NCPA - National Center for Policy Analysis

Competition, Not Consolidation, Improves Performance

April 22, 2004

Arizona is in the process of considering statewide consolidation of its schools on the assumption that administrative costs can be spread over a larger base of students. A new study by the Goldwater Institute, however, suggests that consolidation tends to lead to administrative bloat. In practice, larger schools have a strong tendency to divert whatever savings may be gained through so-called "economies of scale" from core educational activities to secondary or even non-essential ones.

Based on empirical data, the study found that consolidation is unlikely to produce the hoped-for savings and may in fact have the opposite effect:

  • Between 1960 and 1984 -- a period in which the number of school districts fell by 39 percent -- school administration grew by 500 percent, while the number of teachers increased by a relatively small 57 percent.
  • Following years of school district consolidation nationwide, teachers now comprise 51.6 percent of total public elementary and high school staff.
  • Over the last two decades, average SAT scores declined by 3 percent in states with larger school districts, while they increased by 8 percent in those with smaller ones.
  • Consolidation has also had other negative impacts: greater travel, weakened parental influence on education, lower student extra-curricular participation, and the effects of school closures on rural communities.

By contrast, says the study, competition has proven to be more effective at improving school efficiency. The study also found that expanding Arizona's charter schools would improve test scores and generate per student savings over 90 times greater than that promised by consolidation -- $1,530 as compared to an estimated $17.

Source: Vicki Murray, "Competition or Consolidation? The School District Consolidation Debate Revisited," Policy Report No. 189, Goldwater Institute, January 2004.


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