Midsize Michigan school districts tend to spend less per pupil
than smaller or larger ones do, but forcing smaller districts to merge would
probably not have a large impact on education spending in Michigan, a new study
The study, titled "School District Consolidation, Size and
Spending: an Evaluation," was commissioned by the Mackinac Center for Public
Policy, which publishes Michigan Education Report. The study’s author is Andrew
J. Coulson, director of the Cato Institute Center for Educational Freedom and an
adjunct fellow with the Mackinac Center.
Based on analyses of district size, per-pupil operating spending
and a variety of factors statistically associated with district expenditures,
Coulson concludes that districts of roughly 2,900 students tend to have lower
per-pupil operating expenditures.
"Both smaller and larger districts are likely to spend more per
pupil, other things being equal," Coulson writes in the study. While he
originally set out to study the potential cost savings of consolidating smaller
districts, the analyses showed that the theoretical savings from forcing small
districts to merge would be only one-twelfth the theoretical savings from
breaking up larger districts.
At best, Coulson says, "rough, ballpark figures" show potential
annual savings of approximately $31 million through small-district mergers and
approximately $363 million through large-district breakups. However, in either
case, the full gains would only be realized if all small districts could be
consolidated and all large districts could be divided into districts of optimal
size, an unlikely event because of geography and practicality alone, he points
out. Approximately 70 percent of Michigan’s conventional public school students
are enrolled in districts the study finds to be overly large.
The study also concludes that district size only accounts for
about 2 percent of the variation in per-pupil spending across districts, and
that size is much less important to per-pupil spending than the district’s total
income divided by its enrollment — a measure of how easy it would be in theory
for districts to increase per-pupil spending.
"If legislators and the governor wish to address the spiraling
cost of public schooling, this study points to a far more important factor than
district size: the incentive structure of the system itself. The model developed
here indicates that public school districts generally endeavor to spend — and
succeed in spending — as much as they can," the study says.
Consolidation of school district services — as opposed to school
districts themselves — is one topic under discussion at the state level, as
legislators and policymakers discuss ways to address shortfalls in the education
budget. Gov. Jennifer Granholm, in her 2007 State of the State address, called
for schools to share noninstructional services as a cost-saving measure. That
idea has been echoed by Superintendent of Public Instruction Mike Flanagan.
"I don’t think consolidation of school districts is the first
step," Flanagan said in an April podcast posted on the Michigan Department of
Education Web site. "There may be some of that that needs to happen, but
frankly, I really like small high schools and I’m a little fearful that if we
just rushed to consolidate school districts we would suddenly lose that. … The
first step is, I think, really, consolidation of services at the regional
level." Flanagan said he was referring mainly to noninstructional services, such
as transportation or accounting.
Coulson’s analyses were based on Census 2000 figures and five
years of data from the National Center for Education Statistics of the U.S.
Department of Education on district size and spending, not including capital
spending. The study controlled for at least six factors that could affect
per-pupil spending in a given district: federal funding, state categorical
funding, cost of labor, special education costs, public school enrollment as a
share of district population, and racial composition of the student body. It
also took into consideration "demand for education" by controlling for aggregate
household income per capita. Previous studies have shown that higher-income
families have higher expectations of schools, and some researchers theorize that
school officials may spend more to meet those expectations.
Finally, the study discusses at length the question of whether
public school officials, including administrators and school board members, ask
for and spend as much money as possible, an outcome predicted by an economic
theory known as "public choice," or whether they spend only as much as necessary
to meet taxpayers’ wishes. Either approach could affect per-pupil spending. For
example, according to public choice theory, school board members who want
political support from employee unions, or administrators who want to "grow"
their programs, might push for larger budgets regardless of public demand for
One way to measure this, Coulson says, is to determine the total
household income in the district and divide that by public student enrollment.
This measures the ease with which districts can raise per-pupil spending,
because household income is the accepted measure of taxpayers’ ability to pay.
If the ease with which spending can be increased turns out to be a strong
predictor of actual spending after controlling for other possible factors, then
district officials are simply spending as much as they can, Coulson contends.
This should be true despite Proposal A, he says, because districts that spent
more before Proposal A still spend more today due to the "grandfathering" clause
in the legislation.
The study found a strongly positive relationship between total
household income per pupil and spending, Coulson reports. His findings, Coulson
argues, "compellingly support public choice theory."
"In short, public schooling’s incentive structure appears to
encourage district officials to maximize their budgets. To improve the
efficiency of Michigan’s education system, this problematic incentive structure
would have to be replaced with one in which school officials are instead
rewarded for simultaneously controlling costs and maintaining or improving
quality," the study continues.
Injecting more competition and parental choice into the system
would be more likely to bring down costs than state-mandated mergers or
breakups, the study says. The study is available online at
www.mackinac.org/8530 or can be
ordered from the Mackinac Center.