by Laurie A. Cummings, Senior Consultant for Economic and Education Policy

Although several Michigan school districts have explored consolidation, none has occurred in about 30 years. This Advisor examines advantages and disadvantages of consolidating, some of the reasons such action is not popular, and alternatives that can accomplish some of the objectives of consolidation. This information will help school board members, administrators, parents, and other community members to determine whether merger should be seriously considered for their districts.

Introduction

In the 1994 school finance reform plan, incentives, in the form of additional state aid, for school district consolidation were added to the School Aid Act. The state offered them believing that consolidation has “the potential to address administrative, curricular, and organizational efficiencies, providing for a more educationally and fiscally effective system and improved educational opportunities for students, teachers and communities.”1 Among the incentives were grants enabling districts to study the feasibility of consolidating, and several took the state up on it (Public Sector Consultants conducted three such studies for districts exploring the possibility). Since 1994, however, the state has softened its support of consolidation, as is evident in the omission of consolidation-study money in the FY 1996–97 budget (begins October 1).

How Consolidation Occurs

In Michigan a consolidation may occur only if a majority of voters in two (or more) districts approve. If approved, the districts legally dissolve, and a new one is created in their place. The district takes on a new name, the school board changes, the administration is reconfigured, and the way school buildings are used may change. The new district operates under a single name, administration, and school board. Board members are elected at large from the new district, they appoint a new superintendent, and a new labor contract is negotiated with the combined teachers and staffs.

History

Although there has not been a school district consolidation in Michigan in more than 10 years, they once were common. Since the early 1900s, school district mergers have reduced the number of school districts in Michigan by 92 percent, bringing the current number to 562 (including K–6 and K–8 districts.). Most consolidations took place during the 1950s and 1960s, when many single-school, K–6, and other non-K–12 districts merged into K–12 districts. This trend ended, and consolidation did not receive much attention until recently.

The renewed interest in consolidation is due in part to interest in more efficiency and cost effectiveness in public education.

Consolidation has been used by some states as a means to promote efficiency. Maryland and Florida, for example, have a relatively small number of very large districts: an average of 32,200 students per district in Maryland and 30,500 in Florida. (See Exhibit 1.) Other states have relatively large number of small districts: For example, Montana averages only 329 students per district and Vermont 361.

Michigan occupies the middle ground: It ranks 22nd nationally. However, as may be seen in Exhibit 2, Michigan still has a substantial proportion of districts serving fewer than 1,000 students, suggesting to some state lawmakers that reducing the number of district would improve efficiency.

Effects of Consolidation

Potential costs and benefits of school district consolidation are controversial. Proponents say it is efficient, because merging two or more school districts creates economies of scale, eliminates duplicate positions, and creates administrative efficiency. 2 They further believe that it improves education, because with more students there can be a broader curriculum with more specialized courses.

Opponents contend that mergers do not create economies of scale but rather lead to even bigger administrations. They also maintain that in consolidation-imposed larger schools, personal attention to individual students suffers, the environment becomes less closely knit, and there are more discipline problems.

Following are several factors that PSC believes should be weighed when considering school district consolidation.

School Finances

Consolidation affects school finances in several ways—state aid, day-to-day operating funds, tax base, and millage

Research finds mixed results about the overall financial effect of mergers. Some studies find that per student, consolidated schools have fewer teachers and administrative personnel.Others find that per student, administrative expenditures are higher in larger districts than in smaller districts.4 Still others find that savings depend on the size of the schools that consolidate, with smaller schools benefiting more than others.

Public Sector Consultants believes that the net savings or costs of merging depend on the circumstances of the districts considering the consolidation; automatic savings cannot be assumed.

Revenue

In Michigan, state school-consolidation incentives can give merged districts a temporary increase over the total in state aid that the original districts would have received as separate entities. But this windfall is temporary, and it applies only when an original entity was receiving less than the state “foundation grant”5 and, relative to a district’s total budget, comprises only a small amount of revenue. The additional revenue is largest in the first year of a consolidation and declines annually until the year in which the original entity would have reached the base foundation grant; then it ends. The additional revenue is greatest for the poorest districts, because they fall shortest of the foundation grant.

