Enrollment declines rarely yield matching cost reductions. Here’s why.

by | Mar 8, 2019

What is likely to happen to costs when a school district loses 5% of its enrollment? Here comes some thinking and some estimation on some key factors, starting from the simplified budget for a imaginary district serving 2,000 students shown below.

If that district loses 100 students, here’s my take on what can happen to each line of that budget.

Debt Service will not change at all. Districts borrow to build facilities they will use for decades, and once the money is borrowed and the building completed, the debt payments just have to be made.

Plant Operations will barely budge. Fewer students coming in and out of school doors will yield some reduction in utility bills, but the lawn will need the same mowing, the windows the same washing, and the floors and restrooms the same consistent cleaning regimen. A 5% reduction isn’t an option.

Transportation will also decline a bit, possibly with an option of running one less bus, but students still must be brought to school from every corner of the county, and the routes still need to limit their travel time. Again, 5% reduction isn’t possible.

The Instruction and Student Support: Staff is the largest and most important item that cannot drop by 5%. The district may retain fewer teachers, aides, librarians, and counselors, but the reductions will be made by not hiring or not renewing young employees at the bottom of the salary schedule. The more senior teachers, with higher pay, have earned job security, and that tells me that even a 5% reduction in staff will not bring a 5% reduction in payroll. The need to maintain class sizes and meet special needs could make it hard even to cut the staff count.

A full 5% drop may work for Instruction and Student Support: Other. Fewer students will use fewer test tubes, fewer paint brushes, fewer computers and fewer books each year. Administration and Other Costs may allow equivalent adjustments.

Overall, a 5% drop in enrollment might reduce costs somewhere between 2% and 3%. For the sample district, I estimate that sample numbers might look like this:

Again, these numbers are informed approximations of what districts can and cannot cut, and  I’m definitely game for discussion of how to refine this analysis. The central point, though, is clear,  some major education costs cannot move downward at the same rate as enrollment.

Of course, the district can make further changes to balance the budget, but those are likely to be cuts that reduce opportunities for the remaining students, increase the workload for the remaining staff, or accelerate the decay of facilities and other assets.

A 5% enrollment drop is not an imaginary scenario. We already have rural areas experiencing rapid population declines and struggling with this sort of issue. A funding plan for charter schools could have a similar impact, as could the tax credits for private school scholarships being debated in the General Assembly.

Pointing out this pattern is not special pleading for education. On the contrary, it’s an initial step toward understanding education’s “cost curve,” the standard graphing approach economists use to show costs of production as a function of quantities produced.

Whether enrollment changes come from economic shifts or from revisions to state law and policy, we all need to understand those financial impacts and the follow-on implications for excellence, equity, and the readiness of Kentucky’s rising generation.

ABOUT THE PRICHARD COMMITTEE

Since 1983, the Prichard Committee has worked to study priority issues, inform the public and policy makers about best practices and engage citizens, business leaders, families, students, and other stakeholders in a shared mission to move Kentucky to the top tier of all states for education excellence and equity for all children, from their earliest years through postsecondary education.

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