The Costs and Benefits of Test-Based Promotion

Several states have recently adopted test-based promotion policies that require students to score above a minimal threshold on a standardized test in order to be promoted past a certain grade. Policies requiring students to demonstrate basic reading proficiency in the third grade are especially widespread. A growing body of research evaluates the effects of treatment under test-based promotion policies as well as retention occurring due to the decision of teachers, schools and parents (from here “discretionary retention”) in the short and long run. This literature has produced somewhat mixed results. In addition to its inconsistent effects, several authors have criticized the use of test-based promotion because it is seen as a very expensive reform. Retention is costly for both taxpayers who must fund up to an additional year of schooling for the child, and for students who enter the labor market up to a year later than they would have otherwise. However, the research to date suffers from three key weaknesses that limit our understanding of the overall costs and benefits of test-based promotion policies. • All previous plausibly causal estimates of the effect of treatment under test-based promotion policies have used a research design that produces results that only strictly hold for those with scores in the gateway grade that were just above or just below the threshold that triggers the treatment. Thus, if the effect of the treatment varies according to the student’s performance within the gateway grade, prior research has not produced externally valid estimates of the overall treatment effect. • Prior assessments of the relative costs and benefits of test-based promotion policies fail to adequately account for their effect on student performance within the gateway grade, prior to the retention decision. • Previous authors substantially overstate the cost of discretionary retention and especially of retention under test-based promotion policies to both students and taxpayers. In particular, they fail to take into account the delay between supplying and paying for the treatment, and they do not account for the fact that many students retained under the policy avoid retention that would have occurred in a later grade otherwise. This paper addresses each of these issues within the context of measuring multiple impacts and assessing the costs of Florida’s third grade test-based promotion policy. Florida adopted a test-based promotion policy for third grade students as part of a concerted effort to raise early grade literacy in the state. Beginning with third graders in the 2002-03 school year, students were required to score Level 2 or above on the state’s mandated reading test in order to be default promoted to the fourth grade. Important findings include: • The threat of retention led to statistically significant and substantial increases in student math and reading performance within the third grade, prior to the retention decision. • On average, treatment under the policy led to significant and substantial gains in eighth grade math and reading test scores and increased the probability that students earn a regular diploma. • The cost of test-based promotion for both taxpayers and treated students is substantially less than suggested in prior research. • For treated students, the expected later increase in earnings due to the policy is greater than the lost earnings due to foregone time in the labor market. • The statewide net increase in the expected present value of lifetime earnings associated with the policy far exceeds its costs to taxpayers.