Savings and Costs

At the outset, consolidation can save money by eliminating duplicate positions and combining such support services as transportation and maintenance. Positions eliminated commonly include one district superintendent and his/her administrative staff, one athletic director, one curriculum director, one business manager, and so on. Modest savings can also result from more efficient bus routes and elimination of one school board. Little, if any, savings are realized from eliminating teaching positions, because the merged district is serving the same number of students as were the separate districts. There may be savings from merging middle schools and high schools, which again means fewer administrators are needed.

Consolidation also can cost money. Salary equalization, whereby the teacher and staff salaries of one district are raised to be commensurate with those in the other district, almost always is necessary and usually is costly. (It is possible, of course, to lower salaries in one district to the level of the other, but this is very difficult politically.) Although the jobs of some higher-level administrators (e.g., superintendent, principals, business manager) can be eliminated because the merged district is relatively large, some additional mid-level administrative staff (e.g., assistant superintendent, assistant principals) may be needed.

Merging middle and high schools also entails expense, particularly if existing buildings are not large enough to house students from both districts, requiring construction of a new building. The cost of planning, constructing, and moving into a new building can easily run into the millions, and most districts need to ask voters to approve a bond issue to pay for it. It sometimes is the case, however, that a district with a space shortage merges with a district with enough excess capacity to accommodate the other district’s excess enrollment, and the consolidation saves taxpayers the expense of a new building.

Initially, net savings to a newly consolidated district usually are modest: In the three studies conducted by PSC, savings were projected at less than $100,000 (including new-building construction costs). Longer term, however, although it is difficult to estimate accurately, savings should increase because of economies of scale, efficiencies in using staff, and combination/coordination of programs.

Effects on Tax Base and Taxpayers

A consolidation increases the size of the tax base, boosting the amount of money raised for each mill levied. This is because under a merger, the property values upon which mills are levied are combined.

Taxpayers in the district with the lower state equalized evaluation (SEV) benefit more than the higher-SEV district, because the former’s revenue raising ability is slightly lower. However, both districts will be better off over the long run from an improved ability to raise money.

If new buildings (such as joint high school) must be constructed because of a consolidation, the new district almost always will need to ask voter approval of a bond issue; if passed, district taxpayers will pay higher property taxes for approximately 20 years. However, many districts will need to replace aging school buildings in coming years anyway, and the cost per taxpayer often will be less under a merger, because taxes are levied on a wider tax base.

Curricula and Education Quality

The effect of consolidation on education quality is controversial. Consolidation advocates argue that because a combined student body means more students, more “low-incidence” courses (those in which only a few participate) can be offered (e.g., advanced chemistry and foreign languages); likewise, such special programs as specialized career-development programs become feasible. (Most of this opportunity is be at the secondary level, where the need for course specialization is the greatest, rather than at the elementary level, where the curriculum revolves around the “basics.”) Proponents also maintain that consolidation enables athletic and extracurricular programs to be expanded, because a broader student base allows for more varied athletic and other programs. 6

On the flip side, there is a growing “small school movement” based on the belief that the smaller the school, the better the education. Many education reformers believe size is a big contributor to the troubles of the nation’s public schools, and they advocate small schools even in urban areas (which commonly have very large schools), calling for “schools within schools” to overcome the perceived downfalls of bigness. They believe that compared to large schools, small ones give students more individual attention, are more responsive to student needs, and generate fewer dropouts.7 Small-school champions also contend that because there is less competition, more students have the opportunity to participate in athletics and other extracurricular activities.

Few dispute that larger schools can have broader curricula, but they argue that this is outweighed by small schools’ numerous other advantages.

Small-school proponents naturally are at odds with school district consolidation, because consolidation often leads to larger schools. They refer to research findings that school size either has little effect on achievement or that larger schools are associated with lower achievement.

However, evidence that “downsizing” schools is effective is not yet conclusive. One recent study by the University of Michigan finds that high school students learn best in a student body of about 600–900,8 which in Michigan is a mid-size school (see Exhibit 3). Another study finds that a high school must have at least 400 students to provide an “adequate” curriculum.9 These results suggest that neither very small nor very large high schools is optimal, and that students learn best in medium-size schools.

In addition to the school size issue, consolidation has other hard-to-measure but very important effects. Although a new district’s teaching staff likely will comprise the combined staffs of the separate districts, teachers must build new relationships among themselves and with a new administration; the new relationships could be better, worse, or the same as the old ones. The same can be said for teacher-student relationships, which also are unpredictable. Similarly, there is no objective means by which to predict changes in parent involvement and school atmosphere.

