Impacts of Declining Enrollments on Educational Expenditures in Rural Areas

Abstract

An econometric model is used to analyze impacts of declining school enrollments on educational funding in rural areas in Indiana. Results suggest that declining enrollments have led to increased per pupil expenditures in rural school districts. Increased costs are primarily due to decreases in pupil/teacher ratios. The state aid distribution formula in Indiana does a better job of compensating urban schools for these cost increases than it does for rural schools. Rural communities have recently been confronted with two population phenomena that have had impacts on local public schools. Beginning in 1960 both birth rates and total numbers of births began to decline, often at a rather substantial rate. This same time period has been an era of rapid increases in commercial farm sizes and consequent outmigration of people from rural areas. Both of these phenomena have led to decreases in public school enrollments, particularly in rural communities. This article examines the impacts of changes in school enrollments on changes in per pupil expenditures for education. Declining enrollments have primarily had an impact on central city school districts and school districts in isolated rural areas. The analysis is conducted using data from Indiana, a state where enrollment declines have been marked in all but suburban school districts. Between the school years 1972-73 and 1976-77 total enrollment in Indiana public primary and secondary schools declined by 5 percent.