principles is what Hanushek and Lindseth (2009) call “performance-based funding.”

The central elements of such a system, building on what has previously been successful, include a strong accountability system with incentives and direct rewards for successful performance, empowered local decision-making by both schools and parents, and an ongoing information and evaluation system. This would all be built on a rational and equitable base of funding that provides basic support and that recognizes both different abilities of districts to raise revenue and different costs for educating individuals (e.g., for children from poor families and for students with special needs).

Perhaps the key idea, however, is recognizing and rewarding success. Today many public funding programs actually do the opposite: they reward failure. For example, if a school shows poor performance from its students, more funds are provided; if the school shows improvement, funds are reduced. In other words, they provide an incentive for failure, not for success.

Policies based on incentives for outcomes do not call for completely understanding what works and why. They implicitly acknowledge that there might be alternative ways to achieve the same outcomes and that the choices might reflect both differing demands and differing capacities of schools.

Headwinds

An incentive-based funding program faces headwinds from a variety of sources. Perhaps the largest is simply the inertia in the system: “That is not how we do it.” There is a long history of approaches to funding that avoid policies offering direct positive incentives. This history is deeply embedded in both state policies and local decision-making—and leads to a majority of personnel in the current system being happy with the overall structure. Moreover, public views remain supportive of the institutional structure of the public schools. As a result, the system itself resists attempts at alteration.

The strongest force of resistance to change is the teachers’ unions. They, as a matter of principle, push back against any attempt to make policies based on differential performance (Moe 2011). As part of this, they resist accountability of schools and of personnel in general, and they resist linking resources to good performance.

At the same time, the unions do not stand alone. This is perhaps easiest to see in states that do not permit collective bargaining and that still resist changes in terms of accountability and incentives. It is also seen in the fact that right-to-work states do not systematically perform better.

COVID-19 brought new challenges to schools, and it has been common to blame all concerns and policy challenges on the pandemic. In reality, NAEP scores began falling after 2012 and simply continued their slide during the pandemic. The prior falls in scores have hit minorities and disadvantaged students exceptionally hard. The COVID cohort as a group has been seriously harmed by learning losses that accrued during the pandemic (Hanushek 2023). Just getting schools back to their 2020 levels appears to be a major challenge in a range of schools. But if we just get back to 2020, the COVID cohort will be permanently harmed. Eliminating the learning losses for this generation is a major policy challenge, but as described, it is far from the only challenge facing the schools. COVID underscores the urgency of the situation but does not provide a long-run solution.

In another matter that affects budgets but is not closely related to student outcomes, many schools are facing significant budget overhang from their retirement programs. The impact of the retirement system varies widely, depending on state rules on funding and depending in part on the character of prior contract negotiations. Most of these issues are beyond the scope of this discussion—with one exception. There is now evidence that schools tend to put too much teacher compensation into retirement plans that are valued by the teachers as having lower value than salary dollars (Fitzpatrick 2015). Thus, the state funding formula must be sensitive to the incentives sent to districts when they negotiate contracts.

See the full Hoover Institution initiative: . 

It was part of a university initiative to help students relieve some stress as they head into finals, and college students across the state are dealing with plenty of stress from academics, relationships, family issues, and, increasingly, from finances.

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One of the students gathered on the green was Kevin Lopez, a member of the class of 2024. He’s paying his own way through college by working construction and says he feels the pinch of rising prices.

“Sometimes it does kind of affect my classwork, because obviously sometimes I get in late, and I really don’t have time because of work,” he said. “Sometimes it messes up my work schedule as well. It’s just kind of hard, I mean, like, being financially stable and being in school at the same time.”

The Georgia Board of Regents, which oversees the state’s public higher education system, announced this month it will not increase tuition for 25 of its 26 institutions, with the exception of Middle Georgia State University, which will see an increase of $17 per credit hour for in-state undergraduates and $64 for out-of-state undergrads.

Students like Lopez will also get some relief from the end of a fee instituted in 2009 to make up for budget cuts in the wake of the Great Recession. Lawmakers added $230 million to the state’s higher ed budget to allow for the cut, which will leave between $170 and $544 per semester in the pockets of Georgia students.

Because it was treated as a fee rather than tuition, students could not use the HOPE Scholarship to pay it, so getting rid of it is a big deal, said Caitlin Highland with the Georgia Budget and Policy Institute.

So is another budget change setting HOPE scholarship and grant awards to 90% of tuition. Previously awards varied from year to year and institution to institution. That will benefit an estimated 75,000 students across Georgia’s public and private universities, Highland said, saving students up to $780 a year.

Over the past 15 years, enrollment of students from families with low incomes in the university system has grown by 85%, according to GBPI. Four in 10 students attending University System of Georgia, Technical College System of Georgia and Georgia Independent College Association schools qualify for federal need-based Pell Grants.

