Sounds Like A Good Idea, But Is It Really?

Kudos to every politician and/or public official who is trying to find ways to make government more efficient and protect the dollars taxpayers work incredibly hard to earn before it is taken from them to fund government. Consolidating services is an idea frequently investigated — and it should be. But every now and then, what sounds like a great idea turns out not to deliver the expected outcome. And that is the case when it comes to consolidating public school districts. Yes, it’s counterintuitive, but the data tells the story, as JLF’s John Hood explains in this column.

Advocates of folding city districts into consolidated county school systems have long argued that merger saves money by eliminating duplicative expenses and taking advantage of economies of scale — that is, of the ability to spread fixed administrative costs over a larger population of students served.

Sound plausible? Sure. But there is surprisingly little evidence that consolidation results in fiscal benefits. For every dollar that the merger might save by eliminating duplication, the new district often spends at least a dollar on the higher personnel or program costs that come from being larger and harder to manage. Bigger is not always better. There is such a thing as a diseconomy of scale. The preponderance of research on the subject suggests that when a district’s enrollment rises into the five figures, it will probably end up with higher rather than lower unit costs.

The latest study I’ve seen looked at the topic from a different vantage point: the consolidation of services rather than jurisdictional lines. Thomas DeLuca, a University of Kansas professor, published a paper in the Fall 2013 issue of theJournal of Education Finance that used data from Michigan public schools. Districts that consolidate non-instructional services such as accounting, human resources, or purchasing do not appear to save any money compared to those that operate their own, separate services. Districts did appear to save some money by consolidating transportation, however.

As advocates for limited, smaller, more efficient and transparent government, it’s our job to enlighten the policy debate. The idea of consolidating school districts is one where we can — and should — be leaders who help others understand the data.