The Benefits of Adequacy

Estimating the Economic Impacts of Pennsylvania’s Basic Education

Funding Commission Proposal

David Loeb Katie Pullom A. Brooks Bowden

[email protected] [email protected] [email protected]

CBCSE Report
June 2024

Center for Benefit-Cost Studies of Education

Graduate School of Education
University of Pennsylvania

We are grateful for support from Penn GSE for this work. This work was also supported in part by
the Institute of Education Sciences, U.S. Department of Education, through Grant R305B200035
to the University of Pennsylvania. The opinions expressed are those of the authors and do not
represent views of the Institute or the U.S. Department of Education.
Table of Contents

1 Introduction 3

2 Current District Funding and Staffing Gaps 4

3 K-12 Workforce Expansion and Staffing Gap Closure 5

3.1 Evidence on the Impact of Increased Staff Expenditures . . . . . . . . . . 5
3.2 Methods: Staffing Impacts . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

4 Student Outcome Estimates 8

4.1 Causal Effects of State K-12 Funding Reforms . . . . . . . . . . . . . . . . 8
4.2 State Funding Reform Studies Used in Current Analysis . . . . . . . . . . 9
4.3 Methods: Student Outcome Effect Estimates . . . . . . . . . . . . . . . . 9
4.4 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

5 Economic Benefit-Cost Analysis 12

5.1 Overview of Economic Benefit-Cost Model . . . . . . . . . . . . . . . . . . 12
5.2 Methods: Economic Benefit-Cost Estimates . . . . . . . . . . . . . . . . . 12
5.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

6 Conclusion 16

2
1 Introduction

Pennsylvania’s Commonwealth Court ruled in 2023 that the state must reform its K-
12 education funding system. The current system relies heavily on local taxes to fund
schools, creating wide funding gaps between low- and high-wealth districts. The resource
constraints limit low-wealth districts’ ability to adequately prepare their students for
postsecondary success.
The Basic Education Funding Commission (BEFC), comprised of legislative and execu-
tive branch members, has recommended that the state provide an additional $5.1 billion
in funding to 371 districts to address their inadequate funding.i In this report, we ana-
lyze the BEFC adequacy proposal to estimate the economic implications of the proposal
on important aspects of education and the economy: school staffing, student outcomes,
and long-term economic benefits for Pennsylvania.
We ground our estimates in rigorous causal research on the impact of state K-12 finance
reforms on student outcomes and the associated long-term economic benefits. This
research, along with Pennsylvania state data, allow us to quantify the impact of the
BEFC’s proposed adequacy funding on student educational attainment and earnings
and the associated economic benefits for students and the state as a whole.
We focus our analysis on increases to high school graduation, human capital among high
school graduates, and postsecondary enrollment. This is a conservative approach because
it assumes that the effects of improving school quality would only be for those students
who would not enroll in college under current circumstances. We make this choice to
ensure that this investment is evaluated against high standards and because the research
on state K-12 funding reforms finds consistent causal impacts for this population. Thus,
our analysis is based on less than one-third of the population of students in the state
following current educational attainment rates. Given the expansive benefits of school
quality to human capital, this work should be interpreted as a portion of the expected
benefits to the state.
Nonetheless, our analysis indicates that the BEFC adequacy proposal would generate
societal economic benefits that exceed the investment from less than one-third of the
student population alone. In the following sections, we first provide a brief overview
of the current gaps between adequately funded and underfunded Pennsylvania school
districts. We then analyze the potential impact of the funding on district staffing levels
and salaries. In the final two sections we estimate the impact of funding on Pennsylvania
student outcomes and the associated economic benefits for students and the state in a
benefit-cost or “return on investment” analysis of the BEFC proposal.

i
Note that House Bill 2370, the current legislative proposal to implement adequacy funding, would
increase funds for 367 districts by an amount that is less than one percentage point lower than the
BEFC proposal. We focus on the BEFC proposal, and results discussed throughout the report are
substantively equivalent under HB 2370.

