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Can increased and more equitable education funding reduce inequality in adult outcomes? 

Rucker C. Johnson and C. Kirabo Jackson│ October 8, 2018
Policy brief written with the assistance of Emma Fernandez

Summary of: Reducing inequality through dynamic complementarity: Evidence from Head Start and public school sending. Johnson, Rucker C. & Jackson, C. Kirabo. (2018). National Bureau of Economic Research working paper no. 23489.


Can increased and more equitable education funding reduce inequality in adult outcomes?

Children from poor families and socioeconomically disadvantaged communities experience lower levels of educational attainment, employment, earnings, health and well-being as adults than children from wealthier ones. This gap begins early in a child’s life and grows as children get older. Because of the way this gap widens over time, closing it may require early intervention that is sustained throughout a child’s school-age years. Our study examines how school spending affects educational attainment and later-life success by investigating the connection between public funding of preschool programs and K-12 education.

Changes in Head Start and K-12 education funding

Head Start is a national, federally funded early childhood education program, which was established in 1964 as part of President Lyndon B. Johnson’s “War on Poverty”. The Head Start curriculum aims to improve literacy, numeracy, reasoning, problem-solving, and decision-making skills. The program is targeted to poor children ages 3-5 and includes nutritious meals, provides development screenings and access to pediatric care, and connects families with dental and mental health services. Currently, Head Start operates over 19,200 centers that serve more than 900,000 children at an average expenditure level of $8,700 per child (which is much lower than model preschool programs like Perry Preschool or Abecedarian). Our study takes advantage of the significant geographic variation in the timing of the roll-out of Head Start, and differences in spending levels during the first 15 years of the program.

Our study also takes advantage of variation in funding for K-12 education that occurred due to court-ordered school finance reforms in 28 states between 1971 and 2010. Before the 1970s, most public school spending was funded with local property taxes, meaning that wealthier neighborhoods could spend more per pupil on education. School finance reforms significantly altered funding formulas for school spending, which narrowed per-pupil spending differences between districts in poor versus affluent areas. As with Head Start, these funding changes occurred at different times in different places, allowing us to examine the effect of spending levels.

Measuring impact

We followed individuals born between 1950 and 1976 through 2015 to determine how the school spending they had access to as a child affected their socioeconomic success in adulthood. Because of the roll-out of Head Start, some children did not have access to Head Start programming when they were four years old, while others born in the same county were able to attend Head Start when they were four, even if the children were only born a few years apart. Similarly, students who were 17 and older when K-12 school finance reform was implemented in their state would not have been affected by the change in funding, while students who were 16 or younger would have been. We can estimate the impact of the effect of spending on Head Start and K-12 education by comparing the outcomes of individuals exposed to funding increases to those who were not. Success in educational reforms is often measured with changes in test scores, but this focus can miss key significant long-term outcomes. We tracked not only educational outcomes such as high school graduation, but also other measures that indicate the life-long impact of education, such as earnings, poverty, and incarceration in adulthood.

The complementary relationship between Head Start and K-12 funding holds true across all adult outcomes observed, indicating that a 20 percent increase in school spending is large enough to reduce gaps in outcomes between poor and non-poor children by at least two-thirds.

Spending effects are greater than the sum of their parts

For poor children, increases in spending on both Head Start and K-12 education improved educational attainment and earnings, and reduced the likelihood of poverty and incarceration in adulthood. For non-poor children, Head Start funding increases had no effect. But importantly, the individual benefits of both Head Start and K-12 spending increased when poor children experienced the funding in combination. In other words, Head Start funding was more effective when students also attended K-12 schools with increased funding. An increase in Head Start spending was more than twice as effective at improving outcomes for students attending K-12 school districts that spent at the 75th percentile than those attending districts that spent at the 25th percentile. Moreover, the long-run effects of Head Start were small when children subsequently attended poorly funded K-12 schools. And, in the reverse, K-12 funding was more effective when students had access to Head Start funding. The effects of K-12 spending increases were small when not preceded by Head Start spending; whereas the same 10% increase in K-12 spending with Head Start access at age four led to a 11 percentage-point increase in the likelihood of graduating high school. The complementary relationship between Head Start and K-12 funding holds true across all adult outcomes observed, indicating that a 20 percent increase in school spending is large enough to reduce gaps in outcomes between poor and non-poor children by at least two-thirds.

 
 
 

Policy implications

Though there have been many changes in the education landscape since the years the individuals studied were children, access to quality schools has never been more important, as the returns to education have increased over time. Our research indicates that sustained educational investments from preschool onward are key to improving outcomes. Rather than viewing educational spending as a zero-sum game, in which spending on any one program reduces available funding for others, it is key for policymakers to consider preschool and K-12 spending as complementary efforts, recognizing that the total effect is greater than the sum of the investments in isolation. Because of the complementary nature of these investments, redistributing spending from well-funded K-12 schools to Head Start or preschool programs for poor children would improve both the efficiency and equity of the system. As policymakers across the country consider state investments in preschool programs, our work provides key new evidence about the effectiveness of these programs. While past studies on preschool spending have shown inconsistent evidence on the long-term effects, this may not be truly reflective of the effectiveness of preschool programs, rather indicating the wasted potential when children who are given access to quality preschool education go on to attend underfunded K-12 schools. While there is currently significant interest in model preschool programs, our work shows that spending on Head Start can have significant positive impacts at much lower costs. Ultimately, our work shows that improving educational funding in combination across preschool and K-12 programs can successfully and cost-effectively break the cycle of poverty.

 
Ultimately, our work shows that improving educational funding in combination across preschool and K-12 programs can successfully and cost-effectively break the cycle of poverty.