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Policy Library

Outcome-Based Funding

Inadequate funding is the standard excuse for shortcomings and failures in schools. And if more money doesn’t fix the problem then obviously it wasn’t enough money.

We historically have written bigger checks with the hope that education bureaucracies will use them to increase academic performance, but with no guarantees.

For example, since 1950, non-teacher hiring in public schools has grown at seven times the rate of student enrollment (1). That certainly increased funding but did it improve education?

Or consider Chicago, where the ratio of administrators to students has soared, and the average salary of an administrator has jumped from $87,703 in 2000 to $114,360 in 2010 (2). But did the funding increase improve education?

We need to quit funding education and instead start investing in education.

Investing means we strategically target money in ways that improve education.

It is what we call outcome-based funding.

For example, provide incentive funding to high schools based on student performance on Advance Placement, International Baccalaureate and Advanced International Certificate of Education exams.

Change funding formulas so per-pupil payments are based on outcomes, such as course completion and graduation, instead of seat time.

Create grading formulas for schools that recognize not only overall test scores but also learning gains achieved by low-performing students. And then provide performance rewards for schools that earn high grades.

We need to incentivize achievement and reward success. That is the difference between investing and funding.

To learn more, please refer to the links below.


  1. The Friedman Foundation, The School Staffing Surge: Decades of Employment Growth in America’s Public Schools, 2012
  2. The Chicago Tribune, 2011