January 9, 2009

School Regionalization Does Not Save Money

Monique Chartier

The Ocean State Policy Research Institute has shot holes - on the basis of sound figures from the US Dept of Ed - in the well repeated and well intentioned suggestion to merge most of Rhode Island's thirty six school districts.

This from an OSPRI press release of today. [Emphasis added.]

As more towns and schools scramble for cost savings, the call for "regionalization" seems to be gaining momentum. However, new research by the Ocean State Policy Research Institute (OSPRI) shows that, at least with education, it would probably increase costs.

"It's a very easy pitch to say 36 school districts with 36 superintendents are more expensive than five regionalized districts with five superintendents. Unfortunately, it's not true," said OSPRI President William Felkner. "I bought it too, until I saw the data."

The U.S. Department of Education's National Center for Education Statistics' (NCES) latest published data (The 2007 Digest of Education Statistics that reports extensively on the 03-04 school year) show that Rhode Island school districts on average spend 7.9% of their current expenditure budgets on administration and supplies, the 2nd lowest of any state.

Administration and the "economies of scale" derived from combined purchasing are the two items touted to deliver savings from regionalization and Rhode Island already appears relatively lithe in these departments. Even on a per pupil basis, RI spending in these areas is lower than most of the nation and in the top 20 when looking only at "general administration" which are the costs for school district management including the superintendent's office.

"Using a business model, consolidation of services makes sense," Felkner said. "But when government mandates such actions and higher levels of governance are created, accountability suffers and costs rise."

Rhode Island has experience with regionalization and it has ballooned both administrative costs and per pupil costs. Taxpayers of regional districts have not seen savings nor has the state.

When comparing fully regionalized districts to similar size town districts we find that regionalized districts have the highest per pupil costs. One example is the Chariho Regional School District which was put together from three towns to make a school district whose student body is the same size as neighboring Westerly. But, the supposed economies of scale are nowhere on display in Chariho where administration costs per pupil are $825, forty percent more than the $589 spent in Westerly.

Indeed, when it comes to administration costs, the supposed venue for obvious savings, they are well above the median in ALL the regionalized districts.

"When it comes to schools, the solution is not 'streamlining, streamlining, streamlining,' it's 'salaries, salaries, salaries,' and the way to reform salary and benefits is through transparency. Give taxpayers a window on exactly how their money is spent, before, rather than after committing to the spending - as reflected in the East Providence School Committee's proposal for negotiating contracts in public."

The same NCES data source shows that 58.8 % of RI school budgets are devoted to teacher salaries and benefits, the nation's 6th highest. An evaluation of per pupil salary and benefit spending jumps that rank up to the 2nd highest in the nation. And if one wonders what methods might be effective at holding the line on teacher salaries, transparency or regionalizaton, just look at what teachers' unions say. They object to the former and embrace the latter.

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If RI spends among the least on administrative costs for education, it should follow that we spend among the most on "in the classroom" direct education costs. So how do we explain the poor performance of our students?

I suspect we may have fallen into the trap of "you get what you pay for" that has weak leadership manifesting itself in poorly performing teachers and poor results. Maybe, if we were to spend more on the smaller group of really high quality, effective leaders, they could produce a beneficial result while spending less on direct classroom costs.

The billion dollar corporations paying those huge salaries to the "leaders" are not successful by accident.(Please don't take that statement to mean I am in support of million dollar salaries, obviously not.)

The thin layer of leadership we have now is spread too wide makes for a large group of mediocre leaders fighting for the scarce resources of the state at the ultimate expense of the local taxpayer. The structure forces local districts to direct their efforts towards more parochial needs and lose focus on educational outcomes through sound management practices and personnel management.

A smaller administrative team, given a proper set of management rights, and being allowed to hire a staff of professional managers with authority to manage the schools as principals has got to be better than staying with the ineffective, but cheaper structure we have now.

BTW, Monique, it's the local control that has lead to the "contract one-upsmanship" you describe in your next post. That's my best evidence to support my proposition that we spend too much in the classroom without being able to get good results.

I think I have to fall on the side of less, but higher quality leadership, in order to get better results. It will at least eliminate all the distractions over the "johnnie's got more toys than me" contract negotiations.

Posted by: John at January 10, 2009 7:41 AM

"it's the local control that has lead to the "contract one-upsmanship" you describe in your next post."

Well, yes. So are you recommending regionalization, John?

