In November 2002, the Arizona Office of the Auditor General (OAG) released a report on school districts' administrative spending that found, on average, small school districts spent more per pupil than large districts. In response, the Arizona State Legislature established a commission to study the potential savings from statewide school district consolidation.
Understandably, taxpayers want education dollars spent in the classroom, on teacher compensation and smaller class size, not on wasteful administration. Current proposals by the state superintendent of public instruction, Tom Horne, and Pinnacle West Capital Corporation's vice president of government affairs, Martin L. Shultz, therefore attempt to reduce administrative costs from roughly 11 percent to five percent of Arizona's education spending to redirect the savings into the classroom.
A closer examination of the OAG report suggests statewide school district consolidation is unlikely to produce the hoped-for fiscal savings. Moreover, empirical research shows consolidation increases administrative costs at the expense of classroom instruction, yielding larger classes, fewer teachers, and lower student achievement. Therefore, consolidation is a marginal reform, best implemented on a limited, case-by-case basis.
Research shows that competition, not consolidation, improves school efficiency. By fully exercising Arizona's existing open enrollment law, school efficiency could rise by 10 percent, achievement could be roughly three to six percentile points higher, and spending could be almost eight percent lower. Expanding Arizona's charter schools could improve test scores of charter students and students attending nearby traditional public schools by one to three percentile points, while yielding a per-pupil savings of $1,530 --more than 90 times greater than the estimated $17.34 per-pupil savings from current consolidation proposals.
Like policymakers in Arizona, policymakers in dozens of other states are weighing the potential savings from projected administrative efficiencies against the potential pitfalls of consolidation. What is the potential fiscal impact of statewide school district consolidation for Arizona? What other educational quality issues might be affected? This study examines those questions.