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Does Capital Spending on Schools Improve Education?

In a new study, Yale SOM’s Barbara Biasi and her co-authors drew on data covering most of the United States in order to track the effects of capital investments by school districts, such as new buildings or athletic facilities. They found that some projects improve test scores and others boost local property values—but they aren’t the same ones.

Construction on a school building

Construction at Cleveland Charter High School in Reseda, California, in 2020.

Mel Melcon / Los Angeles Times via Getty Images

As anyone who is planning to move to a new city or neighborhood with a school-aged child knows, not all public schools are created equal. Some have shinier athletic facilities or bigger classrooms or newer equipment in the science and computer labs, all indications to anxious parents that their children will receive a superior education, which will better equip them to prosper and succeed in life.

New athletic fields and computers and improvements to school buildings all cost money, of course, which school districts raise through capital bonds, financed by property taxes. The community as a whole, even voters who don’t have kids or any connection to the school, votes on the bond issues during municipal elections. For many parents, and even many members of the community who don’t have children in local public schools, higher taxes are a price they are willing to pay for better schools.

But does every capital project lead to a better education, at least as measured by test scores? Economists have been studying this question for a few decades and have come up with widely divergent answers. Some say any educational investment is worthwhile. Others say the positive effects are greatly exaggerated. Barbara Biasi, a labor economist at Yale SOM, and her colleagues Julien Lafortune of the Public Policy Institute of California and David Schönholzer of Stockholm University suspected that the answers varied so widely because they were based on studies that looked at very different contexts.

“People who have looked at this question before have been using data from one state or even one district, where typically there aren’t a lot of differences in the way the money is spent or among students,” Biasi says. “Also, most of these studies focus on amounts spent over a year, but not on what they’re spent on.”

Their new study, which they’ve been working on since 2018, examines data from across the entire United States and takes into account differences in schools and communities in order to quantify the effects of capital projects on the quality of education and the price of real estate.

Their dataset contained information on house prices and test scores (normalized to account for variations between state achievement tests) from 28 states, encompassing approximately 70% of the nation’s public school students, and on 17,000 bond issues, which they sorted into eight separate spending categories: classroom space, school infrastructure, IT and STEM labs, athletic facilities, land, vehicles such as buses, and improvements to meet health and safety standards. The objective was to see where different communities elected to spend their money and to determine the effects of the various categories of spending.

“We first estimated the impact of the average bond or the average project on both test scores and house prices” Biasi says. Then we asked, how does spending on each category impact the outcomes? We were able to isolate the causal impact of passing a bond by comparing close elections, those where the bond proposal either passed or lost by a very narrow margin. The idea is that these two sets of elections are very similar to each other in both observable and unobservable ways. Therefore, comparing bond proposals that passed to those that did not pass, in this subset, gives us the causal impact of capital spending.”

The community as a whole doesn’t always value items that increase test scores, like improving HVAC systems or other infrastructure issues. These investments don’t affect taxpayers unless they have children in the school, and they are not necessarily visible or salient to them.

The researchers discovered that, on average, capital projects raise both test scores and property values. The impacts, though, are almost uniquely present in districts with more disadvantaged students.

The most striking result of the study, though, is that effects depend crucially on what the money is spent on, and that projects that lead to better test scores are not the same as the ones that raise property values. “On average, the community as a whole doesn’t always value items that increase test scores,” Biasi says. “For example, the categories that most benefit test scores, like improving HVAC systems or other infrastructure issues, don’t raise house prices. This could happen because these investments don’t affect taxpayers unless they have children in the school, and they are not necessarily visible or salient to them. Projects such as expanding classroom space or building new athletic facilities, on the other hand, increase house prices, likely because they’re easier for people to notice.”

Part of the reason capital projects are more beneficial in low-income districts is because those districts choose to invest in the categories of projects, like infrastructure and HVAC, that raise test scores. Yet, even holding categories fixed, more disadvantaged districts benefit more from capital investments.

Biasi hopes the study will inspire voters to think more deeply before they vote on capital proposals, about whether they will benefit students or the community as a whole.

“My hope is also that this spurs a discussion about the implications, for our schools, of having important decisions—such as how much to spend on school capital—be made by voters,” she adds. The majority of voters, she notes, are not parents, so they don’t get to see or experience the benefits of certain projects and may not consider them important.

Though Biasi and her colleagues have been working on this study for five years—during which time they had four kids between the three of them, making these issues increasingly personal for the authors—they’re still not done. The next phase will involve studying the effects of different funding rules in different states. Some require a simple majority, others as much as two-thirds. As a result, a project that might have been approved in one community would be rejected by another, even if the exact same number of voters had favored it. Ultimately, they are interested in understanding how funding rules shape the projects that occur in equilibrium and how modifying those rules could impact both students and taxpayers.

“I’m really curious what the policy implications will be,” Biasi says. “This study will, I hope, speak to the debate over whether money matters. Public schools are supposed to be free, but really people are paying for the best public school they can afford.”

Department: Research