Posted by: Monique at January 10, 2009 10:37 PM

Not exactly. I'm suggesting that a more centralized administration combined with a proper set of management rights can be more successful in achieving positive results.

Centralizing the administration is to do the same things the Governor is beginning to do. One state health care contract to save money and take it out of the collective bargaining process, one transportation provider which should lead to more efficient transportation systems, a single data collection system for students that is purchased and managed by the single state administration, a single state contract for food service to eliminate the 35+ contracts being managed separately, etc. As for the unions, well, as I suggested over a year ago, have the unions remain in the districts their in now, but have one state contract for each union.

The kids will still attend their own local school, but their principal will have clear authority and performance expectations or they will be at risk of being fired.

That's the rationalization I want.

It's probably not the perfect solution, but it clears away the problems we've created with the local control, though I doubt anyone can call what we have now "control." There are so many areas on school governance that will have to be considered, the job will take several years to accomplish.

For us to bitch about what we have and then bitch about a different model without offering a reasonable (and possible) solution is nothing but noise.

Posted by: John at January 11, 2009 10:53 AM


Thanks for placing our arguments before an engaged audience. Sorry I'm a little late to the party. I was in DC over the weekend and I thumbed a response on my phone yesterday, but when I clicked send my 1/2 hour went into the celestial infindibulum.


I appreciate your criticism but without extending our press release to white paper length, you would not garner that we gave consideration to some of the facets of the problem you describe.

You are absolutely right that more money as a percentage of spending in RI goes into the classroom, however all of that is in higher teacher salaries and lower pupil/teacher ratios. To the extent that these do not "buy" results, they are no better addressed by regionalization.

In terms of addressing the first element, East Providence, not regionalization should be the model. And I speak not only of their fiduciary unilateral budget balancing, but of their insistence on opening contract negotiations to the public.

Neither of these important stands would be likely made by regional authorities who have unlimited power to demand the budgets they set from municipalities! Fiscal oversight is essentially removed from the level at which the taxes are paid, is further from the taxpayer.

Both Bill and I would have been susceptible to the regionalization argument until he spent time serving on a regional school committee and saw how it largely evaded accountability to the taxing level of government that faces the music for tax increases directly. I was suspicious of the motives of various proponents and found the numbers in comparing regionalized to non-regionalized districts in RI remarkably unconvincing as regards any 'solution' in regionalization.

On the general question of economies of scale, Per pupil costs have a slight upward, not downward, trend by district in RI, and administrative costs - the arena where everybody imagines there are all kinds of savings to be had, the trend is very slightly down, but the inverse correlation coefficient is very low (.14 I think, don't have that file in front of me, its on the laptop). And, if you pull the tony communities that one can postulate have a more progressive and less restrictive attitude towards school spending (Narragansett and East Greenwich) there is no trend at all.

Regional districts spend more on administration and more per student (Foster Glocester, a partly regionalized district is the only regional not above the median on a per student basis, but they are above the median for administration).

Bigger is just not better finacially ,according to all our existing experience. When you put a superintendent over what used to be several districts they will command a higher salary and layers of super administration will be built in, e.g., deputy for elementary, deputy for middle school, deputy for high school, special assistant for this that and the other. And the watchdog effect of the taxing entity being the same as the spending entity, so that pressue against tax increases translates more directly to the spending side, is gone.

As far as effectiveness goes, the private model with which public schools are competing uses exactly the opposite strategy from that you propose. Small management units, with modest self contained administration

One supposes, if you had hands off regional administration, that you could depict a world in which schools operated largely independent from remote bureaucratic oversight and rose or fell on the accomplishments of staff working cooperatively with in-school administration that lead parents to choose other schools if these did not perform.

But then you are talking about vouchers, not regionalization. It is a pipe dream that regionalization would create lithe empowered administrations unconstrained by union obstructionism and their own weight.

Indeed, if such reform were possible, there is no reason whatsoever to assume it would work differently with the municipal districts we have now. If you want to exempt certain work rules as subjects for contracts with teachers, that is a totally different debate. If the case for doing so is strong, taking the risks of offering regionalization in return for such flexibility indicates that the parties surrendering flexibility, i.e. unions, feel that they would be more in command of other outcomes in a regional system.

