Are there Economies of Scale in School Districts?

Given the current laws and policies governing school districts, what is the most economically efficient size for a school district?

In 2002, Matthew Andrews, William Duncombe,  and John Yinger said the following:

The best of the cost function studies suggest that sizeable potential cost savings in instructional and administrative costs may exist by moving from a very small district (500 or fewer pupils) to a district with ca 2000–4000 pupils.

In 2007, two of those authors said there are savings from combining smaller districts, but they also offered a warning:

We find economies of size in operating spending: all else equal, doubling enrollment cuts operating costs per pupil by 61.7 percent for a 300-pupil district and by 49.6 percent for a 1,500-pupil district. Consolidation also involves large adjustment costs, however. These adjustment costs, which are particularly large for capital spending, lower net cost savings to 31.5 percent and 14.4 percent for a 300-pupil and a 1,500-pupil district, respectively. Overall, consolidation makes fiscal sense, particularly for very small districts, but states should avoid subsidizing unwarranted capital projects.

More recently, Standard and Poors evaluated school districts in Pennsylvania, said that diseconomies of scale kick in at about 3,000 students in a district.

Districts with fewer than 500 students spend an average of $9,674 per pupil in operating costs.3 As districts get larger, their per-pupil spending tends to decrease, until it reaches an average of $8,057 among districts with 2,500 – 2,999 students. However, average per-pupil spending tends to go back up again as enrollments exceed 3,000 students.

It concluded that Pennsylvania seek to consolidate districts so that they had an enrollment of about 2,500 to 3,000 students. Granted, Pennsylvania is not Kansas, but I suspect a similar logic is at work in Kansas. It is very similar to an analysis of district spending in Michigan.

Note, however, that an “adequacy” study of Wisconsin, which also found a u-shaped curve, put the optimal district size at close to 6,000 students. (Yes, I appreciate the irony of quoting a literature that I have had serious objections to.)

I’ll have more on this subject as time allows. Consolidation will certainly be an ongoing concern of Kansas legislators.

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