3
2 Current District Funding and Staffing Gaps

The BEFC analysis found that 74% of Pennsylvania school districts have inadequate
state funding levels.1 Table 1 compares these districts to adequately funded districts. It
also breaks out the 100 most underfunded districts, which make up the bottom 20% of
districts in terms of state funding adequacy.

Table 1: Comparison of Adequately Funded and Underfunded School Districts

100 Most
Adequately Under-
Measure Under-
Funded funded
funded
Low-income students 36.7% 51.3% 62.0%
Total revenue per student $25,156 $20,919 $20,222
Total revenue per need-weighted student $21,859 $17,202 $15,862
Current expenditures per need-weighted student $19,391 $15,088 $13,422
Teacher salary $78,621 $67,991 $65,216
Principal salary $120,497 $106,036 $102,692
Counselor salary $80,674 $70,624 $68,029
Students per teacher 12.8 13.8 14.4
Need-weighted students per teacher 14.5 16.6 18.4
Students per counselor 311 372 404
Need-weighted students per counselor 354 451 519
Source: Pennsylvania Department of Education, 2022-23. See data sources spreadsheet for
detail and technical appendix section 1 for complete variable descriptions.

Compared to adequately funded districts, underfunded districts have more low-income

students, lower staff salaries, and higher student-to-staff ratios. Average total revenue per
need-weighted student is $4,600 lower in these districts.ii The disparities are particularly
stark for the 100 most underfunded districts, where total revenue per need-weighted
student is $6,000 lower than in adequately funded districts.

ii
We use the basic education funding formula need-weighted student count, which weights for student
need factors like poverty and English learner status. See technical appendix section 1.1 for details.

4
3 K-12 Workforce Expansion and Staffing Gap Closure

3.1 Evidence on the Impact of Increased Staff Expenditures

The most important resources in schools are the adults educating and supporting stu-
dents. A large body of research indicates that the quality and supply of teachers are
the most impactful school factors that influence student academic achievement.2,3 Princi-
pals, counselors, and other support staff also have causal impacts on student outcomes.4–6
School districts spend the majority of their budgets on staff, so districts will likely spend
the bulk of their adequacy funding on staff, a wise use of funds as research suggests it
will pay dividends in improved student outcomes.7
Districts and students would benefit from increased staff expenditures through two pri-
mary channels: lower student-staff ratios and higher staff salaries. Lower student-staff
ratios means smaller class sizes and more individual attention for students. It represents
further staffing possibilities as well. For example, it could reflect districts hiring teachers
who specialize in CTE, STEM, or arts to expand curricular offerings, or reading and
math specialists to support instruction.
Salary increases would improve underfunded districts’ ability to compete for talented
teachers, principals, and other staff. Research finds that increasing teacher salaries
enables districts to compete with both nearby affluent districts and other higher-paying
industries to attract and retain high-quality teachers, which in turn improves student
achievement.8,9 To the extent that increased salaries reduce attrition, a portion of that
expenditure will be returned to districts through savings on teacher hiring costs. The
current teacher shortage makes attracting teachers critical, and raising salaries could be
a key strategy to combat the issue in Pennsylvania.
A recent report from Lapp and Shaw-Amoah (2023) finds substantial gaps in staffing lev-
els and salaries between underfunded and adequately funded districts in Pennsylvania.10
They find that underfunded districts would need to hire more than 11,000 teachers and
1,600 support staff to close staffing gaps and spend an additional $2.6 billion to close
salary gaps. We build on these findings to estimate the potential impact of the BEFC
adequacy proposal in closing these gaps.

3.2 Methods: Staffing Impactsiii

We estimate the potential impact of the BEFC adequacy proposal on underfunded dis-
tricts’ staffing levels and salaries using a parity framework. Our goal is to estimate if
the BEFC proposal would allow underfunded districts to close the staffing gaps with
adequately funded districts in the areas of student-staff ratios and salaries.

iii
See the technical appendix section 2 for complete method details.