Likewise, while it is quite sure that the leapfrogging contract language Monique describes contributed to the run-up in teacher's salaries in RI, during the last 7 years, state FTE costs went up almost double the rate for teachers. So localities, when faced with difficult economic realities have not proven unable to exert some discipline.

If you have any evidence whatsoever that we could somehow expect lean, efficient, effective administration from regionalization that lead to high results and low costs, when so far it has brought the opposite to RI, what would that be? I understand your argument in the abstract but I don't think it mutually exclusive with the idea of maintaining the current institutional boundaries. The risks of loosing control of a regional system far outweigh any highly speculative benefits.

If you need any indication of which approaches actually attack the hard questions, the unions are generally for or not opposed to regionalization, but highly object to transparency, and municipal fiscal restraint as cabins to negotiation.

Not all the numerical examples, that we have, fit in the press release and I will get with Bill about posting the excel base files with RIDE data.

But a quintessential regionalization candiate, Aquidneck Island, illustrates the problems with seeing regionalization as any kind of solution. Portsmouth has one of the cheapest administrative costs in the state at $508 per pupil. Newport is at $752 (BTW, these figures are close in ratio to the total per pupil difference as well which is actually a little worse at $9625 Portsmouth vs. 14,915 Newport). These districts are almost identical in student population. But from an institutional standpoint, which style do you think likely to prevail if Portsmouth is forced into a district with Newport (and the slightly less spendthrift Middletown)?

What is really intended is that Portsmouth will subsidize Newport. The statewide property tax by another name.

Now I understand that people will suggest Newport has a more challenged demographic and this argument has prevailed in seeing far more state aid alloted to school districts that make such a case. The evidence could be as easily read to say that schools will spend whatever you give them, but acknowledging that the districts are not the same is anything but an argument for putting them together.

If one wants to experiment with educational opportunity and effectiveness that transcends municipal boundaries, the obvious solution that could be readily tested on Aquidneck Island is Privatize not Regionalize.

Give every student on the island a voucher for the average of what is currently being spent and allow the towns if they have high pride of ownership in their school systems to continue to operate them and accept vouchers (with some provision to ensure a degree of access to these schools if they are the choice of parents from the other towns in this experiment).

Or towns could spin off some or all of their schools as charters or privates that could accept the vouchers. And purely private schools could be established that could compete for vouchers so long as they agreed to accept the voucher as full payment for tuition (so the Abbey could take some island kids if they were willing as long as they were willing to accept the voucher as payment in full).

Of course such a proposal will engender great hostility from unions suspicious of the flexibility of more private or enabled public institutions and you'll have a hard time pushing this in Sen. Paiva-Weed's backyard, but a reform worth arguing for even if the likely reality is that we'll continue to have local school districts fighting it out like East Providence.

Brian Bishop
Ocean State Policy

Posted by: Brian at January 12, 2009 11:42 AM

I agree with you that regionalization as a process by itself will not save money. Having served as an administrator in 3 regional school districts, I can say from experience that there is really only one way to save the kind of money that makes the concept worthwhile, and that is the closure of buildings.

School administration from a distance isn’t effective. Administrators need to be in the schools, even the Superintendent. I served in that capacity in Rhode Island for 7 years, and I can say from experience that visiting classrooms and observing and giving feedback to teachers is the most efficient way to improve delivery to students and increase achievement.

On the other hand, consolidating school buildings, especially high schools, offers the most promise for several reasons. The first and most important reason is that it would improve the educational program by providing a critical mass. On Aquidneck Island, for example, there are approximately 650 high school students in Newport, 700 in Middletown, and 1,100 (including Little Compton students) in Portsmouth. Each community has its own high school. Think of the number of Advanced Placement courses or foreign languages or career development programs that could be provided in a single large school in the center of the island.

But the strongest reason for regionalization on Aquidneck Island is the ability to excess 3 aging and costly high school buildings, all in need of expensive upgrading and renovations, by uniting all 3 communities in a single campus with all the bells and whistles for 60% reimbursement plus 5% for energy-efficient mechanical systems.

For regionalization to succeed on Aquidneck Island – or anywhere else for that matter – there must be a shared vision and shared ownership. I have been making the case in the local newspaper for at least 6 months and on my blog since February 4th at www.middletownleads.blogspot.com.
I invite you to review the reasons for my commitment to regionalization on Aquidneck Island and the concept might begin to look a little different.

Posted by: Barbara A. VonVillas at March 18, 2010 1:02 PM