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Has Neoliberalism Underfunded Schools?

By Arthur MacEwan | November/December 2020

Dear Dr. Dollar:

Covid-19 has created severe problems for schools, kids, their parents, and the schools’ teachers and staff. But weren’t these problems already there and worsened by the long-term underfunding of the schools? —Anonymous, via email

Let me begin to answer your question by presenting you with an apparent contradiction. On the one hand, it is widely perceived that our public schools are underfunded. Moreover, it is easy to lay the problems of underfunding at the doorstep of neoliberalism, with its emphasis on reducing government support for public services and on privatization. On the other hand, expenditures on pre-K–12 public schools in the United States have risen substantially over recent decades. I’ll come back to those rising expenditures shortly. It is useful, however, to first place the widespread concerns about underfunding in context.


A central part of that context is the importance of neoliberalism. Neoliberalism became a dominant ideological force affecting economic policy in the 1980s. Earlier, in the post-World War II era, economic policy in the United States was by no means anti-business. But alongside private businesses operating for profit and an acceptance of the idea that markets should be the major determinants of economic activity, policy was also based on the view that government should play a substantial role by providing the foundation for private activity. Coming out of the Great Depression and World War II, government maintained a framework for unionization and a minimum wage, created various worker protections, expanded Social Security, and established Medicare and Medicaid—to say nothing of civil rights legislation that had economic impacts. Also, of course, Keynesian ideas were dominant, which prescribed a major role for fiscal policy—government spending and taxation—as a means of taming, if not eliminating, recessions and inflation.

Neoliberalism, embraced by conservatives in both parties, touted reliance on the “free market” as the path to progress. According to this doctrine, government should remove itself as much as possible from economic activity, relying on private firms motivated by profit to handle economic and social affairs (think prisons and hospitals). The government could spend money on social programs, including education, but, according to this outlook, it should be private firms that do the job—educating children for example. Furthermore, the argument goes, private firms would be more efficient than government programs, allowing government spending to be reduced. So, in the ideology of neoliberalism, less government spending and privatization went together. Leaving aside the question of whether there is really such a thing as the “free market” (but see sidebar, “The Free Market?”), the term “neoliberalism” is confusing because it is an ideology associated with political conservatives, not political liberals. In the 19th century, the era when classical liberalism emerged, the term “liberalism” developed in association with those who favored a reduction in government control of the economy. And it is from that economic use of the term that neoliberalism emerged in the modern era.

What the Data Say

Figure 1: Per-Pupil Expenditures, K-12 Schools in the United States, 1989-1990 through 2016-2017, in 2018-2019 dollars

Now let me return to those rising expenditures. Measured in terms of 2018–2019 dollars (that is, adjusted for inflation) expenditure per pupil in pre-K–12 public schools in 1989–1990 was $9,261. In 2016–2017, the figure was $12,794, a 38% increase. (See Figure 1.) These data are for current expenditures, not including capital projects, and do not involve debt—so expenditure per pupil means funding per pupil. Furthermore, spending per pupil in these three decades rose more than per capita income in the country, which increased by 29%. (More recent complete data are not yet available.)

Of course, there have been ups and downs in the years since 1989–1990. As Figure 1 shows, expenditure per pupil in the early 1990s was relatively stagnant, then started rising in the late 1990s, continued rising into the Great Recession, fell off in the post-recession years, but had fully recovered its peak by 2015–2016. (In the 2019 Digest of Education Statistics, projections show an expected increase of 5.5% from 2016–2017 to 2020–2021.)

Figure 2: Teachers’ Salaries, Mean Family Income, and Median Family Income, 1989-2017, in 2018 dollars

It is important to note that all these figures are for national averages. Just as there are great income inequalities among people, there are substantial inequalities in school funding between states and within states. (See the sidebar “Substantial Inequalities Between States and Within States.”)

How to Resolve the Apparent Contradiction?

