The Low Cost of Accountability

Summary of working paper 8855
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Even if accountability costs were 10 times as large as they are, they would still not amount to 1 percent of the cost of public education!

One of the chief arguments against the wider implementation of accountability in American public education - comprehensive and properly administered testing, well-defined standards, and an effective report card system - is that it is simply too expensive. In fact, critics argue that accountability is so costly it must come at the expense of such educational aims as reducing class size or increasing teachers' salaries. But in The Cost of Accountability (NBER Working Paper No. 8855), Caroline Hoxby assesses publicly available data and concludes that in proportion to the cost of other education programs, the cost of accountability is minuscule.

The cost of accountability is readily discernible in state budgets, school budgets, and in the revenues of the commercial firms that prepare the testing instruments, grade them, and issue reports. Because of the small number and large market shares of the firms involved, Hoxby says, analysts have a very clear sense of the industry's revenues from accountability systems. According to the Association of American Publishers, total revenues from the sales of tests, related teaching materials, and services amounted to $234.1 million in 2000. But even though this figure includes revenues from a wide range of tests (I.Q., diagnostics for disabled children, career guidance tests, and the like), Hoxby calculates that the revenues amount to only $4.96 per student. Even adding in the cost of the National Assessment of Educational Progress, the only significant test not produced by a commercial test publisher, the accountability cost per pupil reaches only $5.81. Since the overall average cost of educating a child in the United States in the 2000-1 school year was $8157, payments to all test makers represented just 0.07 percent (seven-hundredths of 1 percent) of the cost of elementary and secondary education. Put another way, Hoxby states, even if accountability costs were 10 times as large as they are, they would still not amount to 1 percent of the cost of public education!

Hoxby notes that average costs differ from state to state depending on a number of factors, including the amount of test evaluation done "in house," the degree to which tests are tailored to a specific state's requirements, and so on. But because accountability systems tend to be highly popular with the public, states have an incentive to overstate rather than to understate their financial commitment to accountability. Thus, she writes, once we add up a state's reported expenses for its accountability system, we will certainly find the upper bound on how much it costs to maintain an accountability system.

Hoxby analyzes the educational accountability costs of 25 states, including all the states that have very well known or expensive systems. The systems vary in regard to the amount of testing and in how test results are reported and tracked from year to year. Other factors include the specific testing required in a particular state and the size of the state's population. Thus the statewide expenditures range from a low of $1.79 per student in fiscal 2001 (South Carolina) to a high of $34.02 (Delaware). Arizona's fairly comprehensive accountability system, often cited as a model for other states, costs $8.72 per pupil. California's more elaborate system costs $19.93. But Hoxby maintains that even if every state spent as much as Delaware does per student on accountability, this still would amount to only 0.4 percent, or less than one half of 1 percent, of the total per pupil expenditure in the nation's public schools.

Analyzing national data, Hoxby finds that an educational policy of a reduction in class size of 10 percent (which typically translates into an average of two fewer students per class) requires an increase in per-pupil spending that averages $615 in the United States. Thus, such a class size reduction would cost 12,399 percent more than the current average cost of an accountability system. Likewise, a 10 percent increase in teachers' salaries would cost the average American school $437 per student, which would be 8,810 percent more than the average cost of assessment.

Finally, Hoxby examines the common criticism that accountability systems result in "teaching to the test." Noting that the goal of accountability systems is to give schools strong incentives to teach the material that is ultimately tested, she argues that we must distinguish between teaching the test (bad) and teaching the curriculum on which the test is based (good). Policymakers mean to encourage teaching the curriculum, but they should discourage teaching the test, which occurs through outright cheating and when teachers know the test questions and prepare students with specific answers. Hoxby notes that annually revised tests and outside proctors who deliver, administer, and return tests to the test-grading company would cost no more than $4 per student, which is less than 0.05 percent (5 one-hundredths of 1 percent) of U.S. school spending per pupil. With such cheap solutions to the problem of teaching the test, there is no reason for any accountability system to have less than sterling integrity.

Overall, Hoxby concludes that accountability is so cheap compared to other educational reforms that almost any cost-benefit analysis will favor it over other reforms. Moreover, she notes that many other reforms work better when parents and policymakers can evaluate progress continuously, something that is much easier to do if an accountability system is in place. Accountability tends to be complementary with other reforms, and it is so inexpensive that it can always be combined with them.

-- Matt Nesvisky