by Michael Hicks

Professor of Economics
Ball State University
A number of recent studies examining the cost efficiency of Indiana’s school corporations report that corporations with fewer than roughly 2,000 students face very high overhead costs per student. This diverts significant money away from classroom instruction in more than half of Indiana’s school corporations. These small corporations enroll one in five students in Indiana. The inefficient use of tax dollars is no small matter.
Still, the effect on inefficient school corporations on student learning remained unknown until last week when my office published a study on the subject. That Ball State study, authored by Dagney Faulk, Srikant Devaraj and myself, paints a clear picture of the effect of inefficiently sized school corporations on student performance.
The study isolated the effect of school corporation size, not individual school size, on a number of performance measures from 2011-2014. First, there is some good news. Corporation size does not affect pass rates on elementary school ISTEP scores or the English End-of-Course Assessment (ECA), which is needed for graduation. Unfortunately, when it comes to more expensive educational experiences, especially college preparation and STEM programs, smaller corporations suffer badly.
Isolating the effective of corporation size, by controlling for demographics, local poverty and rurality, we found corporations with fewer than 2,000 students have SAT tests that average 20 points lower than kids from larger corporations. They also had pass rates on algebra and biology ECA tests that are more than 4 percent lower, and eighth-grade ISTEP pass rates are more than 5 percent lower than in bigger corporations. Students in small corporations pass the Advanced Placement (AP) tests at a 15-percent lower rate than peers in larger corporations. This is a stunning difference attributable solely to the overhead costs of running a small corporation
Separately, the study counted the number of AP course offerings. Here too, smaller corporations disadvantage students significantly by offering far fewer college preparatory courses, particularly in the critical STEM fields of math and science. The problem isn’t isolated. For example, one of the more affluent small school corporations (Barre-Reeve) has predictably high standardized test scores. Yet, their students pass AP tests at a rate that is well below the state average. This shockingly poor outcome is costly in terms of college admissions and extra tuition.
The response to this study has been largely positive. Most folks understand that course offerings are not as extensive in small school corporations, even if they didn’t realize how big the effects were. What surprised us most about the study were the number of folks who thought we were targeting small schools and local control. That’s baloney.
This study examined school corporations, not individual schools. This confusion is ironic because the most effective way to preserve small schools and small classrooms is to save money elsewhere. Consolidating wastefully small school corporations is a quick and painless way to direct more dollars into the classroom. Those folks who support small corporations aren’t defending small schools or local control. They are defending wasteful government and less effective education.
It is time for half of Indiana’s school corporations to seriously consider merging with their neighbors. In the end though, the facts of declining enrollment, rather than this study, will compel the issue. Nearly every one of Indiana’s small school corporations faces dwindling enrollment and 94 percent of these small school corporations are adjacent to another one of fewer than 2,000 students. Reality will compel a great many corporation mergers over the next decade.