As far as the perspective of teachers is concerned, it is easy to understand why there is a perception of underfunding. Across the country, adjusted for inflation, average teacher salaries have not increased since 1989. In fact, the average teacher salary was slightly lower, by 1.3%, in 2017 than in 1989. In the same period, median family income rose 15% and mean family income rose 30%. (See Figure 2.) Teachers were being left behind. (The “mean income” is the average of all incomes. The “median income” is the income at which half of the incomes are above it and half below it. With income inequality, the very high incomes pull up the average, but the median is relatively unaffected. Thus, the difference between the mean and the median is one measure of the degree of income inequality. Teachers, however, as the figure shows, have fallen further behind both the median and the mean.)

The Free Market?

Many people who oppose government regulations or spending on social programs and—God forbid—the higher taxes that would pay for such programs argue that economic activity should be left to The Free Market. By this term, they mean economic activity without government involvement. Yet, certainly in the modern era, economic activity cannot exist without government involvement. Government, at the very least, is essential to enforce contracts and protect private property rights. These are often complex tasks—for example, when the property rights of two owners conflict. Can you create a pig farm or coal mine on your property that spoils life on my property? And consider the government’s role in providing education, which structures the labor market and affects firms’ advantages or disadvantages in international commerce. One can readily add the protection of patent rights and the requirement of licenses for myriad activities—doctors, for example.

Those who tout The Free Market and espouse neoliberalism often call themselves libertarians. It turns out, however, that they usually give selective meaning to their terms. For example, the owners of firms engaged in fossil fuels do not decry the government’s provision of subsidies to their industry—e.g., the Koch brothers. The owners of large IT firms do not complain about the government’s protection of their monopoly positions, maintained through the protection of patents on intellectual property—e.g., Apple and Facebook.

So, it seems that there is really no such thing as The Free Market, and, also, that no one (or virtually no one) really believes in The Free Market anyway.

A recent report from the Economic Policy Institute states:

The teacher wage penalty has grown substantially since the mid-1990s. The teacher wage penalty is how much less, in percentage terms, public school teachers are paid in weekly wages relative to other college-educated workers (after accounting for factors known to affect earnings such as education, experience, and state residence). The … teaching wage penalty was 6.0% in 1996. In 2019, the penalty was 19.2%... .

It is, then, no wonder that teachers perceive that the schools are underfunded, regardless of the data shown in Figure 1. Moreover, whatever the trend in the overall level of funding, it is reasonable to view what has been happening to teachers’ salaries as a substantial underfunding of education. (As with other aspects of school funding—see sidebar—there are substantial inequalities in teachers’ salaries from state to state. In Massachusetts, for example, salaries are higher than the average, and on average showed a real increase in the early 2000s. But the cost of living is a good deal higher in Massachusetts than in several states with lower teacher salaries.)

Beyond the importance of teachers’ salaries, the apparent contradiction between perceptions and data is partially resolved by the fact that we—society as a whole—are demanding more from our schools than we were in earlier years. The money for the schools has gone up, but the need for money has also gone up as the schools have made improvements to educational programming and are also told to perform additional functions. The demands for these changes have at least two origins: the rising importance of education as a basis for better, higher income jobs; and the advance of inclusiveness (i.e., meeting the needs of underserved groups) as a social goal.

A prime example is serving children with disabilities. While full data on the cost of educating children with disabilities are not readily available, existing data and information from people who work in the field of special needs indicate that the cost per child is on average at least twice as high as the cost per child for students who are not classified as having a disability. (In extreme cases, the cost of educating a child with a disability, who has to be sent to a program outside of the local district and requires a full-time aide, can be over $300,000 per year.) Also, while special education has long been required of the public schools, the share of children in special needs programs has steadily risen, from about 11% at the beginning of the 1990s to almost 14% in the late 2010s. Also, the pressure for special needs programs to improve, and thus the costs to rise, has continually increased.

Another case is that of English Language Learners (ELL). There is nothing new about schools serving ELL students. However, as a percentage of all students in the public schools, ELL students rose from about 5% at the beginning of the 1990s to over 10% in 2017. Data on the costs of ELL are sparse (and vary widely by state), but existing information suggests the per-pupil costs are roughly 10% higher for ELL students than for non-ELL students.

