Education Finance Systems and Returns to Education

By: Nathaniel Pinhas, Corey Vandruten, Kashfia Kamal

Introduction:

• Education has been a priority for OECD
• The Foundation of Education and Skills 2030 Project
• Push for increase in education expenditures
• Target being 6% of GDP, only 6 nations spend more than 6% of GDP on education
• Average for OECD countries is 4.9%, United States is 6.1%
• Total amount in expenditures is rising but average expenditure as percentage of GDP is falling.
• Strong correlation between education expenditure and education performance.
• Correlation weakens when looking at top spending nations

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Overview of PISA Test

• PISA= Program for International Student Assessment
• It is an international assessment that measures 15-year-old students' reading, mathematics, and science literacy every three years.
• PISA was first conducted in 2000
• The number of countries/regions participating in PISA has increased from 32 in 2000 to about 88 in PISA 2022.
• PISA includes measures of general or cross-curricular competencies, such as collaborative problem solving.
• PISA emphasizes functional skills that students have acquired as they near the end of compulsory schooling.
• PISA is coordinated by the Organization for Economic Cooperation and Development (OECD), an intergovernmental organization of industrialized countries, and is conducted in the United States by NCES (National Center for Education Statistics)

Education Dollars to PISA Score

PISA and HCI Relationship

Education Inequality

• Education inequality globally is falling
• Increase in quantity and quality
• Within developed nations inequality is increasing
• Larger gap between highest scoring pupils and lowest scoring pupils within developed countries.
• Not limited to United States.
• Do education finance systems perpetuate this inequality?
• Centralized vs. Decentralized education systems
• In 2018, on average across OECD countries, 59% of the public funds for non-tertiary education came from the central government before transfers to the various levels of government
• Tertiary education is much more centralised than non-tertiary education

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History of USA PISA Scores

History of France PISA Scores

United States: Focus on States and Localities

• Decentralized education system
• Education remains primarily the responsibility of states and individual school districts
• In general local districts oversee administration of schools.
• States oversee licensing requirements and general rules concerning health and safety
• Public Schools remain heavily dependent on local property taxes
• Reflect the educational values and financial capabilities of the communities in which they are located

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Education Today

• Average revenues for public school come from:
• 47% from state
• 44.8% from locality
• 8.2% from Federal
• No uniform policy for financing
• 5 main financing formulas
• Foundation: 37 States
• District Power Equalization: VT, WI
• Flat Grant: NC
• Full State funding : HI
• Combination/Tiered: 9 States

Public school finance in the United States historically

• All 5 basic programs for apportionment of revenues to education were developed between 1905 and 1930
• These programs still reflect education and social conditions of early 20th century
• Goal was expansion of education, quantity over quality.
• Ellwood Cubberley’s 1906 investigation into school funding in the United States
• Disproportionate cost for different communities
• Direct state apportions to poor counties were needed to equalize educational advantages
• George D. Strayer and Robert Haig, 1923
• Laid groundwork for what would eventually become foundation program:
• Basic minimum guarantee
• Contribution through uniform tax rate
• Set at tax rate needed in wealthiest district
• State made up difference between wealthy and poor districts up to minimum guarantee.
• Districts could exceed the local tax rate, unmatched by state.

Foundation Programs

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Foundation Programs

• Still very similar to system proposed by Strayer and Haig.
• Adequate vs. Minimum
• Key district
• Most states use per pupil basis
• Individual school districts receive payments based on number of students in area.
• Local support derived from property taxes or from local sales tax.
• Each state differs in specifics of program.

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Foundation Programs

• Minimum Guarantees vary from state to state
• Arizona: $3,268
• Nevada: $5,196
• Vary based on grade level:
• Massachusetts:
• Elementary: $6,667
• Middle School: $6,330
• Highschool: $7,893
• Per Pupil Weighting
• Easier for wealthy districts to obtain additional funding from leveraging additional property taxes
• Disproportionate revenues for equal efforts

District Power Equalization

• Originated in 1920s by Harlan Updegraff
• Circumvent the problems inherent in the Foundation Program
• Minimum Foundation level supported by state tended to be very low.
• State’s were not increasing funding enough to compensate rising costs of education
• Fiscal Ability of local districts were not equal
• State’s role in education should be confined to helping localities provide whatever level of education service is deemed appropriate by that locality.

District Power Equalization

• Taxpayer equity
• Providing school districts with equal yields in revenues for equal tax rates
• Minimum guaranteed amount of revenue for each percentage the locality decides to tax
• State payment varies inversely to the amount of local taxable wealth.
• All districts are encouraged to make greater local tax effort
• Equality of educational opportunity is no longer constrained by the wealth of the local community.
• Historically states have set minimum contribution percentage
• Operates as minimum guaranteed amount
• Contribution is left to discretion of individual locality
• Poorer communities often opt to tax and spend less than amount that would be provided with a foundation program.

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Combination/Tiered

• Combination of Foundation program and some other financing program
• Foundation provides base level funding.
• Kentucky:
• under SEEK (Support Education Excellence in Kentucky) funding is derived from a base foundation level with an optional two tiers of supplementation under a DPE.
• Under Tier I, school district can levy an equivalent tax rate which will raise revenue up to 15% above the adjusted SEEK base.
• The local effort is equalized at 150% of the statewide average per pupil assessed property valuation.
• Tier II allows additional levies to produce up to 30% above the adjusted SEEK base plus Tier I, but is not matched by the state.

