More than a million students are enrolled in highly inefficient districts, says the CAP report.

A controversial new study published by the Center for American Progress (CAP) analyzes K-12 school districts based on their productivity: the academic achievement a district produces relative to its education spending.

CAP researchers call their new index for evaluating school systems “educational productivity,” and according to the study, low efficiency costs the nation’s school systems as much as $175 billion a year in unproductive spending. Released last week, the report was blasted by many critics who argued that the success of a school system cannot be measured like that of a business.

“At a time when states are projecting more than $100 billion in budget shortfalls, educators need to be able to show that education dollars produce significant outcomes—or taxpayers might begin to see schools as a weak investment,” says the report.

Called “Return on Educational Investment: A district-by-district evaluation of U.S. educational productivity,” the report was written by Ulrich Boser, a senior fellow at CAP and research director of “Leaders and Laggards”—a joint project of the CAP, the U.S. Chamber of Commerce, and Rick Hess of the American Enterprise Institute that evaluates systems of education.

The study is not meant to undermine the need for education spending, or limit schools’ resources, CAP says; but rather, to explore whether education systems can be evaluated like companies: If public education were a business, with school districts as its franchises, would the business remain open? Would its customers ultimately be happy, or would they demand refunds?

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According to the study, a year-long effort that analyzed more than 9,000 school districts in more than 45 states, after adjusting for inflation, education spending per student has nearly tripled over the past four decades. “But while some states and districts have spent their additional dollars wisely—and thus shown significant increases in student outcomes—overall student achievement has largely remained flat,” the report says.

Besides Luxembourg, the U.S. spends more per student than any of the 65 countries that participated in the recent international reading exam from the Organization for Economic Cooperation and Development (OECD), the report says—and while Estonia and Poland scored at the same level as the U.S. on the exam, the U.S. spent roughly $60,000 more to educate each student to age 15 than either nation.

Boser and a panel of experts relied on education spending data from the 2008 school year, the most recent available, as well as on the results of 2008 state reading and math assessments in fourth grade, eighth grade, and high school.

Educational productivity was measured based on a district’s return on investment (ROI), controlling for differences in special education, low-income students, and living costs. This measure rates districts on how much academic achievement they get for each dollar spent, relative to other districts in their state.

The report’s main finding is that many school districts could “boost student achievement without increasing spending if they used their money more productively.”