Funding Education Opportunity: Study examines K-12 education spending, teachers’ salaries and benefit costs

Good morning,

Today, Reason Foundation published our 2025 K-12 Education Spending Spotlight, which brings together over two decades of school finance data for all 50 states. With nationwide funding approaching $1 trillion and outcomes declining—nearly 40% of 4^th graders aren’t reading at a basic level on the National Assessment of Educational Progress— it’s critical to examine how dollars are spent and why they aren’t producing better results.    

Reason Foundation’s interactive tool, which includes data on expenditures, staffing, teacher salaries, debt, and student outcomes, can help answer those questions and is available here.

There are five key trends to know, but here’s the big takeaway: despite record funding, K-12 finance faces structural problems that undermine student achievement.

Between 2002 and 2023, public school funding rose by 35.8% from $14,969 per student to $20,322 per student after adjusting for inflation. New York now spends $36,976 per student followed by New Jersey at $30,267 per student, and funding now exceeds $25,000 per student in eight states, including: Vermont ($29,169 per student), Connecticut ($28,975), Pennsylvania ($26,242), California ($25,941), Rhode Island ($25,709), and Hawaii ($25,485).

Since the start of the COVID-19 pandemic, the largest increase in per-student spending has occurred in California, rising 31.5% from $19,724 in 2020 to $25,941 in 2023.

Michigan, Kentucky and Missouri were the next biggest percentage increasers, all spending 17% more per student in 2023 compared to 2020. Per student spending also rose by over 15% during that period in Hawaii, New Mexico, Arizona, Mississippi and Alabama.

Figure 1: Inflation-Adjusted Public School Revenue (2002-2023)

All 50 states increased K-12 funding from 2002 to 2023, but inflation-adjusted average teacher salaries fell by 6.1% between 2002 and 2022, decreasing from $75,152 to $70,548 per year. 

From 2020 to 2022, due in part to high inflation during and after the pandemic, the average teacher’s salary decreased by more than five percent in 38 states. They declined the most in North Carolina (−9.6%), New Mexico (−8.8%), South Carolina (−8.7%), West Virginia (−8.6%), and Mississippi (−8.2%).

Research shows that effective teachers are critical to student learning, so why aren’t more education dollars showing up in teacher paychecks?

One reason is that public schools are spending more money on non-teaching staff, such as instructional aides, counselors, social workers, psychologists, and instructional coordinators. Nationwide, non-teaching staff increased by 22.8% between 2002 and 2023, while public school enrollment only ticked up by 4.1%. 

This raises important questions, such as whether public schools have drifted too far from their academic mission and whether special education costs have gotten out of control.

Another reason teacher salaries aren’t increasing is that benefit spending has risen sharply, going from $2,221 per student in 2002 to $4,022 per student in 2023—an 81.1% increase. 

In 2023, employee benefit costs in New Jersey were the highest in the nation at $8,333 per student. In New York, the cost was $7,949 per student.

Research indicates that these costs are largely driven by teacher pension debt. States have failed to set aside enough funding to cover their pension promises, and now the bills are coming due. Benefit spending increased by 194.1% per student in Hawaii, 171.3% in Vermont, 169.9% in Illinois, 167.1% in New Jersey, and 166.4% in Pennsylvania.

Figure 2: Inflation-Adjusted Spending Per Student on Employee Benefits and Salaries (2002-2023)

But these aren’t the only structural issues. With enrollment falling by nearly 1.2 million students since the start of the COVID-19 pandemic, public schools will need to become more efficient by closing schools and reducing staff counts. Available data suggest that school districts have been slow to close under-enrolled schools, and the number of non-teaching staff in public schools has increased since 2020. This is unsustainable, especially since the National Center for Education Statistics projects that enrollment losses will persist for years to come.

There are no quick fixes, but one thing is certain—policymakers can’t expect a good return on investment from public schools unless structural problems are addressed. Focusing on academics, paying down pension debt, and right-sizing schools are difficult but necessary reforms that can pay dividends in the long run. 

