Education is one of the most important sectors in any economy, which makes it a crucial public policy issue, says Phuong Nguyen, assistant professor at the University of Iowa’s School of Urban and Regional Planning.

Nguyen comes from Vietnam, where he says parents put a great emphasis on educating their children. Seeing parents spend a large percentage of their income on education motivated Nguyen to learn more about education finance and policy and to apply the estimation techniques he learned in the United States to research projects in Vietnam.

Nguyen says his mission as a scholar is to provide insight into public policy issues that often lack empirical evidence. His research in public finance and public policy ranges across several fields, including education and transportation, both in the United States and Vietnam.

“Policy-makers or state politicians need to be aware of the potential effects of any policy,” says Nguyen. “I try to shed light on some of the unintended consequences that may occur, and hopefully we have better public policy as we go along.”

He says more information is always better in any public decision-making process, because such decisions affect so many people.

According to his research, Vietnam’s current educational funding system is insufficient in many impoverished regions. “Under the current distribution formula, the central government does not take into account various factors that may affect the cost of producing an adequate education for kids in poor provinces,” says Nguyen.

As a remedy, Nguyen suggests the government could use “cost function estimation” as a tool to better distribute funding for its cities and provinces.

For example, he lists three major types of disadvantaged students—limited English proficiency (LEP) students, poor students, and students with special needs. The cost-function approach gives administrators an estimate of how much each type of student might cost to educate.

“Special needs students may cost 1.5 times more than a regular student. So a school district with a higher percentage of special needs students requires a proportionate amount of funding,” says Nguyen.

He says this cost function estimate approach has been adopted in several states in the U.S., but is generally not used in developing countries.

“My essay is the first one to use the cost function approach for education funding in the developing country context,” says Nguyen.

Nguyen has also examined the impact of education finance reform in Massachusetts in 1993. Under the reform, the state provided more money to needy school districts. More state aid may have opposing effects on student performance: a positive effect when income-induced demand for student performance increases and a negative effect when district inefficiency rises. In his essay, co-authored with John Yinger of Syracuse University, Nguyen found that this reform brought about an increase in student performance (represented by better test scores) in low-performing districts.

Nguyen has also looked at the effects of budget referendums on small city school districts in New York in 1998. He determined that these districts reduced instructional spending and increased student-teacher ratios while preserving administrative spending.

Currently, Nguyen is investigating educational outcomes in local school districts that have the ability to levy a tax. (Iowa schools have that ability.) Nguyen’s research examines local income tax in Ohio to see whether tax revenue plays a role in increasing student performance.

“I want to see if school districts with local income tax can have a better school and provide a better education for local residents’ kids,” says Nguyen.

He hopes his research will provide parents who vote on local income tax referenda with useful information about whether such tax revenue might lead to an increase in student performance.

While questions of taxation often prove controversial, Nguyen keeps his research impartial and scholarly by following the best available methodology and simply reporting the results.

“I don’t have a preconceived idea when I begin to research, because that may bias the results,” says Nguyen. “I go into projects with a clear mind. I just let the data tell me the answer.”

In Vietnam, Nguyen says, the entire education system is divided into 63 cities and provinces, and the cities and provinces do most of the financing. Parents contribute a large share of the revenue at the schools their children attend. The schools usually ask parents to voluntarily contribute.

He says in the U.S. there are three major ways of determining the minimum expenditure needed to provide an adequate education for children in local school districts: 1) a professional approach, 2) a “successful school” approach, or 3) a cost function approach. A professional approach means a group of experts convene and discuss the minimum funding requirements. The “successful school” approach involves a smaller number of experts, who select and examine successful schools to see how much they spend to achieve their success. The cost function approach uses econometric methods to estimate how much each particular type of student costs to educate. 

Nguyen also researches the effects of asymmetric responses in school funding and public policy. When a school district sees an increase in state aid, that aid increase does not necessarily mean that school spending can increase the same amount, because when the school district receives one dollar from the state, the school district may simultaneously lose money due to a reduction in local taxation. This is known as an asymmetric funding scenario.

Another type of asymmetry can occur when funding is cut. For example, a one dollar decrease in state aid may lead to an even deeper cut in spending. Such extreme asymmetric situations occur when the expectation of future shortfalls leads a school to cut programs. “That’s how the asymmetry can be observed,” say Nguyen. “One dollar is increased, and then when you take one dollar back, it doesn’t go back to the original place where you were.”

Nguyen says the public finance literature on this problem has looked at city and county governments, but not educational settings. Nguyen doesn’t know why this problem is so understudied, but he thinks his research and publications on the phenomenon are useful in relation to the economic downturn that hit in late 2007.

“Many school districts had their students’ state aid cut, and it’s particularly relevant if we know how the public school districts may react to those state aid cuts. Whether they will try to cut more than $1 with state aid cuts, or tax more and reduce spending by less than a full dollar,” says Nguyen. “My paper is trying to fill that gap in the literature.”