Until now, Georgia has been one of only two states with no state-funded needs-based aid program, Highland said, but a bill awaiting Gov. Brian Kemp’s signature could change that.

“HB 1435 creates need-based completion grants for students who have completed at least 80 percent of their degree program but face financial hardship,” she said. “This presents an opportunity for the state to remove barriers that prevent Georgia’s students from accessing the economic opportunity that higher education programs can provide. Completion grants are a meaningful way for lawmakers to help students complete their degree programs when their financial aid options have been exhausted. The current version of the Fiscal Year 2023 budget includes an allocation of $10 million for the completion grant program.”

An education is still not cheap

Tuition and fees are the most expensive part of a college education, and Georgia students have it better than students in most other states with a relatively low average cost of $7,457 per semester for in-state tuition and fees compared with a national average of $9,349, according to .

Students who borrow money to attend college end up paying an average of just under $1,900 in interest each year and spend an average of 20 years paying off their loan.

Room and board don’t come cheap either – the average American student living on campus pays about $11,300 per year for housing, while living off campus costs about $10,600 on average.

And rents are way up across the country – in March, the average price to rent a one-bedroom grew 22.2% nationwide and 31.4% in Georgia, according to data from .

Kennesaw State junior Jack Stover stays in a house with four roommates, and his parents pay for half of his $600 share of the rent.

Stover says he’s grateful for the help, but he’s been cutting back in other ways – staying home instead of going out with his friends, buying his clothes from thrift stores and paring back his grocery budget.

There’s a stereotype about college kids surviving on instant noodles and junk food, but many say they are often unsure where their next meal will come from.

Educationdata.org found that 45% of students experience frequent food insecurity. More than half of students at two-year institutions say they worry about running out of food, as do 44% of 4-year students.

At the same time, the consumer price index for food grew 8.8% in the year ending in March, the largest 12-month increase since 1981, according to the Bureau for Labor Statistics.

Stover said college has taught him to buy groceries in bulk when he can and to watch out for good deals.

“Kroger’s got good prices on chicken breasts, so I just get like a pound or two of chicken breasts and split that into like three to five days and then get some rice, you can make anything with that, put it on tortillas,” he said. “I know how to shop on a budget now. You kind of learn to shop on a budget and get the most out of it.”

The price increase in gasoline dwarfs that of food – it rose 48% between March 2021 and March 2022, the BLS found.

Kennesaw freshman Destinee Jordan lives on-campus, but she still needs to fill up her tank at least once a week to get to and from her job, and luckily, her parents are able to help her with gas money.

“We try to work as much as we can and try to save from that, and honestly, my parents help, but like even with that, it still is a little challenging to try to get through college as a college student, I’m not going to lie,” she said. “Things do come up. We’re kind of starting to be adults and growing up. So, we started to have things to pay for, like bills and all of that, so it can kind of get challenging at times, but we just try to work and save as much as we possibly can.”

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Signed by Gov. Dan McKee on June 1, creates a Dec. 31 deadline to develop and approve state-specific consumer education and personal finance standards. By the start of the 2022-23 school year, all public high schools in Rhode Island must offer a standards-aligned course.

“It’s very aggressive to get these standards up and running in the time frame that we have set out, but we know that it’s really necessary,” state Education Commissioner Angélica Infante-Green said. On average, , at $36,193.

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Having met with students statewide who felt they weren’t prepared to go onto college, and given the pandemic’s impact on student engagement, the commissioner told ����Ӱ�� this moment was the time to solidify what they had built momentum behind for years.

“[Students] felt like this was something that they were being shortchanged [on]. So we made it a point to push this agenda.”

Rhode Island approved the national Council on Economic Education standards in 2014. On average only about 5 percent of Rhode Island students receive financial literacy education, according to the state education department, given that schools could choose whether or not to adopt the curricula.

Last year, senior Saloni Jain took a personal finance course in a hybrid learning setup, with three days of learning online, at the suburban East Greenwich High School. She said course simulations, like completing mock returns on and creating a budgeting spreadsheet, kept her engaged during virtual learning.

“We were getting paychecks — how do we put that money towards a 401(k) and pay all our bills and pay down our credit card or student loan debt? That was really helpful to visualize, you know, how we might live in the future,” Jain said. “It was just a one-semester course, but it honestly changed the way I think a lot.”

Nationally, have some version of financial literacy standards, which may be incorporated into math or civics classrooms, though be completed before graduation. 

In 2021, strengthening personal finance education. Advocates contend that literacy is key to breaking cycles of poverty, particularly as the younger generation deals with economic fallout from the pandemic. When loans, budgeting and debt management are explicitly explored during the school day, young people are exposed to as they head into adulthood.

