Inefficient Education Spending in Public School Districts: A Case for Consolidation

Abstract

This paper estimates scale economies for Arkansas school districts. Large economies of scale exist in teacher salary and supply costs, as well as total costs. Our results suggest that districts, especially rural districts, would experience measurable cost-savings from consolidation. We simulate a hypothetical rural school district consolidation to obtain cost-saving estimates from consolidation. Simulations indicate that districts could save an average of 34 percent in average variable costs. At the state level, consolidation of rural districts in Arkansas could annually save million. However, consolidation of school districts may increase various implicit costs to students and local communities.