Specialization does not increase the damage done or the amount of your healing spells. It provides a chance to reduce the mana used upon successfully casting the spell of the appropriate school and reduces the chance of fizzling in that school of magic.
As you increase in actual levels your nukes, heals, and buffs deal more damage and heal more hp to a maximum point until you get the next upgrade in the spell line which scales up as you level.
So your spell damage is working appropriately, and you should find that your alteration spells save you mana occasionally.
http://wiki.project1999.org/index.ph...Specialization