The Fiscal Effects of School Choice Programs on Public School Districts

March 19, 2012

One of the primary arguments made by opponents of school choice programs is that by allowing students to leave public schools, the fiscal security of those schools will inherently be made worse.  In supporting this point, they emphasize that if a student leaves a school, many fixed costs still remain that will become more expensive per student, says Benjamin Scafidl, a fellow with the Friedman Foundation for Educational Choice.

Scafidl sought to ascertain the validity of this argument by exploring the fixed-variable costs model of public schools.  In so doing, he divided all costs of schools into two categories:

  • Variable costs, which represent expenditures that could be reduced in the short run in response to fewer students, such as instruction, student support and food services
  • Fixed costs, which represent expenditures that cannot be reduced in the short run, such as interest payments, capital expenditures and school administration.

After costs were divided into each of the two categories, Scafidl found that the opponents' argument held little ground.

  • For the United States as a whole, education costs amount to $12,450 per student.
  • Sixty-four percent of this ($7,967 per student) can be comfortably considered as variable costs, even in the short run.
  • The importance of fixed costs varies substantially among the states, from 26.1 percent in Rhode Island to 42.9 percent in Wyoming, fixed costs do not amount to more than half of expenditures in any state (the lone exception being Washington, D.C.).

The low level of fixed costs undermines the argument made by those in opposition to school choice on fiscal grounds.  Because fixed costs are relatively low, it means that schools can adapt to a smaller number of students even in the short run (by reducing instructional staff, providing fewer meals, creating fewer bus routes, etc.). Thus, the fiscal shock of losing students is relatively small.

Furthermore, these costs become even more manageable in the long run as options become much broader.  Schools can be consolidated and administrator payroll can be made flexible.

Source: Benjamin Scafidl, "The Fiscal Effects of School Choice Programs on Public School Districts," Friedman Foundation for Educational Choice, March 2012.

For text:

http://www.edchoice.org/CMSModules/EdChoice/FileLibrary/796/The-Fiscal-Effects-of-School-Choice-Programs.pdf

 

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