5
We limit our analysis to traditional school districts due to inherent challenges in estimat-
ing funding increases for individual charter schools. We therefore remove the estimated
portion of each district’s funds that will go to charter schools. We also assume that 20%
of district funds will be used on non-staffing expenditures.iv
We model how districts may use the BEFC adequacy funds whereby districts pursue the
goal of reaching parity with adequately funded districts on the following three measures,
sequentially: 1) student-teacher ratio, 2) student-counselor ratio, and 3) teacher salary.
This scenario provides a useful framework for demonstrating the potential for under-
funded districts to close staffing gaps with adequately funded districts. The three parity
target measures are the averages across all adequately funded districts, as presented in
the table in the prior section.
We first calculate the number of additional teachers and counselors that would need
to be hired in each underfunded district to reach parity. We also identify the teacher
salary increases required to reach parity with the adequately funded district average.
Then we calculate the cost of reaching parity on each of the three measures. Finally,
we add benefits to salaries and use these full staff compensation figures in our cost
calculations.
If districts cannot afford full parity during one of these steps, we assume they would use
their remaining funds to come as close to parity as possible on the given measure.
For districts with funds remaining after reaching parity on all three measures, we cal-
culate the number of additional teachers they could hire at the parity salary. Districts
could spend this money in any number of ways, of course, but hiring additional teachers
is a straightforward way to concretely demonstrate the potential for using the remaining
funds.
A caveat is that districts will increase salaries over time due to inflation. However, the
adequacy funds are specifically intended to close gaps as they currently exist. Current
state proposals would continue basic education funding increases alongside the adequacy
funding to address inflationary cost increases. Local revenue will rise with inflation as
well. Therefore, we do not incorporate inflation into the current analysis. However,
in the technical appendix section 7.1, we provide results of the analysis with inflation
incorporated, which can be considered an extreme minimum bound of expected staffing
impact.

iv
Research indicates that districts typically spend 50-60% of funding increases on instructional staff,
20-30% on support staff, and the remainder on capital expenditures. Current proposals limit the
allowable uses of adequacy funds to non-capital expenditures, so the assumed 20% set-aside would
cover administrative hiring costs and any other non-staffing expenditure. See technical appendix
section 2.1 for a more detailed discussion.

6
3.3 Results

Table 2 shows the results of the analysis. We find that 82% of underfunded districts could
reach parity with adequately funded districts on student-teacher and student-counselor
ratios and 42% would have enough funds remaining to reach teacher salary parity.

Table 2: Underfunded Districts That Reach Parity With Adequately Funded Districts
and Corresponding Staffing Impact

Measure Outcome
Teacher and Counselor Ratio Parity Reached 82%
Teacher Salary Parity Reached 42%
Teachers Hired 18,063
Counselors Hired 415
Average Teacher Salary Increase $7,389

If districts hire additional teachers with all remaining funds, roughly 18,000 teachers and
400 counselors would be hired. Even in the extremely conservative inflation-adjusted
version, we find a total staff increase of more than 10,000; see technical appendix section
7.1 for details. Charter schools will hire staff as well, making these figures underestimates
of the total potential jobs created.
The average teacher salary increase in this scenario would be about $7,400, or about
$9,600 among districts that could afford to make any salary increase.
This approach presents just one framework for the use of funds. We could have prioritized
salary increases, for instance, and seen many more districts achieve salary parity. In
reality, each district will have their own unique set of needs that dictate their spending
priorities. Nonetheless, this analysis demonstrates the potential for the BEFC adequacy
funds to create parity in staffing levels and salaries among Pennsylvania districts and in
turn create thousands of additional jobs in the K-12 sector.
An important consideration is the current teacher hiring challenges facing districts. Dis-
tricts will not necessarily be able to simply hire as many teachers as they want. While
recent data indicate that the pandemic-era acute teacher shortage has reversed, Penn-
sylvania and the nation as a whole face an ongoing challenge of declining numbers of
teachers entering the profession.11–14 These are serious issues, but they are outside of the
scope of the current analysis. The purpose here is to demonstrate the hiring potential
that the adequacy funds would enable. The salary increases that the funds enable would
also likely help with teacher hiring challenges.8,15