Other examples of change include the increase in the number of nurses and counselors in public schools. Here, however, good data showing changes over time seem virtually nonexistent. It is worth noting, however, that despite these increases, many schools still don’t have the staffing level they need—one of the successful demands of the Los Angeles teachers in their 2019 strike was the addition of 300 nurses in the schools.

Substantial Inequalities Between States and Within States

Regardless of the apparent contradiction, it is important to keep in mind that the data cited in this article are averages for the whole country and do not take account of differences between states and within states. In 2015–2016, for example, the 10 states (including the District of Columbia) with the highest per-pupil spending spent on average more than twice as much as the average of the 10 states with the lowest per-pupil spending—$18,359 as compared to $8,352. Massachusetts provides a within-state example. In 2018, among the state’s 50 school districts with 5,000 or more students, the average per-pupil spending in the top 10 was 50% greater than in the bottom 10. (Not surprisingly, in Massachusetts the average per capita income in the top ten was 75% greater than the average in the bottom 10.) The differences in levels of spending have counterparts in different trends, especially among the states.

These figures, however, probably overstate the degree of inequality in school spending because they are not adjusted for the cost of living. It is probably the case that the high-spending states and districts within states have higher costs of living than do the lower-spending states and districts within states.

And then there is the role of information technology. It has become obvious during the era of Covid-19, but it was an issue well before—namely, that schools have to provide their classrooms, and sometimes each kid, with a computer or tablet. Although the cost of these kinds of equipment has dropped dramatically in recent years, they are still much more expensive than the pencils and pens of the 1980s and 1990s. In other words, the correction of the school funding figures for inflation might be wrong, underestimating the rising prices of school supplies—and thus overstating the increase in school funding. I want to emphasize that I and many others believe that these expenditures—from improved educational programs to computers—are highly desirable. Students with disabilities and ELL students have long been underserved, and improvements in their programs should be welcomed. Yes, program improvements and their expansion add to the costs, but we think that these are things that society should pay for, and they should not come at the expense of teachers’ salaries or other resources for students.

Neoliberalism Is Not All-Powerful

These various factors go a long way in explaining the apparent contradiction between perceptions and the data on school funding. The lack of data on particular points, however, leaves open the likelihood that the overall data are at least partially correct, that there have been real increases in school funding in parts of the country. To the extent that this is correct, it can be explained by the actions of teachers and other school staff in fighting for adequate funding and against neoliberal policies. The 2018 and 2019 uprisings of teachers in many states is a good example. Other examples have been the gains achieved in the Los Angeles and Chicago teachers’ strikes. And in Massachusetts, the success of teachers’ unions in halting the expansion of charter schools provides another example. (Charter schools are an important part of the story, but that part will have to wait for another day.) While these actions and their impacts post-date the data cited above, they demonstrate important lessons: neoliberalism is not all-powerful, and unions matter.

It has helped that many state and local governments, and the citizenry, are not dominated by the neoliberal, conservative ideology that has dominated in Washington, D.C. Progress is possible.

is professor emeritus at UMass Boston and a Dollars & Sense Associate.

Digest of Education Statistics, 2018; Federal Reserve Bank of St. Louis (; Sylvia Allegretto and Lawrence Mishel, “Teacher pay penalty dips but persists in 2019,” Economic Policy Institute, Sept. 17, 2020 (; National Center for Education Statistics, “English Language Learners in Public Schools,” May 2020 (; U.S. Department of Education Institute of Education Sciences, “English Language Learner Students in U.S. Public Schools: 1994 and 2000,” National Center for Education Statistics, August 2004 (; Jack Martin, “Limited English Proficiency Enrollment and Rapidly Rising Costs,” Federation for American Immigration Reform, August 2017 (; Ana B. Ibarra, “Hey, Hey! Ho, Ho! Is Striking for School Nurses the Way to Go?” California Healthline, Feb. 20, 2019 (

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