Identifying the Real Costs of Public Education

Published December 1, 2003

Public Education As a Business: Real Costs and Accountability, by Myron Lieberman and Charlene K. Haar (Scarecrow Press, 2003; 232 pages; $32.95; ISBN: 0810847191)

In a speech to the American Society of Newspaper Editors in Washington, DC on January 17, 1925, President Calvin Coolidge said, “[T]he chief business of the American people is business.” If Coolidge were speaking to newspaper editors today he would likely say, “The chief business of the American people is education.”

Education, indeed, is one of America’s largest industries. In the fall of 2002, some 78 million people in the U.S. were involved in providing or receiving formal education, with total expenditures for public and private education from prekindergarten to graduate school estimated to be nearly $700 billion for the school year 2001-02. About 60 percent of that total, or $423 billion, was spent on public and private elementary and secondary education.

However, as an important new book demonstrates, the largest component of that spending—public education—understates the actual costs by a significant amount. Although the exact amount of the understatement is often difficult to quantify, the nature of the understatement is detailed in Public Education as a Business: Real Costs and Accountability, by Myron Lieberman and Charlene K. Haar, who are both with the Education Policy Institute in Washington, DC and the Social Philosophy and Policy Center at Bowling Green State University in Ohio.

While accurate reporting of costs in private-sector businesses has become a major public policy issue in recent years, accurate reporting of costs in the public sector “is usually taken for granted,” the authors point out. That, they make clear, is a big mistake.

Lieberman and Haar identify three kinds of costs that are not included in the figures provided by government agencies and cited by the media as current per-pupil expenditures in public elementary and secondary schools:

  • Costs met by educational government agencies, such as costs for capital outlays, interest, debt service, unfunded pensions and other post-retirement costs, plus expenses met by public school foundations;
  • K-12 education costs incurred in noneducational public agencies, such as tax collection agencies, prisons, Indian reservations, and Department of Defense and Department of State schools;
  • The nongovernmental costs of K-12 public education, such as the cost of remedial education paid for by parents.

These cost omissions are significant. For example, the authors contend that excluding capital outlay, interest, and debt service leads to a 15 percent or more underestimate of the per-pupil cost in average daily attendance in public schools. Also, a 2001 study estimated that eliminating unfunded public employee pension liabilities in Oregon could add $1,207 per year to per-pupil costs for the next 40 years.

Because of its subject matter, Public Education As a Business is not an easy book to read, except perhaps for accountants and financial analysts, but it is a book that should be read widely. Although its insights will be helpful to public school officials and school reform advocates, they will be particularly enlightening to education reporters and education policymakers, for whom the book should be required reading.

“It is … remarkable,” note the authors, “that so little attention has been paid to the erroneous government statistics on the costs of public education.”

George A. Clowes is managing editor of School Reform News. His email address is [email protected].