A showed that financial literacy graduation requirements result in lower credit card balances and high-interest student loan debt for lower -income students, and decreases in private loans for higher-income students. Working- and lower-class students who took financial literacy courses were also able to work less while enrolled in college, which could encourage college persistence and graduation. Expanding access to personal finance courses and support homeownership down the line.

Even within states considered to have the strongest standards and requirements, students seek more real-world connections to prepare them for the future. Whitman Ochiai, who recently graduated from high school in Alexandria, Virginia, described his mandatory course as “more broad than it was deep”.

Left wondering about retirement decisions, building a balanced budget and the intuition behind large purchases, he started the in 2019 to explore thosetopics. He said there’s been increased interest throughout the pandemic, likely with more students working and families facing economic uncertainty.

“A lot of times the only people who have access to this information are the people who would have had access to it anyway,” Ochiai said. “Especially for first-generation college- goers and students, and parents that may not be homeowners, this is a pathway for them to have a deeper understanding of finance.”

Some Rhode Island teachers created elective courses in their schools in recent years, heeding students’ desires and seeing how financial literacy may enable connections to hard-to-grasp concepts like compounding interest. Before now though, funding and implementation was left to individual teachers or schools to prioritize.

Samantha Desmarais teaches math, financial literacy and computer science at Central Falls High School, which serves predominantly low-income Latino and Black students in a working class city just north of Providence. She hopes the legislation will open the door to financial support from the state for credentialing and hiring, building more capacity to teach the subject.

Otherwise, she said, “there’s going to be disproportionality between the districts that are able to shimmy around their budgets or their staff and make it work, and the districts that are weighted under all of these other things.”

Desmarais teaches about three sections of finance per year; enrollment is always on the higher side even with its elective status, at about 25 to 30 students per class. This fall, she’ll also teach a section for language learners, which introduces students to American money systems and credit.

“If you enjoy learning something today, spread that news and talk about it with your friends. There’s no reason why talking about money has to be this taboo subject,” she tells her students.

Advocates say that personal finance education provides an opportunity for students to break down any stigmas about money conversations before they head into large financial decisions, like student loans, car ownership and credit card debt. Lessons learned may also make their way home and support families facing economic challenges.

“I look at the state’s implementation of this guarantee of a financial education as sort of being a gateway to some meaningful engagement with families,” said Pat Page, vice president with the Rhode Island personal finance coalition and a business educator.

Page, Rhode Island’s former teacher of the year, has been a vocal advocate for broader financial education for years, and was one of the first in the state to teach a standalone course. She supported students, including Sunny Sait, in testifying in favor of broader financial education to the state legislature — in 2014, 2019 and again in 2021.

Though Sait took Page’s class two years ago, he said he still uses the concepts daily. Currently on a gap year after graduating this spring, he’s opened up a Roth IRA, and budgets his internship paycheck to make sure he can still afford things he loves, like karate.

“My mindset definitely shifted a little bit from thinking of money in terms of things, but instead thinking of money as a means for growth, saving and investing. I really had my focus shift from purchasing, like being a consumer, to becoming an investor.”

Many describe the effort to make financial literacy a reality for all Rhode Islanders as both a grassroots and grasstops effort, pushed by students and teachers, but also state leaders, like Treasurer Seth Magaziner, who helped introduce the legislation.

“The strongest advocates who worked very hard to get this bill passed were teachers and students. Students who very much wanted this to be taught, and teachers who are ready to teach it,” said Magaziner, who began his career as an elementary school teacher and his run for governor.

The treasurer and education commissioner both see the law’s signing as phase one of creating a broader financial literacy landscape in the state — their hope is to expand lessons to middle and elementary grades. The education, Magaziner says, will make a particular difference in Rhode Island.

“We do have a large rolling immigrant population, students who are English language learners. We have one of the highest poverty rates in the Northeast. Financial education is not a panacea, it’s not a cure-all, but it is an important part of the puzzle for how we solve these inequities, and correct them.”

But now, with chicken and beef prices up, a worldwide shortage of packaging materials and a dearth of long-haul truckers, she’s not as sure what she’ll be serving the district’s 18,000 students this fall. And she won’t be surprised if distributors start adding transportation surcharges “to stop the bleeding on their end” — something she hasn’t seen since the Great Recession.

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“It’s a domino effect,” she said. “We’re at the point now where we don’t even know what’s going to come in the back door.”

Food services are just one aspect of school operations affected by inflation, which is experiencing a 13-year high. Wages are climbing because districts can’t find enough employees to drive buses or provide students additional academic support. Price hikes on materials are causing some districts to hit pause on construction projects and districts are for teachers to help students catch up.

