Assessing the Costs of K–12 Education in California Public Schools

The cost of education can be defined as the minimum amount of money that a school district must spend in order to achieve a given educational outcome, such as reading at a grade-appropriate level. Costs generally differ across school districts for reasons that are outside the control of local school boards or state governments, such as the number of children with special needs. All else equal, districts with higher costs will need to spend more than districts with lower costs in order to achieve any given outcome. While many states, including California, have some adjustments for cost factors in their school finance formulas (such as weights and categorical programs for special education, etc.), these adjustments are often ad hoc, and most state systems of school finance do not attempt to explicitly link district revenues with costs or student outcomes.

The objective of this study is to estimate the costs for California districts to meet the achievement goals set out for them by the state and examine how these costs vary across districts with different student characteristics. The primary methodology used is the econometric cost function approach. A cost function for K–12 education is estimated for California and used to provide estimates of base costs (i.e., per-pupil costs in a district with relatively low levels of student need) and marginal costs (i.e., the additional costs associated with specific student characteristics) for poverty, English learners, and special education. These results are compared with the findings from cost studies in other states, which have used a variety of methods, and then used to analyze whether the current system appropriately accounts for cost differentials across districts.