A landmark review of research studies has confirmed that increased school funding significantly improves student achievement, particularly for disadvantaged students.
The findings come at a crucial time as Australia’s public schools continue to struggle with chronic underfunding. Recent data from ACARA shows private schools receive 27% more recurrent income per student compared to public schools, despite enrolling a lower proportion of students with additional needs.
On Monday 3 March, public school advocates Save Our Schools shared the findings of a major review, conducted by the Albert Shanker Institute and authored by Professor Bruce Baker (University of Miami) and Associate Professor David Knight (University of Washington), that provides one of the most comprehensive analyses of the link between school funding and student outcomes in recent years.
It finds that more money in schools leads to better test scores, higher school completion rates, improved tertiary attainment, and increased lifetime earnings. Importantly, both operational spending, such as teacher salaries and resources, and capital investment, play a significant role in lifting student performance.
The case for increased school funding
The study found that a $1,000 per-student funding increase over four years led to statistically significant improvements in student achievement more than 90% of the time. A major 2016 study also revealed that a 10% increase in school funding throughout a student’s education resulted in 7% higher wages and a 3.2 percentage point drop in adult poverty rates.
Critically, the benefits were greatest for students from disadvantaged backgrounds, reinforcing the argument for progressive funding models that prioritise schools with the greatest need.
The findings dismantle the long-standing claim that “money doesn’t matter” in education. While funding must be strategically allocated, the evidence is clear: without additional resources, lifting student outcomes is nearly impossible.
Implications for Australian schools
The study’s findings are particularly relevant to Australia, where public schools remain significantly underfunded despite educating the vast majority of disadvantaged students.
A 2023 Save Our Schools report revealed that:
- 81% of low socio-educational advantage (SEA) students attend public schools.
- 91% of schools with a majority of low SEA students are public schools.
- Nearly one-third of all public school students come from low SEA backgrounds.
Despite this, in 2024, public schools were funded at just 87.6% of the Schooling Resource Standard (SRS). While Prime Minister Anthony Albanese has pledged to fully fund public schools, current agreements delay this until 2034.
Pat Murphy, president of the Australian Government Primary Principals Association (AGPPA), said the study is particularly relevant to Australia as State and Federal government continue to negotiate new school funding agreements.
“The review’s conclusions offer a strong argument for fully funding public schools. Currently 98% of government primary schools are currently under-resourced despite serving the majority of disadvantaged students,” Murphy told The Educator.
“The report identifies that through delivering adequate and equitable funding, Australia can expect significant improvements in educational outcomes and a reduction in the achievement disparity between affluent and less affluent students. This research reinforces the necessity of investing in education to foster a more equitable and prosperous society.”
Are the tables finally turning
On Tuesday 4 March, NSW became the latest state to sign up to the Federal Government’s school funding deal, clinching $4.8bn in additional funding. NSW now joins all other states and territories except Queensland to sign on to the ‘Better and Fairer Schools Agreement’ (BFSA).
The agreement, announced today, raises the Federal Government’s share of the Schooling Resource Standard (SRS) from 20% to 25%, ensuring public schools reach full SRS funding with state contributions. It also eliminates past accounting loopholes that let states inflate their contributions, with NSW committing to direct real funding into classrooms.
Dr Jordana Hunter, Education Program Director at Grattan Institute, said the BFSA, is “a major win” for government schools.
“Not only will it mean increased funding, but it should put an end to years of divisive debate that has distracted political parties and stakeholders from the key reforms we need to improve learning,” Dr Hunter told The Educator.
“Australia has many world class teachers and schools, but there is urgent work to bring all schools in the country up to this standard.”
Dr Hunter said Ministers need to make stronger commitments to embedding evidence-based practice in every classroom, especially when it comes to reading and maths.
“With the funding issue now almost squared away, it’s time to focus on getting this done,” she said.
“Better outcomes for students will flow directly from investment in quality teaching – the biggest in-school factor that affects learning.”
Investment in teachers and leaders crucial
Dr Hunter said while there needs to be more investment in teacher training and more support for effective school leadership, it is essential that this investment “focuses on what works, not out-dated ideas.”
“In the Australian context, where new money has been flowing into schools for years now, we can’t just expect more money to lift outcomes. Every additional dollar needs to be put to work,” she said.
“Australia has dropped the ball on practical research into more effective school models, more effective teaching approaches and how to make the most of the resources schools already have.”
As schools grapple with persistent staffing challenges, education experts are urging a shift in focus beyond simply increasing teacher numbers. Dr Hunter stressed the need for a more strategic approach to supporting educators and students alike.
“We can’t just assume that hiring more teachers or allied staff will solve everything,” she said.
“We have to start thinking harder about how schools support teachers to work together as a team, the quality of curriculum materials that are used, and how schools support children to keep on track with their learning rather than waiting for children to fail, when it becomes so much more resource intensive to catch them up.”
More school funding helps – but only if spent wisely
Pasi Sahlberg, Professor of educational leadership at the University of Melbourne's School of Education, said the new funding deal highlights the critical role of equitable resourcing in improving student outcomes, particularly for those in underfunded schools.
“It is a timely reminder now when all but one Australian jurisdictions have signed the Better and Fairer Schools funding deal with the Commonwealth Government how resourcing schools adequately makes positive difference for students in schools,” Professor Sahlberg told The Educator.
“Research has shown already before this review by SOS Australia that the benefits of increased funding can be particularly significant for socio-educationally disadvantaged students and areas where states have historically underinvested in schools that have higher concentrations of socio-educational disadvantages.”
Professor Sahlberg said it is important to note that studies in the U.S review mainly link school funding to test scores, not broader outcomes like learning, competence, engagement, or wellbeing.
“It is good to keep in mind that studies included in this review, however, are typically looking at how school funding is associated to students’ reading and maths test scores, not in their learning outcomes, competences, engagement or wellbeing,” he said.
“In other words, more money may improve standardised test results but not necessarily other important outcomes such as students’ social-emotional wellbeing, engagement or agency in school. Furthermore, simply pumping in more dollars in education systems does not automatically make education systems any better or fairer.”
Professor Sahlberg pointed out that in a famous review of almost two decades of PISA data, the OECD has concluded that “over the past decade there has been virtually no improvement in the learning outcomes of students in the Western World, even though expenditure on schooling rose by almost 20% during this period”.
“Money matters for sure but in the end, it depends on what it is supposed to improve,” he said.
“States and territories need to be smart in figuring out what would really transform schools so that they would make improvements in broader outcomes than just student test scores.”