Bridging the Divided: School Finance Policy Reform in Israel

• In Event: Developments and challenges in economics and finance of education: Evidence from LMICs and high-income countries

Proposal

Academic success plays a pivotal role for both students and nations. At the individual level, it facilitates personal development and lifelong improvement. High academic achievement often correlates with improved economic outcomes, as high-performing students tend to pursue higher education, earn higher salaries, and engage in more prestigious professions. Moreover, academic success is associated with better health outcomes, increased social contribution, and political participation.
At the national level, academic success contributes to economic growth and elevates the average standard of living. Globally, it enhances a nation's competitiveness in the world market (Lucas, 2002; McMahon, 2010; Stiglitz & Greenwald, 2014).
While natural ability among students is normally distributed, regardless of socioeconomic background, empirical evidence suggests that students from lower socioeconomic backgrounds or with less-educated parents face lower success probabilities compared to their more privileged peers.
The Israeli Ministry of Education's policy is predicated on the notion of equity investing more resources in students with lower starting points to mitigate educational gaps and improve their chances of academic success. This investment strategy aims to enhance overall achievement distribution, accelerate economic growth, and maintain social resilience.

One method of implementing this strategy is the allocation of additional resources to schools serving disadvantaged students, quantified through a "Funding Formula" in Israel. This formula reflects the additional resource needs of students with lower starting points and has undergone several iterations throughout Israel's history.

The formula calculates a score for each student, which is then used to rank schools into deciles. The highest decile (10) represents the population with the lowest starting points, requiring the most additional resources, while the lowest decile (1) represents the population with the highest starting points, requiring no additional resources.

This resource allocation strategy considers both the basic needs of each school and the additional needs of disadvantaged students. The presentation will provide a comprehensive overview of this public resource allocation system, including its theoretical underpinnings, international comparisons, historical development in Israel, and current criticisms of the existing model.

Author

• Iris BenDavid-Hadar, Bar Ilan University