The U-Shaped Curve in Per-Pupil Spending: A View from Michigan

From a financial point of view, is there an optimal size of a school district?

In 2007, the Mackinac Center for Public Policy published a report on school district sizes in the state of Michigan. Now, Michigan is not Kansas, but looking at other states can give us some ideas of how district size and expenses interact?

Here’s the key paragraph from the executive summary of the report, titled, School District Consolidation, Size and Spending: an Evaluation

Based on the model developed for this paper, the most cost-effective size for school districts in Michigan is roughly 2,900 students. Both smaller and larger districts are likely to spend more per pupil, other things being equal. In light of this finding, it is correct to surmise that some Michigan public school districts are probably too small, and others too large, to operate with optimal cost efficiency.

The 2,900 enrollment is far lower than the 10,000 threshold of HB2728, but much larger than typical district in Kansas. According to the Kansas Comparative Performance and Fiscal System, the median sized district in 2008-2009 was 523.6 students.

What’s very interesting about the report, which uses regression analysis, is that it estimates that while consolidating some districts could save money, much more money could be saved by breaking up large districts. In fact, breaking up big districts could save 12 times the money of consolidation: $363 million, compared with $31 million per year.

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