Does more funding help schools?

Washington state Governor Christine Gregoire poured huge amounts of new money into education in the past four years:  about $2.46 Billion.   Most of this (80%) went to pay increases for teachers (including the worst ones), but some also went to other education initiatives, such as training and all-day kindergarten.  If you think big jumps in education funding helps education quality, then it's just a matter of time before we start to see big improvements, right?

Stanford University's Eric Hanushek wants to know how money helps improve schools, but in spite of many years of searching, he can't find examples where additional money has made a clear difference.  You'd think it would be easy :  decide on some measure of school quality (e.g. WASL or other test scores, percentage of kids who graduate, etc.), find every school in the country where funding went up, and pick out those where your measure of quality also increased. 

He can't find any examples!  That's why this podcast I heard this week on Econtalk should be required listening for everyone interested in school funding.  So much of every discussion about education finances takes it for granted that schools need more money, and who could argue otherwise?  My local public school, for example,  is pathetically underfunded.  Overeager legislators are happy to pile on mandate after mandate (special education this, equality that) while allocating no additional money, and we are getting squeezed.  In 2005-6, before the full effects of Gregoire's increases, our state ranked 38th in the country on education funding, though interestingly that didn't stop us from out-performing the "best" state, New York.  Meanwhile, Utah finished dead last in per-pupil spending on education. At about $3400 they spend 40% less than we do, yet they score higher than the national average on math and reading. 

The problem, according to Hanushek's research,  is that money is almost completely irrelevant to education quality.

Hanushek describes the history of education and school finance and how dramatically it has changed just in the past 25 years from a system funded locally through property taxes, to today's system where state governments have a larger and growing role.  Much of the changes have resulted from lawsuits, starting with "equity lawsuits" that use state constitutional requirements to show huge disparities in spending by district, and force redistribution to poorer localities.  More recently, there has been a rise in  "adequacy lawsuits" that claim schools are not funded properly in the first place--usually resulting in judgments forcing additional money for education.

You'd think Hanushek could find the proof in one of these court cases.  Wouldn't the plaintiffs, somewhere, introduce evidence of an underfunded school that was turned around when a bag of money arrived?  Hanushek complains that in fact there are no such examples--the courts simply take it for granted that more funding equals better education.

Meanwhile, there are plenty of egregious counter-examples.  Take New Jersey, where courts forced 28 districts to increase their spending to $19,000/student/year (when the national average was closer to $8k/student).  Except for a single one-year blip in 4th grade reading scores, nothing else about those districts results changed.  This was in spite of lowered class sizes, pre-school education, after school programs -- the works.

An even better example was Kansas City, where courts told administrators that money was no object:  "dream your biggest dreams," they said and do whatever it takes to make your school district so attractive that  people from outside the district will try to get in there.  Result:  huge new facilities (a wonderful swimming pool, a "zoological garden") but no noticeable difference in education quality.

Why does funding, by itself, make no difference?  And if it makes no difference, why do we assume that politicians who want to "increase funding for education" are better for kids than those who don't? 

There are plenty of factors that are proven to make a difference in educational quality.  So why doesn't somebody run for office specifically pushing for things that matter (like better teachers)?  Unlike the simple push for "more funding", the data would be on your side.