Study Tallies a District's Return on Investment

Virginia Beach Superintendent James G. Merrill checks on construction for a new school. A study says such investments pay off.

—Nicole Frugé/Education Week

Payoff is $1.53 for every $1 invested

How much is a good school system worth?

The Virginia Beach, Va., school district believes its own system is worth about $1.53 for every $1 spent from the 70,000-student district's operating fund.

Not content with making an argument that good schools have an economic value that is unmeasurable, the district asked a university economist to calculate just what it brings both to the city and the Hampton Roads region in southeastern Virginia.

The report generated for the district, the third-largest in the state, is more than an academic exercise for James G. Merrill, the Virginia Beach superintendent. The district is one of the few in the state that receive money from local taxpayers based on a revenue-sharing formula, which is currently under fire. As the city and the school district head into budget season, Mr. Merrill said he wanted to make an argument for school funding based on business principles.

"I'm growing weary of that public sentiment that we're a drainer of public resources," Mr. Merrill said. "Yes, we use public resources, but look at what we get in return. You really need to couch funding for schools in terms of investment and return."

Virginia Beach's move is part of a trend to frame educational impacts in terms of their projected economic payoff. For example, in 2009, the London-based consulting firm McKinsey & Co. attempted to calculate the financial impact of achievement gaps. Its study estimated that the nation's gross domestic product would have been $1.3 trillion to $2.3 trillion higher in 2008 if the United States had closed achievement gaps between black and Latino students and their white counterparts, gaps between students based on socioeconomic status, and gaps between lower-performing and higher-performing states.

Returns on Teachers

More recently, Eric A. Hanushek, a senior fellow at Stanford University's Hoover Institution and a consultant on the McKinsey study, created a report to gauge the financial value of good teachers. By his estimates, a teacher in the top 15 percent in terms of effectiveness can, in one year, add more than $20,000 to a student's lifetime earnings. "Student achievement, which provides a direct measure of later quality of the labor force, is strongly related to economic growth. Improving achievement leads to a better-prepared workforce and to greater growth, and this growth translates into higher levels of national income," Mr. Hanushek wrote last summer in the magazine Education Next.

The Virginia Beach school district has a revenue-sharing agreement with the city of Virginia Beach that provides it with 51.3 percent of seven revenue streams, which include taxes on real estate, general sales, personal property, and cable franchises. Fewer than 10 of the state's 133 districts have such revenue-sharing agreements. For the school system, that equaled more than $363 million for ...

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