EDUCATION NOTEBOOK: 
The Cost of American Education

September 15, 2006

More than 50 million children across America returned to school over the past few weeks, and so now is a good time to consider how much we spend on public education and whether we're getting good value for that money. This big-picture view is disheartening.

How much does K-12 public education in America cost? One way to answer that is to look at direct taxpayer expenditures on education. In July, the National Center for Education Statistics reported that the average per-student expenditure in public schools was $8,310 in the 2003-04 school year. State's per-student expenditures ranged from a high of $13,338 in New Jersey to a low of $4,991 in Utah.

Altogether, spending on all elementary and secondary education topped more than $500 billion in 2003-04, or about 4.7 percent of the entire economy as measured by GDP. The U.S. spends more on K-12 education than the Philippines, Saudi Arabia, or Sweden spends on everything.

Based on the most recent per-pupil expenditure figures, the average student enrolled in public school for the next 12 years can expect to have about $100,000 spent on his or her education.

And what we are getting for all that money? Despite this considerable investment, many students will not receive a quality education. More than a quarter of all eighth grade students scored "below basic" in reading on the 2005 NAEP exam, which by the government's definition means that they are not able to "demonstrate a literal understanding of what they read" and "make some interpretations." One in five eighth graders scored "below basic" in math.

Poor test scores are just one bit of evidence of widespread underperformance. According to the Department of Education, the national high school graduation rate is 73 percent, and some researchers argue that even this estimate is too generous. Whatever the exact number, it is disturbing that so many American students fail to earn a high school degree.

Failure to graduate comes at a substantial cost. According to the U.S. Census Bureau, the average full-time worker who did not graduate from high school earns $23,400 annually, versus $30,000 for a high school graduate. That's a 29 percent pay cut. And an average full-time worker with a Bachelor's degree earns $52,200 per year-or more than twice as much as the average high school dropout.

The Census Bureau projects that a high school dropout who works full time will earn $1 million over his or her lifetime, while a high school graduate will earn $1.2 million. A college graduate can expect to earn $2.1 million. Clearly, education pays, and stopping short can be expensive.

Another growing cost of our failing public education system is remediation, which is the burden that other institutions like colleges and businesses shoulder to help people develop the basic skills they should have learned in primary or secondary school. The Department of Education reported that 100 percent of all community colleges and 81 percent of four-year colleges offer remediation. The Mackinac Center for Public Policy estimates that remediation costs colleges and business in just the state of Michigan approximately $600 million per year. If the other 49 states and the District of Columbia are anything like Michigan, the country spends tens of billions of dollars each year making up for public schools' shortcomings.

And then there are the opportunity costs of public education. An opportunity cost, as economists define it, is the benefit forgone by choosing a particular course of action, as opposed to an alternative. How much stronger would the American economy be if the billions spent on public education actually bought our 50 million schoolchildren a high-quality education?

And what about the toll the current education system levies on the lives of the children it disserves? No dollar figure can make up for a lifetime without even a basic education.

Politicians and lawmakers tend to get mired in the details of legislation and so rarely step back and look at the big picture. We won't see widespread improvements in American education until we as taxpayers begin to recognize the costs of the current American education system and demand something better.

Dan Lips is an Education Analyst at the Heritage Foundation www.Heritage.org.