At a time when the American Rescue Plan is flooding school districts with more federal money than they’ve ever had, educators are slowly awakening to the reality that those funds might not go as far as expected and that inflation may have a lasting impact on their regular budgets as well .

“School districts are like little cities. You’ve got food service. You’ve got transportation. You’ve got maintenance. Inflation across the sectors will impact all those areas,” said Charles Carpenter, chief financial officer for the Denver Public Schools.

The economic indicators are clear. This summer, the Consumer Price Index — which measures changes in what people typically pay for goods and services — saw its largest one-month and 12-month increases since 2008, according to the government’s .

Experts attribute in inflation in part to the rollback of pandemic restrictions: Consumers are traveling, eating out and shopping more, which is driving up prices. But there’s not enough supply to meet the demand.

The debate is over how much to worry about it. Some that President Joe Biden’s policies — the partisan relief bill that passed in March and his big-ticket infrastructure packages — will hurt the economy, while others argue this period of inflation and won’t spiral out of control.

Either way, Carpenter is closely monitoring costs of raw materials like lumber and copper as the district moves forward with building new schools and adding air-conditioning to 24 sites over the next three years.

Contractors “are bidding on our projects knowing that they’ll see price increases,” he said. “Do you try and push forward now and lock in a price or wait and it could be worse?”

Some districts are discussing whether to to lower prices and others have decided to pause projects because contractors can’t provide solid cost estimates. The St. Clair R-III School District, southwest of St. Louis, decided in June to delay construction on a performing arts center and a bus facility until costs stabilize. “It has become much more difficult to obtain competitive, cost-effective bids for construction projects,” Superintendent Kyle Kruse said in his report to the board.

‘Can’t find the people’

While districts might be able to defer construction or renovation, they can’t put off addressing students’ academic needs — especially given the extreme learning loss that often accompanied more than a year of remote learning.

“We’ve got this short-term demand for services to mitigate instructional loss and a shortage of labor willing to put in that time,” said Jonathan Travers, who leads consulting services for Education Resource Strategies, a nonprofit that helps districts leverage resources to improve student learning.

That’s why in addition to price hikes on materials, districts are seeing higher labor costs. Some have offered bonuses and even to attract summer school teachers. The danger for districts, he said, is that unions might expect to maintain those higher wages when they return to the bargaining table to negotiate future contracts.

In Plymouth-Canton, Hennessey still has 20 positions to fill before fall. She said entry-level school nutrition employees earn about $11 per hour, but that doesn’t come close to the $15 they can earn at McDonald’s. And districts nationally are struggling to find even with higher pay.

“It’s great to have all this money,” said Uri Monson, chief financial officer with the Philadelphia schools. “But if you can’t find the people to do the work — even if you’re going to pay them — that’s a problem.”

Districts aren’t the only ones feeling the pinch. from the accounting firm KPMGshowed parents estimate they’ll spend an average of $20 more on school supplies this fall. Parents of young children, many of whom delayed enrollment last year, anticipate spending $156 per child — a 32 percent increase over last school year.

What’s eating up much of their back-to-school spending? — a necessity some may have skipped last fall when many districts opened remotely.

One relief for families is that the increased costs come at the same time the majority of households with school-age children are receiving monthly of $250 to $300, approved as part of the relief bill.

‘Calm the markets’

Some districts plan budgets to allow them to ride out periods like this. The Philadelphia district signs fixed contracts for expenses such as fuel, food services — and, of course, labor.

“We occasionally get criticized when we do long-term guaranteed pricing contracts,” Monson said. “No one is going to complain right now. This is exactly why we do it.”

But he acknowledged that the soaring prices are hitting contractors hard as well as those waiting for supplies. “The cost of wood and basic materials has been out of control,” Monson said. And with shipping delays, he’s urging departments to allow longer lead times for deliveries. “It’s really hard to order something on Friday and expect it to be there on Monday.”

That’s because the most Americans experienced at the beginning of the pandemic haven’t really gone away.

“There are shipments from Asia that have been stuck at the Los Angeles port since October” — mostly because of labor shortages, said Charlie Andrews, a senior cost manager with Rider Levett Bucknall, which advises school districts on construction costs and provides project management services.

When contractors face unforeseen costs, such as tariffs, they often pass those on to school systems.

Mary Filardo, executive director of the 21st Century School Fund — which advocates for modernizing school facilities — said cost fluctuations help make the case for Biden’s $100 school construction plan, a combination of direct grants and bonds. The proposal didn’t make it in the with Republicans, but is expected to re-emerge in the details of a Democrats have proposed.

“Districts need long money,” Filardo said. “It will calm the markets somewhat and give them more leverage as they plan and implement projects.”