Community Effects

School Identity

In many communities, especially smaller ones, school identity and community identity are strongly linked. Schools are often a source of pride for a locale, and this may be lost when schools are “shared” among two or more communities. If middle and high schools merge, changes must be made in such identifying symbols as school nicknames, sports team mascots, and school colors. Athletic and other rivalries, sometimes with generations of tradition, are lost. Physically, the location of the high school, often near the center of the community (and thus a locus for activity), also changes for at least one of the merging districts.

This loss of identity is troublesome to many residents of locales considering consolidation. PSC and other researchers find that many strongly object to losing long-standing rivalries with their neighboring district. Although others believe that sports teams and other identity issues should be secondary to what happens in the classroom, school officials must be prepared to address these issues as valid concerns.

Local Control

Insofar as public education is concerned, Michigan has one of the strongest “local control” cultures in the nation, and tinkering with it generally is poorly received. Local control obviously is an issue in consolidation, because a new school board is elected at large from within the consolidated district. While the size of the board doesn’t change, its members are elected from a wider area, leading to concern about diminished local control. People fear that in a bigger district they will have a smaller voice, or that the needs of their particular area or neighborhood may not get the attention they do now.

Although the new board is responsible for the entire district, concerns usually are expressed about unequal representation. Such fears arise particularly when the population of one district is larger than the other (which is usually the case).

Alternatives to Consolidation

Cooperative Arrangements

Although districts may choose not to consolidate, there are ways they can combine forces to improve quality and cut costs; one such tool is cooperative arrangements.

A cooperative arrangement is any activity that two or more districts undertake voluntarily and collaboratively to improve program opportunities for students and/or achieve efficiencies in program and service delivery. Such arrangements do not involve any change in governance structure or school funding—the districts simply work together. Examples include

  • purchasing goods and services jointly,
  • sharing classes across district lines,
  • sharing staff, and
  • linking together electronically to share courses.

Cooperative arrangements do not earn any state incentive money, but neither do they result in any revenue loss for one or another of the participating districts. Such arrangements also do not eliminate duplication in central administrative staff, but other types of duplication can be eliminated by sharing staff and/or facilities.

Cooperative measures may cost districts money or save them money, depending on the endeavor: for example, joint purchasing usually cut costs, and adding the technology needed for electronic course sharing costs money, at least in the short run. Each potential arrangement must be evaluated on its own financial merits, to determine if the benefits outweigh the costs.

Cooperative arrangements can increase education opportunities, by allowing for more specialized curricula, more advanced curricula, and special programs. Such arrangements can enable districts to move beyond the status quo and improve education quality.

Sometimes, however, there are complications that make certain cooperative arrangements less effective than consolidation in improving education opportunity. For example, time and expense are involved in transporting students to and from shared courses and other activities. Moreover, the time and disruption of leaving one school to go to another may preclude some students from taking advantage of shared courses. While there are ways to get around these problems (such as alternating schools on different days), it is clear that course sharing and other cooperative arrangements are not without their limitations.

Federation

Another means of district collaboration is to form a federated district, a concept introduced in Toronto, Canada. Although this has been discussed in Michigan, it has not been tried; current law would have to be amended.

A federated district comprises two or more school districts and has a single school board and a shared tax base. Each member district, however, continues to function as a unique operating unit while abiding by the regulations and policies set by the federated district board. In a federated district, therefore, each participating district retains its local board, but the local board ultimately is under the authority of the joint (federated) board.

The biggest difference between consolidation and federation is that in the latter, each district maintains its own identity and there is little elimination of duplicate administrative personnel; yet the districts share one tax base and operate under one overall school board, making cooperation and collaboration easier.

Public Opinion

It is sometimes members of the community that impel districts to investigate consolidating in the first place. Members of the public usually want districts to consider it because of concerns about the cost of education and its effect on property taxes and/or a desire to improve local schools.

Consolidation studies generally draw intense interest from parents and students, teachers and staff, and the community at large. The decision to support or oppose a consolidation (and to vote to approve/disapprove it) is difficult for community members, and in our three studies on the issue we observed a fair amount of public uncertainty. The key to overcoming it is to give the public as much information as possible about the curricular, financial, and other effects of merging. Nevertheless, districts may find it difficult to satisfy the public’s craving for detail, because there is unavoidable uncertainty about such matters as exact costs, exact changes in personnel, and new bus routes; the specifics of some aspects simply cannot be known before the merger takes place.

