To afford small schools, merge smaller districts

By Michael J. Hicks

A number of recent studies examining the cost efficiency of Indiana’s school districts report that districts with fewer than roughly 2,000 students face very high overhead costs per student. This diverts significant money away from classroom instruction in more than half of Indiana’s school districts.

These small districts enroll one in five students in Indiana. The inefficient use of tax dollars is no small matter.

Still, the effect on inefficient school districts on student learning remained unknown until recently, when my office published a study on the subject. That Ball State study, authored by Dagney Faulk, Srikant Devaraj and myself, paints a clear picture of the effect of inefficiently sized school districts on student performance.

The study isolated the effect of school disrict size, not individual school size, on a number of performance measures from 2011-14. First, there is some good news. District size does not affect pass rates on elementary school ISTEP scores or the English End-of-Course Assessment, which is needed for graduation.

Unfortunately, when it comes to more expensive educational experiences, especially college preparation and STEM programs, smaller districts suffer badly.

Isolating the effectiveness of district size, by controlling for demographics, local poverty and rurality, we found districts with fewer than 2,000 students have SAT tests that average 20 points lower than kids from larger districts. They also had pass rates on algebra and biology ECA tests that are more than 4 percent lower, and eighth grade ISTEP pass rates are more than 5 percent lower than in bigger districts.

Students in small districts pass the Advanced Placement tests at a 15 percent lower rate than peers in larger districts. This is a stunning difference attributable solely to the overhead costs of running a small district.

Separately, the study counted the number of AP course offerings. Here too, smaller districts disadvantage students significantly by offering far fewer college preparatory courses, particularly in the critical STEM fields of math and science. The problem isn’t isolated. For example, one of the more affluent small school districts (Barre-Reeve) has predictably high standardized test scores. Yet, their students pass AP tests at a rate that is well below the state average. This shockingly poor outcome is costly in terms of college admissions and extra tuition.

The response to this study has been largely positive. Most folks understand that course offerings are not as extensive in small school districts, even if they didn’t realize how big the effects were. What surprised us most about the study were the number of folks who thought we were targeting small schools and local control. That’s baloney.

This study examined school districts, not individual schools. This confusion is ironic because the most effective way to preserve small schools and small classrooms is to save money elsewhere. Consolidating wastefully small school districts is a quick and painless way to direct more dollars into the classroom.

Those folks who support small districts aren’t defending small schools or local control. They are defending wasteful government and less effective education.

It is time for half of Indiana’s school districts to seriously consider merging with their neighbors. In the end though, the facts of declining enrollment, rather than this study, will compel the issue. Nearly every one of Indiana’s small school districts faces dwindling enrollment, and 94 percent of these are adjacent to another one of fewer than 2,000 students. Reality will compel a great many district mergers during the next decade.

Michael J. Hicks is the director of the Center for Business and Economic Research and an associate professor of economics in the Miller College of Business at Ball State University. Send comments to [email protected].