Flat Grants: North Carolina

• Only utilized by North Carolina
• State law places responsibility of school funding for current operations entirely with state
• Individual school districts responsible for cost and maintenance of facilities.
• Determines amount given to each district based on 4 different categories
• Base allotments
• Student Based allotments
• District Based allotments
• Program specific grants

Comparison of States in 2015 PISA

Full State Funding: Hawaii

• Currently only being used by Hawaii
• Only one school district
• No property tax funds are levied for support of education
• No constitutionally or legislatively prescribed formula for allocating funds for schools
• Henry Morrison School Revenue, 1930
• Sole duty of publicly supported education is to prepare young people to assume responsibilities of citizenship in American democracy.
• Cannot be accomplished if educational decisions are primarily a local matter.
• Citizenship training

Educational Structure & History of France PISA Scores

• French elementary and secondary schools, as well as a large number of universities, are public institutions that have highly centralized administrations.
• According to the main domain assessed in PISA 2018, France scored slightly above the OECD average in mathematics and science
• France is one of the OECD countries where the link between socio-economic status and performance in PISA is the strongest
• In France, the average performance in science of 15-year-olds is 493 points, compared to an average of 489 points in OECD countries.
• Socio-economic status explains 18% of the variance in reading performance in France (OECD average: 12%).
• The average difference between advantaged and disadvantaged students in reading is 107 points, compared to an average of 89 in OECD countries. However, 10% of disadvantaged students are academically resilient (OECD average: 11%).
• The French education system consists of three stages:

-primary education

- secondary education

-higher education.

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Funding Structure of Education System in France

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ISCED 0 and ISCED 1 (Pre-Primary and Primary Education)

• the municipality is responsible for public nursery and primary schools

ISCED 2 and ISCED 3 (Secondary education)

• Local Authority and the State is responsible for funding of the secondary education
• Secondary school grants are awarded to students enrolled in secondary schools and in (EREA) Establishments régionaux d'enseignement adapté on the basis of criteria that essentially take into account the level of household income as determined by tax legislation
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Funding Bodies (French Education System)

The State

• In 2019, the State's contribution to domestic expenditure on education amounts to 56.2% of the 41.2 billion euros allocated to public pre-primary and primary education. 48.8 billion allocated to public secondary education

Local Authorities

• In 2019, local authorities financed 38.6 % of national spending on pre-primary and primary education, and 20.6 % of spending on secondary education

Companies

• Public and private companies contributed 8.4% of domestic expenditure on education in 2019. They are particularly involved in financing apprenticeships (via the apprenticeship tax), both public and private, in the vocational stream of upper secondary education.

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Funding Mechanisms (France)

• Financing of the Ministry of National Education
• Financing by local and regional authorities- Local and regional authorities contribute to the financing of education through their budgets.
• Financing by companies: the apprenticeship tax- The apprenticeship tax is a State tax payable by companies

Financial Support for Students (France)

• Aids- Housing Assistance , Support for Catering
• Scholarships- Based on Social Criteria, Merit-Based Aid, International Mobility Grant, Specific Annual Aid, Punctual Financial Aid
• The State-guaranteed student loan

Financial Support for Student’s Families (France)

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• For Pre-primary education (ISCED 0) There is no specific support for families with children attending educational institutions at this level.
• For Primary education (ISCED 1) Families can apply for direct financial allowances and a financial allowance paid by the family allowance funds (CAF) to households whose resources do not exceed a certain ceiling
• For Secondary education (ISCED 2 and ISCED 3) The direct allowances available to families, a financial allowance paid by the family allowance funds to households whose resources do not exceed a certain ceiling

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Pros and Cons of Education in France

Pros:

Inexpensive Education

• Unlike many universities in the US for example, French universities offer affordable courses. This means you do not need to apply for a student loan and spend years paying it back. In addition, the French government offers many students a benefits programme that reduces tuition fees to almost nothing. Although this is not the case for everyone, these fee structures are still lower than other universities in Europe.

Low cost Transport and Accomodation

• The TER network offers discounts for young people and students in each mainland region. On the other hand, many French students in Paris use the bike renting system called Vélib’, which is affordable and hassle-free.
• For housing, the Caisse d’Allocations Familiales grants financial aid is available to all students, whether they are French or foreign citizen, as long as: they are already renting or co-renting their apartment; they are not related to the landlord; they have little to no means of financial support.
• The aid ranges between €100 and €200 per month. It generally takes two months from the application date to receive the first payment.

Pros and Cons of Education in France

Opportunities Post Graduation in France

• Many students who study abroad end up staying in the same country to seek a job. Anyone who studied full time in France can apply for a one-year work permit. However, it is not easy to get a work visa or a residence permit in another country after graduation.

Cons

• Language Barrier
• Expensive Private Education
• Expensive living as French capital is, in fact, the most expensive city worldwide along with Hong Kong and Singapore.

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Comparison of Mean PISA Scores

Socioeconomic Status to Reading PISA

Socioeconomic Status and PISA Scores, USA

Variability Explained by Socioeconomic Status

Proficiency Levels, All Students

Reading Proficiency Levels, by ESCS, USA

Reading Proficiency Level, by ESCS, FRA

THANK YOU!

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QUESTIONS?