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Why Does the Government Spend So Much on Education?

In the U.S., education spending made up less than 3 percent of the federal budget in 2015. The rest went to Medicare, Social Security, and other priorities. After accounting for inflation, the education budget increased slightly during the 2013-14 school year. Despite its increase, the education budget still falls short of the OECD average of $10106. Nonetheless, education spending has become a crucial part of the government’s budget.

While government education spending is largely driven by local taxes, the federal government does spend a significant amount of money in schools. In 2009, the American Recovery and Reinvestment Act (ARRA) allocated almost $100 billion in education funding to states. Despite the ARRA, federal allocations fell drastically after the 2009-2010 year. The federal budget is now at a historic high, but school districts across the country are feeling the pinch.

While the federal government spends more on higher education, states fund most of the rest. According to a recent Washington Post article, state and local governments account for 84 percent of higher education spending, including federal dollars. Meanwhile, private nonprofit and for-profit institutions spend the rest. While the federal government continues to fund higher education, states continue to struggle to maintain their spending amid reduced tax revenues. So, what does the future hold for education spending?

The U.S.’s productivity has stagnated over the past decade, despite a significant increase in school funding. Moreover, the gap between students from the richest 10 percent of families and the poorest ten percent of the population is the same – four years earlier, the gap was the equivalent of four years of learning in 1960. Regardless of how one looks at it, we all benefit from a high-quality education and a productive workforce.

In addition to federal money, states and local governments invest more than ever in public schools. Local governments also get a share of the tax dollars, so schools in high-income neighborhoods have sufficient funding. Nevertheless, less-affluent communities may not get adequate funding. The amount spent per student varies from state to state. However, in 2014, total spending in all elementary and secondary schools was $11,621 per pupil.

In the beginning of the 20th century, state education spending amounted to just 0.05 percent of GDP. By the 1930s, this amount increased to 0.2 percent of GDP, reaching 0.4 percent of GDP. However, after the World War II, state education spending fell to only 0.2 percent of GDP. By the 1950s, spending on higher education increased again, reaching 1.0 percent of the GDP. It remained there for the next four decades.

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