Welcome to the seventh blog post in the Region 5 Comprehensive Center’s Strategic Budgeting series. As outlined in our first post, we are walking through the five elements of Strategic Budgeting to help provide additional tools to local education officials who want to think about their budgets with a wider lens.
Today’s post is the second of two about Using Data. You can read the previous one here for an overview about using data to inform resource allocations.
Today, we take up the topic of cost-effectiveness analysis, a method for combining effectiveness and cost data to compare how much improvement is generated per dollar spent across different program alternatives.
What is Cost-Effectiveness Analysis and Why is it Important?
Cost-effectiveness (CE) analysis is a tool that may be used by districts to compare the costs and effectiveness of two or more program alternatives with similar goals. The value of CE analysis is that it takes both effectiveness and cost into consideration. One program alternative may promise the greatest level of improvement, but is also very expensive to purchase and implement, leading to a high cost per unit of improvement. CE analysis may identify one or more alternatives that offer comparable levels of improvement at a much lower price. By adding cost to the equation, your district can make more efficient investment decisions.
For example, if your district is evaluating remedial algebra intervention programs, CE analysis can help you determine which alternative would provide the most improvement for the least cost per unit of improvement; in other words, which offers the greatest “bang for the buck.”
CE Analysis Steps
A CE analysis requires both a common outcome measure, such as a change in NWEA scale scores, which may be compared across the alternatives under consideration, and a detailed accounting of the costs of each. A CE analysis then calculates the cost-effectiveness ratio, which tells us the cost per unit of improvement for each alternative intervention.
Levin, et al. outline the following four steps for conducting a CE analysis:
The example below shows the results of a CE analysis of five programs designed to improve high school completion. The programs improved graduation rates by between 9.2 and 19.8 percentage points. The CE ratio shown in the last column is calculated by determining the cost (number of participants X cost per-participant) divided by the unit of improvement - in this case, number of additional graduates. For the Talent Search program, this calculation is:
(3,930 X $3,290)/423 = $30,520
Comparing the CE rations shows that Talent Search, with the lowest ration, is the most cost-effective among these programs. The CE ration may be interpreted as the cost of producing each additional graduate equaling $30,520
While CE analysis may seem complicated, the Region 5 Comprehensive Center is working on a CE brief that goes into more detail about how to do cost-effectiveness analysis, along with a cost-effectiveness calculator tool to streamline the process. We will let you know when these are available.
Some Helpful Resources
The following resources may be helpful to understand and get started using CE analysis.
- The Center for Benefit-Cost Studies of Education at the University of Pennsylvania Graduate School of Education is a federally funded center dedicated to using cost analyses in education decisionmaking. The site includes introductory information, tools, and study reports https://www.cbcse.org/. For published analysis reports and articles on methodology, see https://www.cbcse.org/publications. For training opportunities see https://ies.ed.gov/funding/grantsearch/details.asp?ID=4467.
- For a comprehensive guide to using cost analyses, including CE analysis, see Levin, H. M., McEwan, P. J., Belfield, C., Bowden, Brooks A., & Shand, R. (2018). Economic Evaluation in Education: Cost-Effectiveness and Benefit-Cost Analysis. Los Angeles, CA: Sage. https://methods.sagepub.com/book/economic-evaluation-in-education-3e.
Next Week’s Blog Post
Our next post will be the first post on communicating with, and engaging the district and the broader community, in the strategic budgeting process. We hope you will join us. In the meantime, let us know if you have any questions or suggestions. You can reach us at BradKeller@westat.com.
New posts will appear here on Monday mornings, so feel free to bookmark the page. This is the seventh post in the series; if you want to start at the beginning of the series, go here. The previous post was the first half of this discussion about using data, and can be found here.
KEEPING UP WITH OUR POSTS
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