7
4 Student Outcome Estimates

4.1 Causal Effects of State K-12 Funding Reforms

The best way to predict the BEFC adequacy proposal’s effects on student outcomes is
to look at the outcomes in other states that have enacted similar K-12 funding adequacy
reforms. At least 26 states have enacted such reforms since 1990, the beginning of the
“adequacy era” of state K-12 finance.16
Advances in causal inference methods over the past two decades have enabled researchers
to estimate the causal effects of funding increases driven by these state funding reforms
(SFRs) and other forms of funding increases. Researchers analyzed the effects on test
scores and educational attainment, and studies have found effects on other outcomes
such as adult income and even crime.7,17,18 A recent survey of this research by Han-
del and Hanushek (2023) shows that all 18 studies examining the impact of funding
on educational attainment find positive effects, and 14 reach statistical significance.19
Similarly, 14 of the 16 studies examining funding impacts on student test scores find
positive effects, with nine reaching statistical significance.
SFR studies typically use a difference-in-differences (DD) design. The core of this ap-
proach is to compare the change in outcomes in a state before and after enacting an SFR,
to the outcome change in states that do not enact SFRs over the same time period. In
equation form, the design is:

effect = (SFR statepost-SFR years − SFR statepre-SFR years ) −

(non-SFR statespost-SFR years − non-SFR statespre-SFR years )

These comparisons are averaged across all states that enact SFRs to produce the final
effect estimate.
The key causal assumption is that the non-SFR states are valid comparison states. That
is, the changes in outcomes post-SFR would have been the same in the SFR and non-
SFR states had there been no SFR enacted. While this cannot be tested, researchers can
show that the year-to-year changes in outcomes before the SFR enactment were roughly
the same. Indeed, this demonstration of “parallel pre-trends” is a prerequisite for a valid
DD study.
A feature that makes the court-ordered SFR research particularly strong is that the
timing of the court decisions is quasi-random. In other words, logistical features of
states’ legal systems that are unrelated to funding or outcomes result in decisions being
handed down at somewhat arbitrary times. Combined with parallel pre-trends, this
makes a strong case that the court-ordered SFRs are indeed the cause of the observed
difference in outcome changes.

8
4.2 State Funding Reform Studies Used in Current Analysis

We narrow our focus to educational attainment and adult incomes for the current analysis
because we can rigorously quantify economic benefits for these outcomes. Two studies
have estimated the nationwide effects of adequacy SFRs on these outcomes. We conduct
analyses using both sets of estimates. For simplicity, we present results using the more
conservative study, Rothstein and Schanzenbach (2022) in this report.17 We present
alternative results from Candelaria and Shores (2019) in the technical appendix section
7.2.20
Rothstein and Schanzenbach (2022) estimate the effect of adequacy SFRs on high school
graduation, college enrollment, and adult incomes. The SFRs drove average increases of
$912 per student (2013 dollars). For each year of exposure to the increase, high school
graduation increased by 0.20 percentage points and college enrollment increased by 0.14
percentage points. They also examined the adult earnings differences among students
at different education levels. The earnings gain for high school graduates compared
to dropouts increased by 3 percentage points post-SFR, and it grew by another 0.67
percentage points for each additional year spent in K-12 post-SFR.
Two potential mechanisms may explain this earnings effect. First, receiving a stronger
education likely increased students’ human capital development and thus improved their
labor market performance. Second, the stronger local education systems may have im-
proved communities’ ability to attract business investment, creating better regional job
opportunities.
We use all effect estimates outlined above in our analysis. We limit attainment predic-
tions to high school graduation and college enrollment, as the evidence for these two
outcomes is clear and consistent.