To support a merger, the community needs to see clear benefit from it. The argument that consolidation will cut costs often meets with public skepticism. When asked if they believe a consolidation will cut costs, community members commonly respond that there will be hidden costs of consolidating, that they have always observed that school administrations grow larger rather than smaller, and that the lottery, too, was supposed to cut the cost of education for taxpayers but did not deliver. The public is generally more open to the notion that consolidation will improve education, although this, too, often is questioned. The state incentive money is generally not perceived to be much of a benefit, because it is modest and temporary.

Another issue is that school district consolidation is major change, and change always involves risk. If a community generally is satisfied with its schools, it will be less willing to accept the risk, real or perceived, of consolidation. Districts in crisis are more likely to have consolidation approved than are districts that are faring well.

Summary

Consolidation is the most direct way for two or more districts to work achieve efficiencies in administration, transportation, and program delivery. There are several reasons, however, why consolidation is not very popular right now.

  • Consolidation is not as financially beneficial to schools as it was before Proposal A passed. Low-revenue schools, which had the most reason to merge, now are receiving larger increases in state aid than are other districts, thus they generally are faring better than in the past.
  • The need for consolidation as a means to expand course offerings is not as great as it once was. Today schools have more options for broadening curricula, such as providing courses electronically, sending students to local community colleges for supplemental courses, and sharing courses across neighboring district boundaries.
  • Currently, the trend in education is to promote smaller schools as a way to improve learning—the antithesis of merging schools into larger entities. The growth of home schooling and charter schools are two signs of the public’s craving for smaller schools.
  • The public generally is not conducive to consolidation right now because of skepticism about government in general and strong anti-tax sentiment. Community members may question whether merger really will result in efficiency and cost effectiveness; they want to know precisely the specific benefits that can be expected. Also, a consolidation that requires millage for new facilities may run into opposition because anti-tax sentiment is very strong and (particularly since Proposal A passed), and voters question schools’ need for additional money.

Despite these impediments to consolidation, there are situations in which it could help districts strengthen their financial position. It is important to keep in mind that consolidation is most likely to pass the voters’ muster when both districts will realize substantial, measurable benefits; examples are given below.

  • Where two neighboring districts both have financial difficulties, merging can put them in a much stronger financial position. This is the case especially if declining enrollment is causing the financial problems, since under the new school finance system school revenue is closely tied to enrollment. (Approximately 23 percent of Michigan districts experienced one-percent or higher enrollment declines from FY 1991–92 to 1993–94 period.)
  • Where two districts are so small that it is difficult for them to provide adequate curriculum for their students, a merger can strengthen their academic program. (About 130 of Michigan’s high schools, excluding combined junior-senior highs, had fewer than 400 students in the 1994–95 school year.)
  • Where a growing district with a space shortage is located next to a district with excess capacity and declining enrollment, consolidation would ease the space shortage of the first district and the enrollment problem of the second.

Almost all school districts can expect challenges that will require them to use their resources as creatively and efficiently as possible. In certain cases consolidating is the best way to do this. However, in many cases cooperative arrangements with neighboring districts, distance learning, and partnerships with local community colleges and other institutions can achieve many of the same goals without the uncertainty and turmoil involved in merging. Public Sector Consultants has learned through research and our work with districts around the state that bigger is not always better, and, while there is certainly strength in numbers, it can be achieved through cooperation and collaboration among districts.

1Michigan Department of Education, 1995–96 School District Consolidation and Annexation Planning Grant Application.
2Economy of scale in education means that the per student cost of education goes down as the number of students in a school district goes up.
3E.g., Erik Nelson, School Consolidation (Washington, DC: Office of Educational Research and Improvement, 1985).
4E.g., David Angus et al., School District Consolidation and Other Issues of Organization: Recommendations for Michigan (University of Michigan, Ann Arbor, MI, 1994).
5The additional funding is temporary because the state allocates it by raising per pupil funding up to the state foundation grant level—$5,305 in FY 1996–97. Since all districts receiving less than the foundation grant will be brought up to this level by the year 2000, the benefit is temporary.
6See Nelson.
7Craig Howley, The Academic Effectiveness of Small-Scale Schooling (An Update), Office of Educational Research and Improvements (Washington, DC: OERI, 1994).

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Copyright © 1996

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