Michael Hicks: Small schools face tough choices


Michael Hicks

This month, my colleague Dagney Faulk and I released a study titled “School Corporation Size and Student Outcomes.” This is the newest of perhaps a dozen studies we’ve authored on the key issues of government size, cost and effectiveness. The largest of these was a book examining government consolidation in the U.S. through two centuries.

Our K-12 school study was funded by the Indiana Chamber of Commerce and is an update of earlier work we published on the cost and effectiveness of school corporations. The goal of these studies was to isolate how the size of school corporations affected the performance of students. To do so, we needed to control for student demographics, poverty, share of English Language Learners, changes in enrollment and other factors that might also affect performance.

There is an abundance of research finding very small school corporations have worse educational outcomes for students than more modestly sized ones. There also are studies finding very large school corporations shortchange students. These studies find the size of affected small corporations are under roughly 2,000 students and large corporations closer to 50,000 students.

Here in Indiana, 162 out of 290 school corporations enroll fewer than 2,000 students and none close to 50,000. For Hoosiers, small school corporations are the issue. The challenge is exacerbated by the continued shrinking of school corporations. Of the small schools, 120 are smaller now than they were a decade ago. The simple fact is there are almost no organically growing school corporations under 2,000 students and many more that will shrink to fewer than 2,000 in the coming decade.

This is worrisome because smaller school corporations do worse on the most important metrics of performance than larger schools. Small corporations have substantially lower pass rates for the IREAD and ILEARN tests, lower SAT scores, a smaller share of students graduating with honors diplomas and a smaller share heading to college.

Our study carefully lays out the data and analysis, with some stark findings. For the smallest corporations, even modest increases in enrollment boost scores substantially. A corporation with 1,000 students could boost pass rates by more than 10% by adding 100 more students to their rosters. This is reflective of the power of overhead costs on providing instructional content.

Among the most worrisome figure is about 60 of the state’s smallest school corporations offer no Advanced Placement classes in the STEM fields of calculus, biology or chemistry. This shocks me as a parent and professor. Colleges keep close tabs on course offerings, and schools that offer no AP STEM classes are loudly saying, “Don’t admit our students; they aren’t ready for college.”

Many rural community leaders complain about shortages in nurses, physicians and pharmacists. So, this is a good opportunity to connect the dots between educational and economic outcomes. Few universities will wish to admit students in business, the sciences, or healthcare who haven’t taken an AP STEM class. And, even if they do, the outcomes for students who didn’t take an AP class is substantially worse than those who did.

So, if you have low educational attainment that is keeping your local economy from growing, or if you face a local nursing shortage, it is time to connect the dots to local school corporations.

Fortunately, there are some bright points. Smaller school corporations do better than larger schools in Career and Technical Education courses, but even there, fewer students in small corporations complete the technical honors degree. Thus, few benefit from the extra, and relatively low-cost, CTE courses. In many other areas, like FAFSA completion or graduation rates, small and large corporations aren’t statistically different. That’s about the end of the good news.

Still, our research, and that of many scholars before us, tells a clear story. Very small school corporations, with roughly 2,000 or fewer students, are shortchanging the educational outcomes of a substantial share of their students. This is a tough, but unambiguous conclusion. Our study made no recommendations on how to address this problem. I can think of four options.

First, school corporations could do nothing. For most communities this is a very, very high-risk strategy. Another two or three generations of declining enrollment aren’t guaranteed. But if I were a betting man, I’d put my life savings on a wager 90% of Hoosier school corporations with fewer than 2,000 students today will be much smaller by 2040. This will be a disaster for many places across the state.

Second, school corporations could structurally consolidate, or merge. Here, the state could help by allowing some flexibility in the size of school boards for a few years after merging. This offers the opportunity for school corporations to divert resources towards the courses they lack and fill the educational gaps they face. The challenge is that smaller corporations tend to cluster, so it may take multiple mergers to make a single ‘average-sized’ school corporation.

Third, school corporations could functionally consolidate services. A potential model for this is to extend how schools now offer CTE education through the 49 CTE districts around the state. This service could be offered for AP STEM classes. Corporations could also share more costs from transportation to teaching and administrative staff. I suspect the legislature could take several low-cost steps to help school corporations do this.

Fourth, school corporations could hold school funding referenda. Tax increases are always unpopular, but small school corporations are predominately located in counties with very low effective tax rates. This would be an excess burden in no communities.

Indiana school corporations have been through two consolidation waves. The first accompanied the invention of the automobile, and the second followed the big declines in agricultural employment. Another wave of changes lies in the near future, as population decline continues across much of the state.

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

Finally, like many others in the debate, I doubt the efficacy of state mandates on corporation size. These are inherently local matters, with local solutions. Indiana needs many more vibrant, growing communities, with superb schools that draw new residents. For well over half of school corporations that means facing unpleasant facts and a difficult set of options about the future.

Michael J. Hicks is the director of the Center for Business and Economic Research and the George and Frances Ball Distinguished Professor of Economics in the Miller College of Business at Ball State University.