4.3 Methods: Student Outcome Effect Estimatesv

We multiply the effect estimates outlined above by each district’s per-student BEFC
adequacy funding to estimate the plan’s effects on the three outcomes. We assume a
seven-year phase in of the funding increases in accordance with current proposals.
Effects will vary year-to-year based on the following factors: 1) the increase in funding per
student, 2) the number of years a student spends in K-12 post-reform, and 3) inflation.
We therefore estimate unique effects for each graduating cohort in each district over the
next 20 years by multiplying a) the effect per dollar increase, b) the average inflation-
adjusted BEFC increase, and c) the number of K-12 years students are exposed to the
increase.

district-cohort effect = effect per $ × avg $ increase × years exposed

v
See the technical appendix section 3 for complete method details.

9
The result is a percentage point increase in outcomes for each district-cohort. We then
multiply the estimated high school graduation and college enrollment increases by dis-
tricts’ graduating cohort size to estimate the number of additional high school graduates
and college enrollees. We use PDE projections of future cohort sizes to account for pro-
jected enrollment declines.
We impose a 10 percentage point cap on the maximum high school graduation rate
increase in any district-cohort. Capping individual district effects is a conservative ap-
proach; it is a blunt instrument that prevents overestimation but tolerates underestima-
tion at the district level. While this approach can potentially result in underestimating
the aggregate statewide effects, we err on the side of caution, preferring conservative
estimates. See the technical appendix sections 3.4 and 5 for an in-depth discussion and
analysis of this cap.

4.4 Results

Table 3 presents the estimated effects for three selected cohorts: students who will enter
high school, middle school, and kindergarten next school year. The effects grow with
each successive cohort because funding increases and the number of K-12 years students
are exposed to these increases grow. The cohort that enters high school next school year
would see roughly 900 additional students graduate from high school due to the funding
increase. For the cohort that enters kindergarten next year, the estimated increase grows
to 3,800, a 4.5 percentage point overall increase in the graduation rate in underfunded
districts. The estimated increase in college enrollees grows from 700 for those entering
high school next year to 3,850 for those entering kindergarten. It grows faster than high
school graduation due to the cap we place on graduation rate increases. Finally, lifetime
earnings for those whose highest education level is high school increase by a predicted
4% for those entering high school next year and 12% for those entering kindergarten
next year.

10
Table 3: Estimated Changes in Outcomes for Selected Student Cohorts in Underfunded
Districts in the 2024-25 School Year

Entering Entering Entering

High Middle Kinder-
School School garten
Funding Inputs
Total students in cohort 93,709 90,663 85,031
Average annual funding increase per student $1,656 $2,664 $3,650
Years exposed to funding increases 4 7 13
High School Graduation Increase
High school graduate increase 924 2,303 3,800
HS graduation percentage point increase 1.0 2.5 4.5
New 4-year cohort graduation rate 87.1% 88.9% 91.1%
College Enrollment Increase
College enrollee increase 711 1,807 3,859
College enrollment percentage point increase 0.8 2.0 4.5
Earnings Increase, HS Highest Education Level
Earnings advantage increase for HS grads vs dropouts 7.5% 14.7% 24.6%
Lifetime earnings increase, HS highest education 3.6% 7.0% 11.7%

The analysis underscores that sustained investment yields greater effects. The estimated
effects grow as graduating cohorts spend more of their K-12 years exposed to the funding
increases. Both SFR studies we examine demonstrate this phenomenon empirically; see
the technical appendix section 5.3 for a detailed discussion.
It is important to note that policy impacts are sensitive to contextual factors. The
actual realized effects will depend on other future state policies, economic trends, and
a range of additional factors that are currently unknowable. The most direct example
in our analysis is the assumption that the state will sustain the adequacy investment
indefinitely. The assumed inflation rate is another example. Predictive analyses are
inherently limited by these unknowable future contextual factors. That said, we root
our predictions in the best available evidence, the average realized effects across all
other states. Doing so captures the influence of all contextual factors in other states and
smooths across them to provide the strongest indicator of the effects we can expect.

