School District Consolidation: Move Can Lead to Administrative Bloat, Fewer Dollars for Classrooms

Posted on January 23, 2004 | Type: In the News | Authors: Ross Groen, Vicki Alger
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Smart shoppers know that you can buy fish sticks cheaper if you buy the 20 lb. bag at Costco or Sam's Club than if you buy the 16-ounce pack from your local grocer. It's a simple economy of scale. Because the fish-stickery can spend less on packaging, savings can be passed on to the consumer.

Some of Arizona's civic leaders have proposed applying that same concept to Arizona's schools. By making school districts bigger, they hope to achieve economies of scale in purchased supplies and administrative salaries. With less administrative waste, more resources could be directed into the classroom. But can consolidation actually deliver?

State Superintendent of Public Instruction Tom Horne advocates school district consolidation, saying, "People expect the money to be spent in the classroom on teacher compensation and on smaller class size, rather than wasteful administration." We agree. But in a new Goldwater Institute study, we find that school district consolidation, and the accompanying administrative centralization, will likely lead to more waste and less money for the classroom.

Consolidation plans put forth by Superintendent Horne and Pinnacle West vice president Martin L. Shultz point to districts of 6,000 or more students as models of administrative savings. But according to a recent Syracuse University meta-analysis, which analyzed 30 years' worth of research on school district consolidation, diseconomies of scale begin to emerge when districts grow larger than 6,000 students. Further, "Sizeable diseconomies of size may begin to emerge for districts above 15,000 students."

But if you and I can buy fish sticks cheaper in bulk, why doesn't bulk purchasing of computers and crayons lead to more money in the classroom?

The problem is that any savings produced by bulk purchasing are consumed by inefficiencies inherent in large, bureaucratic school districts. And those inefficiencies tend to grow rapidly relative to district growth.

In 2002, UCLA management professor William Ouchi examined nine different school systems, including the nation's three largest. He found that the centralized management model ushered in by consolidation actually leads to administrative bloat, not streamlining. In the highly centralized Los Angeles Unified School District, for example, only 45 percent of education dollars are spent in the classroom.

History bears out Mr. Ouchi's research. Between 1960 and 1984, the number of school districts nationwide declined 40 percent, from 40,520 to 15,747. During that same time, school administration grew by a staggering 500 percent. After years of consolidating school districts nationwide, administrators now equal, and in some states exceed, teachers and instructional staff as a proportion of school staff.

In our report, we examined Arizona's 209 school districts and found that smaller districts averaging 300 students and medium districts averaging 2,400 students perform as or more efficiently than the state's ten largest districts. In fact, the state's top three performing districts with the lowest per-pupil administrative costs are medium-sized and very small.

Consolidation's impact on education quality must also be considered. Consolidation tends to create larger schools, and research shows that students in larger schools generally have lower levels of achievement than those in smaller schools. Kids thrive in educational settings where they are treated as individuals, not as one more bulk commodity to be processed.

UCLA's Mr. Ouchi concludes, "Our data generally support the view that decentralized public school districts outperform more centralized districts on student performance outcomes, administrative efficiency, and incidence of corruption."

Consolidation may be appropriate for some small school districts, but that determination must be made locally, on a case-by-case basis. Imposing consolidation from the statehouse would likely lead to administrative expansion at the expense of student achievement. Nobody wants to stick kids with that.

--Ross Groen and Vicki Murray are education policy researchers with the Goldwater Institute, a Phoenix-based research organization.

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