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Op-Ed: Try Performance-Based School Funding to Narrow Achievement Gaps

State’s current approach to education spending, based on student enrollment, is out-of-date and ineffective

mesecar and soifer
Doug Mesecar and Don Soifer

How can New Jersey schools address troubling achievement gaps, and improve graduation rates and college- and career-readiness, while the state decreases the number of chronically poorly-performing schools and increases the number of high-performing schools?

New Jersey taxpayers spend more than 6.3 percent of the state’s GDP funding elementary and secondary education, well above the national rate of 5.4 percent.

Neither education system, in all likelihood, is sustainable at their present levels of productivity. Legislators of all stripes need to start making policy differently in order to achieve better outcomes.

The current practice of funding schools based almost exclusively on student attendance is one that has outlived its usefulness. Its intrinsic flaws misalign incentives, reward sub-par performance, and diminish the imperative for significant and sustained educational outcomes.

School funding should be based upon academic growth – not just whether a student sits at a desk or a school maintains the status quo.

Most education reform is focused on the usual issues of staffing, choices, governance, or the accountability of schools and districts.

Debates over education funding usually revolve around less vs. more for competing priorities. This is especially true in New Jersey, a state with one of the highest education-spending levels in the country and with almost four decades of court involvement in school-funding levels.

The New Jersey state Legislature, which spends more money on education than on any other government function, has always relied on increasing funds in the hopes that somehow this will lead to different, stronger outcomes.

A better model that circumvents entrenched arguments, and which is gaining momentum around the country, is Performance Based Funding (PBF) for schools. This simple concept seeks to better align funding with important student outcomes and offer incentives for ongoing, improved performance of schools individually and systemically.

Implementing PBF provides an opportunity to make strategic investments in schools at the state level by a straightforward focusing of school funding on desired results.

Across the country, there have been efforts by various governors and states to implement PBF for all public schools. Arizona began a statewide PBF program in 2013. Likewise, Michigan has been implementing a limited PBF model since 2012. Pennsylvania took a slightly different approach, providing funding flexibility in exchange for performance-based outcomes. In addition, Florida, Wisconsin, and Oregon have all recently been exploring PBF. In each case, the amounts of funding are modest, but the potential impact promises to be significant over time.

Why does New Jersey need Performance Based Funding? For all of the taxpayer money New Jersey spends on education, it is not spent efficiently and what it does buy in terms of specific academic outcomes is uneven and highly tenuous for at-risk student populations.

New Jersey has some of the largest achievement gaps in the country, despite overall high aggregate achievement when averaging all student scores. And, for those students who are not behind academically, the rigor of the education they receive can be questionable.

While 93 percent of white students graduated on time in New Jersey, only 75 percent of black students, 77 percent of Latino students and 75 percent of economically disadvantaged students graduated on time.

Similarly, when looking at state trends in comparison to some specific urban areas in New Jersey, disconcerting inequities emerge, with on-time high school graduation rates that are dramatically lower in the most challenged school districts. In Asbury Park, Trenton and Camden, fewer than 50 percent of students graduated on time in 2012.

Addressing these long-standing and glaring gaps should be reason enough to re-examine how New Jersey could better leverage its nation-leading spending.

However, there is more to the story. New Jersey schools are generally failing to set the bar high enough to ensure that all students are college- and career-ready.

More than half of New Jersey students are considered unprepared for success in college and the workforce based on the National Assessment of Educational Progress (NAEP) benchmarks. On the 12th-grade NAEP, only 38 percent of New Jersey’s students were considered college- and career-ready. Further, this pattern holds true on the SAT; in 2012 only 43 percent of New Jersey students met the appropriate target for college readiness.

New Jersey already has a school-accountability system that could become a solid foundation for an effective Performance Based Funding model.

The designated “Reward” schools included in New Jersey’s No Child Left Behind waiver have been identified for high proficiency levels or high levels of growth, including progress toward closing the achievement gap. The schools with high levels of proficiency are, for the most part, located in higher-income communities, or are magnet schools with high-achieving students enrolled through selective admissions.

“Reward” schools tend to serve fewer low-income students than the average statewide. However, by focusing on both achievement and growth of individual students over time (instead of one or the other), New Jersey can better balance performance incentives.

By including all schools in a PBF framework, New Jersey can better leverage its nation-leading spending to close achievement gaps and better prepare all of New Jersey’s students for future success as citizens, and in college or career.

A recent report by the Lexington Institute, “Performance Based Funding in New Jersey: Leveraging Education Spending to Close Stark Achievement Gaps,” provides a blueprint for implementing a PBF model in New Jersey.

Performance Based Funding faces some limitations in New Jersey, where the state provides a smaller-than-average share of total school funding relative to other sources, and faces the continued constraints of the court-decreed Abbott funding scheme.

One state-level policy option would be a plan that leverages new state funding to match locally-derived PBF models.

The 20 school districts that hold annual voter referendums to approve school budgets, which are often more immune to internal pressures between school leaders and other stakeholders, could be more likely to take advantage of such an incentive program.

Performance Based Funding removes the notion that government education funding should be solely compensatory instead of largely incentivizing.

It is a policy innovation moving ahead in other states that is deserving of more attention and analysis, and which can provide a new approach to improving academic outcomes outside the traditional reform approaches, while addressing systemic inefficiency.

New Jersey should step up and embrace this new, strategic direction in funding schools and pursuing educational excellence and equality.

Doug Mesecar and Don Soifer are education analysts with the Lexington Institute, a public policy think tank in Washington, D.C.

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