Association for Public Policy Analysis & Management

Should we spend more on schooling? Opponents of school finance reforms argue that schools spend new funding to raise salaries without hiring more or more qualified staff, and without raising achievement. This paper shows that reforms increase school quantity (the supply of work days by staff) but not quality, leading researchers to mis-measure both the benefits and the indirect costs of reforms. I use an event study of reform events from 2003 to 2013, and independent samples from the American Time Use Survey (ATUS) and the CPS, to show that higher compensation is used to add days to the end of the school year. The marginal wage rate for additional days is half of the average wage rate, suggesting that extending the school year is an efficient use of additional funding. However, because the National Assessment of Educational Progress (NAEP) and other tests are administered before the end of the school year, they are not suited to measure the effects of an extended school year. I use random variation in the timing of NAEP administration to show that additional learning time raises test scores linearly, and that reforms don’t increase school quality (the rate of learning); the expected gains from school quantity (added days) are at least seven times larger than the estimated gains from reform events. While these results suggest that school finance reforms benefit students, they also provide a new caveat: since students outnumber staff, the total time cost of adding a day to the school calendar is an order of magnitude larger than the direct time cost to staff. Because it is cheaper to increase quantity than quality, schools may fail to internalize indirect costs they impose on the families they serve. I conclude with suggestive evidence from the ATUS that students do less work around the household after reforms: the cost is not just leisure time. Parents, however, do not reduce their investment in children.