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Understanding the Cost Effects of Small School Districts and Racial Isolation in New Jersey Bruce D. Baker Department of Educational Theory, Policy and.

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Presentation on theme: "Understanding the Cost Effects of Small School Districts and Racial Isolation in New Jersey Bruce D. Baker Department of Educational Theory, Policy and."— Presentation transcript:

1 Understanding the Cost Effects of Small School Districts and Racial Isolation in New Jersey Bruce D. Baker Department of Educational Theory, Policy and Administration Rutgers University © Bruce D. Baker, NJASA 2009

2 Unorganized States * © Bruce D. Baker, NJASA 2009 Data sources: Effort based on total state and local education resources as % of gross state product (http://www.bea.gov/regional/gsp/ ). Education fiscal data from U.S. Census Fiscal Survey (F-33) - Elem. & Sec. Fin. Enrollment and district characteristics data from National Center for Education Statistics Common Core of Data http://www.bea.gov/regional/gsp/

3 Why New Jersey is Different Many small, non-unified New Jersey districts are not remote rural ones - –In fact, they are anything but… Many are a few blocks wide, along the shore, along the Hudson (Bergen/Hudson), or in the Camden area. –This is also true in Illinois, where the small K-8 districts are clustered around Chicago. © Bruce D. Baker, NJASA 2009

4 New Jersey District Enrollments © Bruce D. Baker, NJASA 2009 Data source: Enrollment and district characteristics data from National Center for Education Statistics Common Core of Data

5 Inefficiently Small (& Population Dense) in NJ © Bruce D. Baker, NJASA 2009

6 Race/Ethnicity & New Jersey Schools % Black% Hispanic © Bruce D. Baker, NJASA 2009 Data source: National Center for Education Statistics Common Core of Data , Pubic School Universe.

7 What we know about economies of scale Per pupil costs of constant outcomes level off between 2,000 and 6,000 students for a unified school district –Optimal elementary size likely between 300 and 500 students –More rigorous evidence on high schools, with optimal around 600 to 900 students © Bruce D. Baker, NJASA 2009 Andrews, M., Duncombe, W., Yinger, J. (2002) Revisiting Economies of Size in American Education: Are we any closer to consensus? Economics of Education Review 21 (3):

8 Important Definition COST - Is the cost in dollars of current operating expense, needed to achieve a specific set of student outcomes, given the student population and other factors (regional competitive wage variation, etc.) –Cost is not the same as Spending –Relationship to economies of scale In very small schools and school districts, it costs more to produce comparable outcomes, holding other factors equal (given the students, labor market conditions, etc.) © Bruce D. Baker, NJASA 2009

9 Production vs. Cost Flip Sides of the Same Coin Production Function –What level of outcomes are produced, given a variety of uncontrollable conditions, at a given spending level? –One can treat size as uncontrollable to estimate the effects of school or district size on outcomes at constant spending. But, size may be controllable in some cases. –Research question: All else equal (at constant spending, etc.), is there a negative effect of small school district size on outcomes? Cost Function –What is the level of spending (cost), associated with achieving specific outcome levels, given a variety of uncontrollable conditions? –One can estimate the spending differential associated with small school district size, at constant outcome levels. –Research question: All else equal, does it cost more to produce the same level of outcomes in small school districts? If the answer to one or both of these research questions is yes, we must carefully evaluate whether we should continue to support these inefficiently small producers. © Bruce D. Baker, NJASA 2009

10 Cost per Pupil 2,000 to 6,000 District Enrollment <300>10,000 Y (1.0) (2.0) Economies of Scale © Bruce D. Baker, NJASA 2009

11 Scale Related Spending Variation - East Coast 2/1 © Bruce D. Baker, NJASA 2009 Data sources: Education fiscal data from U.S. Census Fiscal Survey (F-33) - Elem. & Sec. Fin. Enrollment and district characteristics data from National Center for Education Statistics Common Core of Data Scale effect based on interaction term from pooled, cross state model ( ). lnSTREVPP = b0 + b1(POV x STATE) + b3 (IEP x STATE) + b2(SCALE x STATE) + b4ECWI

12 Savings from Consolidation Shared services & administrative consolidation –Central administration is typically under 2% of district budgets. Re-organizing and/or sharing supts., etc. really doesnt save that much. That said, we should still try to save here, if we can! Reorganizing school enrollments & attendance boundaries –This leads to more significant staffing efficiencies, and long run cost savings but… –There are up front costs (new facilities/ renovations) © Bruce D. Baker, NJASA 2009

