K-12 Non-Instructional Service Consolidation: Spending Changes and Scale Economies

Educational policy makers (e.g., legislators, state and local school boards) continue to promote inter-district service consolidation as one method to reduce operating expenditures citing economies of scale as the source of any savings. This study uses survey data to identify the extent of non-instructional service consolidation in Michigan, with these data then merged with financial and other administrative panel data from 2004–2010. Except for a small spike in the number of consolidations in 2009, the annual trend showed no apparent acceleration or deceleration in the pace of service consolidation. Financially, this study measures and finds non-significant spending reductions associated with the consolidation of services from the local district to the Educational Service Agency (ESA). Although this is only one of several service consolidation models, (e.g., local districts sharing services with each other, local districts sharing services with municipalities, privatization of services), this study finds no support for the prediction that consolidating non-instructional services significantly decreases service spending. Conversely, the findings show that consolidating business office services significantly increases instructional spending.