Share this page:

J. Michael Smith, President — Michael P. Farris, Chairman
August 19, 2005

Federal Education Spending

Where the Money Goes? When Will it Stop?

There is no correlation between increased spending and student performance.

Despite the massive spending in federal dollars on education since the Department of Education was created in 1979, it is clear that increased government spending on education is not connected with improved education in America. In February 2001, newly elected President George Bush presented his budget to Congress. He recommended an 11.5% increase in the Department’s spending, the largest increase in history. This paper will track federal education spending and demonstrate how more dollars do not make more “sense.”

The 1996 Congressional Discovery

Total Expenditures per Pupil (for Fall Enrollment)

On February 28, 1996, Republican leaders in the House of Representatives held a meeting on abolishing the Department of Education. House Majority Leader Dick Armey (R-TX), flanked by Congressman Bill Goodling (R-PA), “Buck” McKeon (R-CA) and others, produced the results of an investigation by the Economic and Educational Opportunities Committee. The committee documented 760 unconstitutional federal education programs—175 from the Department of Education alone—located in 39 separate agencies, departments, commissions and boards. The combined unconstitutional funds totaled $120 billion. Further, the committee found that only six percent of these programs have as their primary function the teaching of math, reading, or science.

“This massive list of federal education programs clearly demonstrates what many of us had suspected for quite some time that Washington is out of control and out of touch,” said Rep. Goodling. Pointing to a huge stack of regulatory papers required for all the Education Department’s programs, McKeon remarked, “The Clintons say that it takes a village to raise a child, but that is only because it takes a village to fill out this paper work.”

More Dollars Don’t Make “Sense”

A new study conducted and released on August 25, 2000, by the American Legislative Exchange Council (the nation’s largest bipartisan, individual membership association of state legislators, with nearly 2,400 members across America) found that there is no correlation between increased spending and student performance. The study reported on state education performance, noting that Minnesota’s public school performance ranked highest in the nation spending at an average of $6,245 per student and the District of Columbia’s public school performance ranked last—even with spending $8,670 per student. According to ALEC Chairman Ray Hynes, “This study shows the path of least resistance fails our children, and that throwing more money at the problem is not the answer.”

According to an article by Paul Ciotti, Cato Policy Analysis no. 298, March 16, 1998, Kansas City began a 2 billion dollar, 12-year program in 1985, in an effort to create new schools, integrate schools and improve student’s poor test scores. After spending up to $11,700 on each student and implementing some very costly school improvements, the Kansas City schools had very little to show for the huge bills they incurred. In what Paul Ciotti called, “a major embarrassment and an ideological setback for supporters of increased funding for public schools” the Kansas City experiment demonstrated that the amount of money poured into an education system has little to do with the actual education students receive.

Over the last decade, spending per pupil has increased by 23 percent nationwide in real dollars, yet our public schools continue to perform poorly. On the other hand, homeschoolers spend on average less than $600 per pupil per year according to a 1998 study conducted by Dr. Lawrence M. Rudner. Compare that with the approximate $9,000 per student spent in the public schools each year. Since homeschoolers are scoring higher across the board on standardized achievement test like the ACT and the SAT, and spending significantly less for their education, it is obvious that students and schools do not need more money for success. Clearly, legislators should consider the success of home schooling and realize “more dollars do not make more scholars”.

Extensive Federal Education Spending Examined

According to the National Center for Education, the federal government provides support for education well beyond the programs funded through the Department of Education. Federal education spending was at an estimated $171.0 billion in fiscal year 2003, an increase of $108.2 billion, or 172 percent, since Fiscal Year (FY) 1990. However, the $171 billion spent on education was only the federal education spending for 2003. The Total U.S. Expenditures for Elementary and Secondary Education is considerably higher, and has been increasing consistently every year. (source:

One important measurement of the influence of federal spending on education is the difference between “on--budget” and “off--budget” spending. Off--budget spending is nonfederal funds made available for education purposes when federal programs require matching funds or offer incentives or subsidies. These funds are basically federal guarantees and subsidies for student loans made by banks and public and private lending authorities but are excluded from the federal budget. This creates an obligation by the federal government and results in additional government spending that must be financed through tax revenue. Over $32.2 billion in off-budget spending did not appear on the authorized outlays for education in FY 98. Off-budget spending makes up over 30 percent of total federal education spending.

Estimated federal on-budget funds for education, by agency: Fiscal year 2003

To put the growth of off-budget and nonfederal funds spending generated by federal legislation in perspective, it has grown from zero dollars in 1965 to inflation--adjusted $4.1 billion in 1975. Between 1980 and 1998, off-budget support grew 232.9 percent after inflation. The off-budget support has continued growing under President Bush, increasing an additional 37 percent from 2000-2003. (source:

On-budget programs, monies authorized by Congress for specific programs, institutions or research have also increased significantly. In fiscal year 98, Congress legislated $75.1 billion—an increase in current dollars of 118 percent since FY 80. More than half of this increase occurred between FY 90 and FY 98. Elementary and secondary education programs received $36.8 billion, nearly 50 percent of all appropriated education spending. Furthermore, by FY 2003, the Department of Education was receiving a whopping 46.1 percent of all the on-budget funds among agencies.

Growth of the Department of Education

Since the 1979 inception of the U.S. Department of Education, it’s spending has grown astronomically. Excluding expenditures on loans such as higher education loans, the Department spent $14,612 million in 1980, one year after its inception. By 1989, the ED’s budget had increased to $18,145 million and grew to $25,832 by 1992. Today, the Department of Ed’s outlays continue to grow, reaching over $34 billion in 1999, nearly $40 billion in 2001, and will approach $70 billion in 2005. The ED’s budget even increased more under the Bush Administration than under the Clinton Administration. The current argument among Congressional Republicans is that higher spending is the price that has to be paid for passing needed reforms.

Despite the fact that no positive correlation between spending and student performance has been found, Congress continues to fund the Department of Education, pumping more and more money into public education.

Red Tape

Although statistics show that only seven to eight percent of an average school’s budget is subsidized by the federal government, local districts complain about overwhelming paperwork and red tape required to receive these skimpy funds. A 1991 survey of Ohio school districts found that each district was required to fill out an average of 330 forms—157 were from the state and 173 from the federal government. Responsible for only seven to eight percent of the budget, the federal government causes 55% of the red tape.


The federal government’s involvement in education represents everything that is wrong with many of our government agencies: they are unconstitutional, wasteful, expensive, and out of touch. The Founders of America tried to prevent this when they added the 10th amendment to the U.S. Constitution, declaring, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” Under their interpretation, education was an issue to be dealt with at the state and local level, not by the national government. The Department of Education is unconstitutional and it is the duty of Congress to abolish not only the Department, but also the entire federal involvement in education. If Congress refuses to do its duty, the bureaucracy will continue to grow, and American education will continue to decline.

In 1979, Representative L.H. Fountain (D-NC) made an accurate prediction about the Department of Education that could be applied to the whole federal role in education. Fountain stated,

“I am opposed to this ill-advised and unnecessary legislation to establish a department which will grow and grow, cost the taxpayers of this nation unnecessary billions of dollars, and ultimately become an unmanageable monster bureaucracy.”