Cost-Effective Decision-Making for California’s School System

California’s school system is under tremendous long-run fiscal pressure; allocating resources efficiently is therefore paramount. Efficient allocation means more money spent on the most effective policies and interventions; less waste; and ultimately better outcomes for students. Economic analysis—making sure districts and schools are spending their budgets wisely—is the method used to identify effectiveness and efficiency. This method responds to the question educational professionals face: Am I making the most efficient decisions given the resources I have and the goals I need to meet for my students?

In this report, we look at the role of economic analysis in decision-making in California’s school system. Our goal is to show how economic evaluations can be more straightforward, more useful, and more influential for decision-making. Economic analysis is not often performed within educational institutions. We attribute this to misconceptions about economics as “cost-cutting” or narrowly focused on money rather than on how well students learn. But there are some legitimate and important barriers to performing economic analysis. Too often, it is not sufficiently useful for or relevant to the decisions that education professionals must make.

In response, we describe cost-effectiveness analysis (CEA), one of the primary methods for economic evaluation. We provide a summary of this method, along with templates for framing the research analysis. We include a worked-through example to illustrate the key steps in performing CEA. We also describe case studies where such analyses have been performed that show the broad applicability of the method.

We emphasize that CEA is: (a) about ensuring resources are used to meet districts’ and schools’ own objectives; (b) a joint effort with education professionals; (c) focused on whatever helps students learn and develop; and (d) responsive to institutional, cultural, and political preferences.

We respond to the misconceptions and barriers that hinder economic research in California. To be more influential, economic analysts should: (a) make clear that, even as there is a cost to performing economic evaluation, there is also a cost to not performing it; (b) focus on policies and programs that require significant funding; (c) formally investigate how any results are relevant to the conditions faced by decision makers; and (d) explicitly consider how resources might actually be allocated towards a program that has been identified as cost effective.

If analysts follow these steps, decision makers can feel more confident that economic analysis is justifiable and worthwhile. The end result should be better spending, greater accountability for decisions, less waste, and more learning by California students.

Read the full report here and the related PACE commentary here.