Study Finds Arkansas School District Consolidations Failed to Deliver Expected Cost Savings

In 2004, then-Governor Mike Huckabee took steps to enhance governmental efficiency by enacting a law to consolidate school districts with student populations under 350. This policy led to the merging of 85 districts and the closure of 105 schools within a decade, predominantly impacting high schools.

The push for consolidation sparked significant pushback from families and educators. Long bus rides prevented students from participating in sports and after-school programs, while studies in 2022 indicated that these mergers were accelerating depopulation in rural areas and suppressing property values. Additionally, an academic performance review revealed negligible improvements in student achievement.

Advocates of consolidation often cite potential financial benefits: it seems impractical to maintain administrative operations for small student bodies. The logic was straightforward—by consolidating, schools could eliminate excess administrative positions and reduce operational costs.

However, findings from a new University of Arkansas study, presented at a September conference, challenge this assumption. Researchers tracked the financial performance of Arkansas school districts over two decades and found that anticipated cost savings were, in reality, elusive. There were no overall reductions in spending immediately after consolidations, nor were there any after ten years.

“We should be cautious about endorsing school consolidation,” noted co-author and economist Josh McGee. “The expected benefits have not materialized as planned, and there are significant potential drawbacks.” Currently, the analysis is awaiting peer review.

With Arkansas's statewide consolidation legislation serving as a unique case study, McGee asserts that the state’s financial situation is fairly standard, suggesting similar outcomes could be expected nationally. The context is critically relevant as school districts nationwide grapple with declining student enrollments, a trend expected to worsen, with K-12 enrollment projected to decrease by 6 percent from 2020 to 2030.

So, where exactly are the supposed savings dissipating? While the study estimates that administrative costs fell, by as much as $138 per student on average, those reductions failed to offset increases in other areas. Indeed, transportation expenses surged, rising by $24 per student initially and continuing to escalate over time, ultimately adding $63 per student to the cost. Similarly, expenditures on instructional staff climbed, with increases up to $179 per student, alongside rising pupil support costs, which grew an additional $61 per student.

The core issue is that merging districts does not inherently reduce the number of students who need schooling. Larger districts often inadvertently introduce additional administrative layers or higher staffing requirements, including the hiring of administrative personnel like assistant superintendents and instructional coaches.

To illustrate, one Arkansas district affected by consolidation served only 81 students, yet the data falls short of determining the viability of such small districts. According to co-author Md. Juwel Ahmed Sarker, the merger model's success hinges on the nature of the consolidation. Larger districts that absorb smaller ones displayed a trend towards cost savings, unlike scenarios involving two small districts merging.

Compounding the issue is Arkansas’s state funding structure, which is student-based. While consolidating districts reduces their number, it doesn't decrease the student count requiring education nor does it provide financial incentives for reduced spending.

“Under the state funding formula, districts receive their allotted funds and will find ways to utilize that budget,” McGee explained. “The aim should be to invest those funds in ways that genuinely benefit students.”

Notably, the research does not categorically condemn all district consolidations. There can be distinct efficiencies when larger districts absorb smaller ones compared to two small districts merging. However, the Arkansas case underscores that merely reducing the number of districts doesn't translate to lower educational costs.

Interestingly, Arkansas appears to be moving away from the aggressive consolidation stance. Waivers for the consolidation requirement are being granted even as enrollments dip below 350, and three districts have opted to break apart, creating smaller entities.

The prevailing consensus was that consolidation, while disruptive, would result in cost-saving benefits. Yet, two decades of data from Arkansas suggest that the anticipated financial efficiencies have not materialized, questioning the foundational rationale behind these mergers.

Contact staff writer Jill Barshay at 212-678-3595, jillbarshay.35 on Signal, or [email protected].

This story about school district consolidation was produced by The Hechinger Report, a nonprofit, independent news organization that covers education. Sign up for Proof Points and other Hechinger newsletters.