Consolidation and the Costs of Public School Systems

Posted on January 14, 2009

When budgets get tight across states, legislatures try to figure out where they are going to find savings… as fast as possible.  One idea that resurfaces now and then is  consolidation of school districts and/or other layers of government within states, where some of those layers draw on state resources – especially schools. The issue has again emerged in Kansas as having the potential to produce “huge” savings. There is little doubt in the research literature on public education costs that smaller school districts do have elevated costs of producing even the same outcome levels of larger districts. The best review of literature on this topic was written by Andrews, Duncombe and Yinger (2002) in the Economics of Education Review, which noted that costs tend to rise for districts enrolling fewer than 2,000 students. Costs tend to rise most sharply for districts enrolling fewer than 300 students. Duncombe and Yinger have also produced more recent work on the potential savings from consolidation.

In this article (later published in the Journal of Education Finance and Policy) the authors do find that consolidation can lead to reduced operating costs – assuming schools within districts are reorganized to achieve more optimal size.

As you might expect, Kansas Liberty, throwing its support behind the conservative house Speaker Mike O’Neil has chosen to echo the speaker’s arguments about the huge potential savings… most likely from reduction of administrative redundancies (their argument… certainly not mine).

Consolidating Kansas school districts and other layers of government further is probably a good idea, but the savings are unlikely to be any where near as large as legislators might desire. A few important points:

1. central administrative overhead costs for public schools are relatively small – as a share of public education expenditures. The real long term savings comes not so much from reducing centralized administration (numbers of district units) but from reorganizing individual schools into more optimal operating sizes – where feasible (elementary schools of 300 to 500 students and high schools of 600 to 900 students). But, achieving this optimal long run arrangement often means significant increases in short run capital costs. As such, a well designed consolidation plan likely does not help with the short term budget crunch.

2. When one thinks of consolidating Kansas school districts, one often thinks only of consolidating the smallest of rural school districts, but many of these districts likely can’t feasibly be consolidated at the school level. Only the relatively small district level redundancies might be eliminated. One must also look to reorganize smaller districts that are carved out of and clustered near the state’s much larger cities and towns (e.g. consolidating Piper with KCK).

As for total savings, the legislature needs to realize that large shares of the state’s children already attend scale efficient, reasonably well organized school districts (as a function of the 1963 consolidations) and many of the children who attend very small districts also attend districts that are geographically remote, such that the bulk of operating costs cannot (with present teaching/learning strategies) be cut.

Consolidating and/or reorganizing school districts is likely an even more viable option for states other than Kansas.  I cannot say enough that the rationality, equity and adequacy of state programs for financing public school systems is inextricably linked to the organization of those school districts  – the grade ranges of children they serve, the enrollment size of those districts and the extent to which many small “un-organized” school districts are, in some states, carved out of densely populated areas.

Below is a table of states ranked by the percentage of children in those states who attend scale efficient (>2,000 students) unified K-12 school districts (NCES Common Core of Data fro 2006-07). While states like Montana, South Dakota, Wyoming and Nebraska make this list – as does Kansas, there is arguably less that can be done in these states to feasibly relocate children into schools and districts of optimal size.

Vermont, on the other hand is a particularly interesting case – with only slightly more students in total than Wyoming, but very few attending unified public school districts of reasonable size. Vermont is near the top of my list for major re-organization, especially as student enrollments continue to decline. The lack of organization of Vermont school districts, the role of non-operating districts and complex tuition arrangements between elementary and union high school districts has – year after year – undermined that state’s ability to achieve greater equity in school funding.

The case is similar, though arguably even more exaggerated in the nation’s most population dense state – New Jersey. Like Vermont, New Jersey has a multitude of small, non-unified school districts, not in the remote southern pine barrens area, but in densely populated areas adjacent to New York City (Bergen County) and near Philadelphia. In some cases, undersized K-8 school districts span a few city blocks. Even more so than Vermont, New Jersey has made efforts to improve equity in school funding – but some of these gains are necessarily offset by the awkward and inefficient organization of New Jersey school districts.

Finally, there’s Illinois – which unlike Vermont or New Jersey has never really made any effort to improve equity in financing schools. In fact, Illinois is among the only states that to this day maintains a persistent strong negative relationship between available school resources and school district poverty and racial composition. Now, not familiar with details of school district organization in Illinois, one might assume the unorganized school districts to exist in the southern and more rural regions of the state. However, Illinois’ lack of organization of school districts mirrors that of New Jersey – existing primarily in the most densely populated suburbs around Chicago.

So, there they are… my picks for the day for consolidation and reorganization – Vermont, Illinois and New Jersey – if anyone is paying attention. In Illinois and New Jersey especially, the geographic constraints to reorganizing where students attend school are minimized. Vermont might take a little more work, and all three will require some significant investment in new and reorganized infrastructure.