11
5 Economic Benefit-Cost Analysis

5.1 Overview of Economic Benefit-Cost Model

Decades of research document substantial benefits of increased educational attainment

for individuals and society on a range of outcomes.21,22 Economists have developed rig-
orous models that quantify these benefits in dollar values. To estimate the economic
benefits of the adequacy proposal, we use a widely applied model that estimates the
accrual of benefits over the life course of individuals who increase their human capital.23
While the greatest benefits accrue to the individuals themselves, taxpayers and other
members of society broadly benefit as well.
The model identifies the following benefits of increased educational attainment: improved
individual earnings, health, economic productivity, and reduced crime and government
dependency. All of these outcomes have strong research bases demonstrating their causal
relationship with educational attainment.24 Better health reduces government spending
on health care, and it also reduces the social burden associated with poor health, such
as caring for chronically ill family members. Similarly, less crime reduces government
spending on criminal justice and corrections, and it also reduces the social burden of
crime, borne primarily by crime victims. Economic productivity gains occur because a
more educated populace drives greater business investment, and workers and community
members learn from one another, creating educational spillovers.25
The modeling approach is to identify the “educational gradient” of these outcomes, or the
change in the outcomes when an individual moves to the next highest level of education.
We focus on the three education levels of less than high school, high school graduate,
and some college, as these are the levels for which we estimate effects of the adequacy
funding proposal.
The model was recently populated with Pennsylvania-specific data and up-to-date social
science research by Belfield (2020, 2021) and submitted as expert reports in the adequacy
trial.24,26 The reports provide the following three figures that we use in the current
analysis: a) the earnings benefits of graduating high school, b) the total benefits of
graduating high school, and c) the total benefits of attending some college. Again, these
benefits are defined as the result of moving up a single education level.

5.2 Methods: Economic Benefit-Cost Estimatesvi

We estimate societal economic benefits by multiplying the estimated number of addi-

tional high school graduates and college enrollees by their associated PA-specific eco-
nomic benefits. The societal benefits associated with moving from high school dropout

vi
See the technical appendix section 4 for complete method details.

12
to graduate are roughly $520,000 per student in the baseline year.vii The benefits asso-
ciated with moving from graduating high school to attending some college are roughly
$155,000.
We also factor in the benefit of increased earnings for those with a high school diploma
as their highest education level. We take a conservative approach, focusing purely on
the earnings increase and ignoring potential spillovers such as reduced government de-
pendence. We first estimate the percentage of each district’s cohort that will graduate
high school but not attend college. We do so using educational attainment data from
the US Census American Community Survey. The average across districts is 26% and
ranges from 22% to 28%. We multiply this estimated percentage by district’s cohort
size to obtain the estimated number of students who will graduate high school and not
attend college in each district.
We then multiply the earnings advantage associated with high school graduation by
its estimated adequacy funding-driven increase. The earnings advantage is slightly less
than $350,000 in year one post-reform, and we adjust for future inflation. Finally, we
multiply this estimated increase in earnings by the estimated number of students who
will graduate high school and not attend college to obtain the total economic benefit
associated with this earnings increase.
We must make the following adjustments to accurately account for these three benefit
sources working in tandem. We add the earnings increase for high school graduates to the
high school graduation benefits, and we subtract this earnings figure from the college
enrollment benefits. We also subtract the new college enrollees from the estimated
number of students whose highest education level is high school.
Finally, we aggregate the district-specific benefits to obtain the estimated total statewide
societal economic benefits associated with the three outcomes.
Once we have determined the benefits, we calculate the cost to compare. Costs are
spread across 13 cohorts each school year, so we must compute the cumulative amount
of funds spent on a given cohort across their K-12 career. To do so, we multiply a) the
average annual per-student funding increase that a cohort experienced, b) the number
of K-12 years they are exposed to the increases, and c) the number of students in the
cohort. We can then examine whether the benefits exceed this cost.