From the states

The New Jersey Senate Education Committee advanced a proposal that could significantly limit charter schools. It would ban virtual and prohibit charter school boards from contracting with for-profit entities to manage or operate the school, and “impose residency requirements for some charter school trustees,” the New Jersey Monitor reported. Harry Lee, the president of the New Jersey Charter School Association, argued that this legislation could be “read as a moratorium on charters.”

What to watch

Also in New Jersey, on the campaign trail, Gov.-elect Mikie Sherrill supported expanding the state’s Interdistrict Public School Choice Program–a form of open enrollment. This policy is in much need of reform and hopefully she will keep this campaign promise. As of the 2023-24 school year, more than 5,000 students used it to attend public schools other than their assigned ones. Despite being operational for more than 25 years, participation is one of the lowest in the nation due to an artificial cap imposed by then-Gov. Chris Christie’s administration in 2012. 

The New Hampshire Supreme Court issued a decision clarifying the state’s cross-district open enrollment law, which allows students to transfer to schools in other districts. The court stated that every school district must have an open enrollment policy and that a transfer student’s home district is responsible for 80% of tuition costs, even if the home district’s policy is not to have an open enrollment policy. New Hampshire’s law ranks 21st among the 50 states nationwide, according to Reason Foundation’s open enrollment best practices, but the state scored just 45 out of 100 points, receiving an F grade for its transfer policies.

Tennessee Speaker of the House Cameron Sexton (R-Crossville), expressed interest in expanding the state’s private school scholarship program. Launched last year, the program provided $7,300 scholarships to 20,000 students to pay for private school tuition. While the program is scheduled to increase the total number of scholarships available to 25,000 during the 2026 school year, Sexton argued that the expansion should be greater, as 42,000 students applied for scholarships.

The latest from Reason Foundation

–Public schools without boundaries 2025: Ranking every state’s open enrollment laws

–Policymakers are increasingly supportive of public school choice

–Open enrollment is an important part of school choice in California

–Los Angeles Unified School District celebrates mediocre test scores

Recommended reading 

Ohio school districts shouldn’t be allowed to declare students “impractical” to transport

Aaron Churchill at the Fordham Institute

“Ohio districts have used this loophole to deny transportation to thousands of public charter and private school students—and this was the way Columbus ducked their transportation responsibilities last year…Statewide, almost 23,000 charter and private school students were declared impractical last year (roughly 8 percent), while only 592 out of more than 1.4 million district students—a miniscule fraction—were deemed as such. In other words, non-district students were nearly 200 times more likely to be denied transportation than students attending district schools.”

Contested questions in public schools

Ilana Redstone at National Affairs

“Despite the post-pandemic increase in the popularity of private schools and homeschooling, the vast majority of American children have continued, and likely will continue, to receive a public education. However, doing so in an institution that hasn’t acknowledged its failures ensures that both the educational crisis and its associated erosion of democratic norms will persist. This means that rebuilding trust in this institution matters — although doing so will require us to first understand how public schools lost their way.”

Rulemaking must resolve ambiguities in federal school choice law—and fast

Jim Blew at Education Next

“Governors should be prevented from adding requirements not found in the federal law, such as prohibiting SGOs from focusing on specific student groups or educational approaches. Similarly, new governors should not be allowed to remove an organization from a state’s list unless that organization falls out of legal compliance; this stipulation would preempt the sudden disruption of a student’s education due to politics.”

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Are you a state or local policymaker interested in education reform? Reason Foundation’s education policy team can help you make sense of complex school finance data and discuss innovative reform options that expand students’ educational opportunities. Please reach out to me directly at jude.schwalbach@reason.org for more information.

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Source: https://reason.org/education-newsletter/funding-education-opportunity-2025-k-12-education-spending-spotlight-release/