13 Outcome Loss in Small K-12s Over 7% reduction in proficiency at same $$ © Bruce D. Baker, NJASA 2009 Data source: Based on OLS production function model for New Jersey Public School Districts using NJDOE data from to Full model estimates and alternative models available on request

14 Excessive Costs of Small K-12s for Same Outcomes Over $2,000 per pupil increase in cost for same proficiency rate! © Bruce D. Baker, NJASA 2009 Data source: Based on 2SLS (instrumental variables) cost function model for New Jersey Public School Districts using NJDOE data from to Full model estimates and alternative models available on request

15 Outcome Loss in Small K-8s Over 4% reduction in proficiency at same $$ © Bruce D. Baker, NJASA 2009 Data sources: Based on OLS production function model for New Jersey Public School Districts using NJDOE data from to Full model estimates and alternative models available on request

16 Excessive Costs of Small K-8s for Same Outcomes Over $2,000 per pupil increase in cost for same proficiency rate! © Bruce D. Baker, NJASA 2009 Data source: Based on 2SLS (instrumental variables) cost function model for New Jersey Public School Districts using NJDOE data from to Full model estimates and alternative models available on request

17 Actual NJ Example (adjacent K-8 school districts separated by <2 miles driving distance) © Bruce D. Baker, NJASA 2009

18 Per Pupil Resource Structure in Small K-8s District B is able to offer more breadth at 20% lower staffing expense alone (nearly $1,500 per pupil). Pulling the two districts/schools together, and reducing/eliminating redundancies could save at least as much in annual staffing costs per pupil for District A. Given that District B is also below scale economies, per pupil staffing costs could likely be reduced to a level lower than current B levels. © Bruce D. Baker, NJASA 2009

19 What we know about racial isolation, Costs and Outcome Effects Hanushek and Rivken conclude: The substantial contribution of changes in achievement gaps between schools is consistent with an important role for schools, and we find that the imbalanced racial distribution of specific characteristics of teachers and peersones previously found to have significant effects on achievementcan account for all of the growth in the achievement gap following third grade. (p. 29) –Hanushek, E., Rivken, S. (2007) School Quality and the Black-White Achievement Gap. Education Working Paper Archive. University of Arkansas, Department of Education Reform. Hanushek, Kain, and Rivken (2004) note: A school with 10% more black students would require about 10% higher salaries in order to neutralize the increased probability of leaving (p. 350). That is, all else equal, it would cost more simply to provide comparable teaching quality in predominantly black schools. –Hanushek, E.A., Kain, J., Rivken, S. (2004) Why Public Schools Lose Teachers. Journal of Human Resources 34 (2) © Bruce D. Baker, NJASA 2009

20 Effects of Racial Isolation and Size on Costs of Comparable Outcomes Data source: Based on 2SLS (instrumental variables) cost function model for New Jersey Public School Districts using NJDOE data from to Full model estimates and alternative models available on request

21 © Bruce D. Baker, NJASA 2009 Effects of Racial Isolation and Size on Costs of Comparable Outcomes Data source: Based on 2SLS (instrumental variables) cost function model for New Jersey Public School Districts using NJDOE data from to Full model estimates and alternative models available on request

22 Northern Shore Small Districts © Bruce D. Baker, NJASA 2009

23 Shore Districts © Bruce D. Baker, NJASA 2009

24 Elsewhere in NJ Bergen CountyMorris/Essex © Bruce D. Baker, NJASA 2009

25 Bergen/Morris/Essex © Bruce D. Baker, NJASA 2009

26 Still Elsewhere! © Bruce D. Baker, NJASA 2009

27 Hunterdon/Warren © Bruce D. Baker, NJASA 2009

28 Somerset County Enrollments © Bruce D. Baker, NJASA 2009

29 Somerset County From SFRA documentation (NJDOE) © Bruce D. Baker, NJASA 2009

30 Summary Many K-8 districts enrolling fewer than 300 students [and the handful of K-12 under 800], in population dense areas should be considered for consolidation. Only marginal savings will be found in administrative consolidation and shared services. The bigger, long-run savings are in reorganizing schools and school attendance boundaries. –Up front costs of infrastructure –Long-run reduction in staffing (for savings to be realized) Demography may present significant political/social barriers. © Bruce D. Baker, NJASA 2009

31 Hows NJ doing? © Bruce D. Baker, NJASA 2009

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37 Data Source: IPUMS Census 2000 and American Community Survey Place of Work: New Jersey Wage differential controls for (holds constant) hours per week, weeks per year, education level (MA and BA only), age (23 to 65), gender, race © Bruce D. Baker, 2009


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