5.3 Results

Table 4 presents the results of the benefit-cost calculations. For simplicity, we present
the estimates for three selected cohorts of students: those who will enter high school,
middle school, and kindergarten next school year.

vii
We adjust the benefits figures provided in Belfield (2020, 2021) for inflation. See technical appendix
section 4.1 for inflation adjustment methodology.

13
We stress that these are the estimated benefits from a relatively small portion of the
overall population that will generate societal benefits. These benefits are derived from
less than one-third of each cohort in underfunded districts who would not eventually at-
tend at least some college under current circumstances. This is a conservative approach,
as it assumes that the effects of improving school quality would only be for those stu-
dents who do not enroll in college. Given the expansive benefits of school quality to
human capital, this should be interpreted as a portion of the expected benefits to the
state.

Table 4: Costs and Societal Economic Benefits for Selected Student Cohorts in Under-
funded Districts in the 2024-25 School Year

Entering Entering Entering

High Middle Kinder-
School School garten
Cost
Total students in cohort 93,709 90,663 85,031
Avg annual funding increase per student $1,656 $2,664 $3,650
Years exposed to funding increases 4 7 13
Total cost for the cohort $657M $1.796B $4.277B
Societal Benefits Across Students’ Lifetimes
HS graduation $572,471 $637,081 $784,516
HS graduate increase 924 2,303 3,800
College enrollment $138,415 $121,399 $100,621
College enrollee increase 711 1,807 3,859
Lifetime earnings, HS highest ed level $26,497 $53,124 $98,010
Total students, HS highest ed level 23,582 21,702 18,182
Total Benefits of BEFC Adequacy Funding
Total societal benefits $1.252B $2.839B $5.151B
Benefits surplus (benefits – cost) $595M $1.043B $875M
Notes:
(a) High school graduation benefits include the earnings increase for those whose highest
education level is high school, which contributes to the large growth over time. College en-
rollment benefits have the earnings increase for high school graduates subtracted from them,
which causes the decrease over time.
(b) The benefits surplus is smaller for the cohort entering kindergarten than those entering
middle school primarily because of the cap we place on high school graduation rate increases.
This is a mechanical feature of our model and should not be interpreted as a substantive de-
cline in return on investment for younger cohorts.
(c) The total cost for the kindergarten cohort is $4.3 billion because the full adequacy invest-
ment would not be reached for seven years. So, the full cumulative $5.1 billion investment
would first be experienced by the cohort entering kindergarten in seven years, conceptually
speaking.

14
We find that the estimated benefits exceed the costs for every cohort from this small
portion of the student population alone. Students entering ninth grade in the upcoming
school year would experience an increased investment of $650 million across their four
years of high school. Based on the life course benefits model, these students would yield
benefits of $1.25 billion, nearly double the investment. Students entering kindergarten
next year would experience nearly the full adequacy investment by the time they grad-
uate, a cumulative $4.3 billion. The model estimates that these funds would yield $5.15
in societal economic benefits across the lifetimes of these students, roughly $875 billion
more than the investment.
We present results for the rest of the 20 student cohorts analyzed in the technical ap-
pendix section 7.2. Benefits exceed costs for all cohorts. Figure 1 visually depicts benefits
compared to costs for the three selected cohorts presented in Table 4.

Figure 1

15
6 Conclusion

Our analysis indicates that, from an economic perspective, the BEFC adequacy proposal
is a wise investment that would yield quantifiable benefits to Pennsylvania’s students,
economy and society that exceed the funding increase. Enhancements to the K-12 work-
force would improve the quality of education while expanding the state economy. The
stronger education system would increase students’ human capital development and edu-
cational attainment. These educational improvements will translate to societal economic
benefits that exceed the costs. The full benefits will likely be far greater.

16
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