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4/17/01
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PLAIN ECONOMIC SENSE, Column 403
For release April 23, 2001
Study says School Consolidation Reduces Student Performance but Saves Costs
By Mark A. Edelman
Extension Public Policy Economist
Iowa State University Extension to Communities
A study of school district costs and student performance by Oklahoma State University economists recently caught my attention. Like similar studies in Iowa and Nebraska about a decade ago, this study found that economies of size do exist for school district expenditures. This means that as school district size increases up to a threshold level, the costs per pupil decline as the district achieves greater efficiency. However, the item that caught my attention was the student test performance analysis by school district size. Much to my surprise, the authors found student achievement scores in Oklahoma declined as school district size increased.
Oklahoma is a state that is similar to Iowa in many respects. It is a midwestern state with many rural and agricultural economic trends similar to ours. The largest city is the state capital, centrally located in the state. According to the 2000 Census, Oklahoma has a population of 3.5 million, slightly larger than Iowa. It has a few more K-12 students and school districts than Iowa. However, like Iowa, Oklahoma has a lot of small districts that account for a majority of the districts and a smaller number of larger districts that account for most of the statewide student body.
The OSU study, published in the latest issue of the Ag and Applied Economics Journal by C. Jacques, W. Brorsen and F. Richter, analyzed 1994-95 costs and school quality data for the 547 districts in Oklahoma. The state had 203 districts with fewer than 300 students as measured by Average Daily Membership (ADM). There were 130 school districts with 300 to 500 students and 91 districts with 500 to 1,000 students. The 123 districts with more than1,000 students accounted for 75 percent of the students statewide.
School district costs ranged from $6,973 per pupil for school districts with fewer than 100 students to $4,363 for those with more than 1,000 students. The OSU study found that most of the size economies were achieved by a district size of 965 pupils. Districts with 500 to 1,000 pupils averaged $4,584 per pupil. OSU analysts said that decreases in costs per pupil were small as district size increased for districts with more than 500 pupils. A similar study of Iowa school district costs from a decade ago indicated that districts with 800 pupils or more achieved most economies of size. A 1988 Nebraska study indicated the threshold for achieving school efficiency was closer to 500 pupils in the district.
The surprising result was that the OSU analysts found that increasing school district size resulted in lower achievement test scores. Plots of the student performance parameter showed that a few of the smallest school districts--mostly with ADM of less than 50--did very poorly on achievement tests. However, overall, the analysts concluded that test scores declined as district size increased, with the biggest showing the smallest decrease.
The OSU analysts concluded that consolidating small school districts into larger ones lowers achievement test scores and the impact is large enough that it "may result in decreasing the state's average achievement test scores." The decrease in student performance occurs even when adjusting for differences in socio-demographics and school expenditures. The net effect of consolidation on school quality depends on how losses from the students in the small school district compare to the gains by the students of the larger districts because student achievement also is influenced by instructional expenditures.
The OSU study reviews evidence from other studies supporting the notion that increased spending on classroom instruction has a positive effect on student test scores. The OSU analysts concluded by suggesting that part of the negative impact on student test scores could be offset if the consolidation savings were used for additional instructional support in the merged districts.
Finally, not all small Oklahoma school districts exhibited higher test scores and higher expenditures per pupil compared to larger districts. Thus the OSU analysts suggest that if a school consolidation policy is to be implemented, it should be on a case-by-case basis after evaluating the cost per student and the achievement test scores of the school districts in question. This sounds similar to a recommendation found in Iowa's recent studies.
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