NCPA - National Center for Policy Analysis


November 8, 2005

Education spending constitutes up to half of many state budgets, but at least 40 percent of every dollar spent never makes it into the classroom. To reduce the increasing amount of overhead and still create economies of scale and buying power, a program of shared services should be implemented, says the Reason Foundation.

By implementing shared services:

  • Small districts can band together to share everything from transportation services to building gymnasiums, creating the purchasing power and economies of scale of medium-sized districts.
  • Large districts can organize their individual schools into smaller clusters and still benefit by sharing services internally.
  • Charter schools can purchase administrative services from school districts or other charter schools, and districts of all sizes can participate in agreements that improve the quality of their staff and internal capacities.

Moreover, these services have been employed by both the private and public sectors for decades and their popularity has increased due to their proven ability to reduce costs, says Reason:

  • Shared services are now commonplace in the government; the U.S. Postal Service saves $25 million a year by using shared services for accounting.
  • In New Jersey and Michigan, many municipal governments have engaged in shared services agreements for everything from purchasing to benefits administration.
  • School districts have also made use of productive shared service arrangements; in Ontario, Canada, two districts joined together to share bus transportation services and audio-visual resources.

Yet, a majority of school districts have barely scratched the surface in terms of tapping into the cost savings potential of shared service arrangements.

However, shifting just a quarter of tax dollars spent by school districts throughout America to shared services could yield nearly $9 billion in savings; that's the equivalent of 900 new schools or more than 150,000 additional teachers, says Reason.

Source: William D. Eggers, Lisa Snell, Robert Wavra and Adrian T. Moore, "Driving More Money Into The Classroom: The Promise of Shared Services," Reason Foundation and Deloitte Research, October 2005.

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