Hicks: Indiana needs another wave of school consolidation

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This month, my colleague Dagny Volk and I released a study, “School Foundation and Student Outcomes.” This is the latest of dozens of studies we have authored on key issues related to the size, cost, and effectiveness of government. The largest of these books was a book that examined the process of integrating government in the United States over two centuries.

Our study was funded by the Chamber of Commerce and is an update of previous studies we have published on the cost and effectiveness of school corporations. The goal of these studies was to isolate the extent to which the size of school institutions affects student performance. To do this, we needed to control for student demographics, poverty, the proportion of English language learners, changes in enrollment rates, and other factors that might also affect performance.

There is an abundance of research finding that very small school corporations achieve worse educational outcomes for students than educational institutions of modest size. There are also studies that have found that very large school corporations shortchange students. These studies find that the size of affected small businesses is approximately less than 2,000 students, and large businesses are closer to 50,000 students.

Many Indiana school businesses are downsizing.

Many Indiana school businesses are downsizing.

Here in Indiana, 162 of 290 school institutions enroll fewer than 2,000 students, and none are close to 50,000 students. For Hoosiers, small school businesses are the problem. The challenge is exacerbated by the continuing shrinkage of school institutions. Of the small schools, 120 are now smaller than they were a decade ago. The simple fact is that there are almost no school companies that grow organically under 2,000 students, and there are many others that will shrink below 2,000 students in the next decade.

This is worrying because smaller institutions perform worse on the most important performance measures than larger schools. Small businesses have much lower pass rates on the IREAD and ILEARN tests, lower SAT scores, a lower percentage of students graduating with honors and a smaller share who go on to college.

Our study carefully presents data and analysis, with some striking findings. For small businesses, even modest increases in enrollment rates dramatically boost results. A company with 1,000 students can increase pass rates by more than 10 percent by adding an additional 100 students to its rosters. This reflects the strength of overhead costs in providing educational content.

Among the most troubling numbers is that about 60 of the state’s smallest school institutions offer no Advanced Placement classes in STEM fields in calculus, biology or chemistry. This shocks me as a parent and professor. Colleges closely monitor course offerings, and schools that don’t offer AP STEM classes say loudly: “Don’t take my students, they’re not ready for college.”

Many rural community leaders complain of shortages of nurses, doctors and pharmacists. So, this is a good place to connect the dots between educational and economic outcomes. A few universities may be willing to accept students in business, science, or health care fields who have not taken an AP STEM class. Even if they did, the outcomes for students who did not take an AP class were much worse than for those who did.

So, if you have low educational attainment that is preventing your local economy from growing, or if you are facing a local nursing shortage, it is time to connect the dots with local school organizations.

Fortunately, there are some bright spots. Small school companies do better than larger schools in CTE courses, but even there, fewer students at small companies complete technical honors. Consequently, few take advantage of additional, relatively low-cost CTE courses. In many other areas, such as FAFSA completion or graduation rates, small and large firms are not statistically different. That’s about the end of the good news.

However, our research, and that of many scientists before us, tells a clear story. Very small school corporations, with approximately 2,000 students or fewer, underrepresent educational outcomes for a large proportion of their students. This is a difficult but unambiguous conclusion. Our study did not provide any recommendations on how to address this issue. I can think of four options.

First, school institutions can do nothing. For most societies, this is a very high-risk strategy. Another two or three generations of declining enrollment rates cannot be guaranteed. But if I were a betting man, I’d bet my savings that 90% of Hoosier school institutions with fewer than 2,000 students today will be much smaller by 2040. That would be a disaster for many places across the state.

Second, school companies can structurally consolidate, or merge. Here the state can help by allowing some flexibility in the size of school boards for a few years after consolidation. This provides the opportunity for school companies to shift resources toward the courses they lack and fill the educational gaps they face. The challenge is that small companies tend to cluster, so it may take multiple mergers to create one “mid-sized” school company.

Third, school companies can functionally standardize services. One potential model for this is to expand how schools now deliver CTE education through 49 CTE districts across the state. This service can be provided for AP STEM classes. Companies can also share more costs ranging from transportation to faculty and administrative staff. I think the Legislature could take several low-cost steps to help educational institutions do this.

Fourth, school organizations can hold referendums on school funding. Tax increases are not always popular, but small school businesses are often located in districts with very low effective tax rates. This will not constitute an excessive burden in any societies.

Indiana school corporations have gone through two waves of consolidation. The first accompanied the invention of the automobile, and the second followed the significant decline in agricultural labor. Another wave of changes lies in the near future, as the population continues to decline in much of the state.

There are no easy solutions to the problem of poor performance in small schools. This is because the problem does not lie in the quality of administration, the dedication or skill of teachers, the intelligence or diligence of students, or the interest of parents. The challenge for small schools is simply the age-old problem of economies of scale. It’s a dollars-and-cents problem, one that poorly managed will exacerbate the challenges facing many of Indiana’s most vulnerable communities.

Finally, like many others in this discussion, I question the effectiveness of state mandates regarding corporate size. These are local issues in nature, and have local solutions. Indiana needs many vibrant, growing communities, with great schools that attract new residents. For more than half of educational institutions, this means facing unpleasant realities and a difficult set of choices about the future.

Michael J. Hicks is Director of the Center for Business and Economic Research and the George and Frances Ball Distinguished Professor of Economics at Ball State University’s Miller School of Business.

This article originally appeared on the Indianapolis Star website: Indiana needs another wave of school consolidation

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