Maximum consolidation savings would be $31 million annually; breaking up large districts would provide maximum savings
of $363 million annually

For Immediate Release
Tuesday May 22, 2007
Contact: Andrew J. Coulson, Adjunct Fellow
989-631-0900
ACoulson@Cato.Org

MIDLAND — School district consolidations would not be a substantial source of savings for Michigan taxpayers according to a new report released by the Mackinac Center for Public Policy.

The report, titled "School District Consolidation, Size and Spending: an Evaluation," finds that other things being equal, districts of roughly 2,900 students tend to spend the least per pupil, and that both smaller and larger districts tend to spend more. The maximum theoretical savings from consolidations would be on the order of $31 million annually, while the maximum theoretical savings from breakups would be on the order of $363 million annually. That is partly because the vast majority of students in conventional public schools are currently enrolled in "overly" large districts.

Author Andrew J. Coulson, an adjunct fellow with the Mackinac Center and director of the Center for Educational Freedom at the Cato Institute, cautioned, however, that the maximum theoretical savings could not likely be approached, and certainly not maintained, in practice. To realize these theoretical savings, he said, "it would be necessary to redraw the lines for every district in the state, replacing them with over 570 new districts of optimal size. Even if that were politically feasible, population mobility and population growth would make it difficult to maintain optimal district size over time." Actual long-term savings from even an ambitious campaign of both breakups and consolidations, Coulson says, would likely be far below the theoretical maxima, and "would not put much of a dent in the $17 billion spent annually in Michigan’s public schools. It’s also unclear how district consolidation might affect academic quality."

But while the study finds that district size is only a weak predictor of per pupil spending, it identifies another factor that explains 10 times more of the variation in spending from one district to the next: the ease with which public school officials can raise money. "When you do a statistical analysis of this kind," says Coulson, "you have to control for other factors besides district size that might affect per pupil spending." Two of the control variables in Coulson’s model represented competing theories of public officials’ spending behavior: the view that officials spend only as much as they need to in order to fulfill the public’s demand for educational services, and the view that officials spend as much public revenue as they can obtain. Coulson’s results suggested that the latter view was more accurate and that it explained 15 times more of the variation in spending between districts than did the public’s level of demand for education. "As things stand," says Coulson, "the public school system provides incentives for officials to raise per pupil spending, regardless of public demand."

"What that means," he added, "is that efforts to rein in spending will be futile until public school officials at all levels face incentives to offer high-quality services as economically as they can. So a major expansion of competition and parental choice would likely have a much greater impact on educational costs than consolidating or breaking up districts."

The Mackinac Center for Public Policy is a nonprofit, nonpartisan research and educational institution headquartered in Midland, Mich.

The 35-page Mackinac Center report is available at www.mackinac.org/8530.

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