Relationship of School District Expenditures and Size Studied

January 28th, 2003

AMES, Iowa — An Iowa State University study shows that Iowa school districts with fewer than 750 students generally spend more per student than larger districts. Of the 374 Iowa school districts in 2000-2001, 208 had enrollments below 750.

The study was done by ISU economists Dan Otto and Mark Imerman. It provides general information on how much money is spent on K-12 education in Iowa and the sources of that money. The researchers examined revenue and expenditure patterns from data public school districts file annually with the Iowa Department of Education.

There were 494,290 students in Iowa school districts in the 2000-2001 school year. In that year, the school districts spent more than $3.1 billion, with a statewide average expenditure per student of $6,383.

When the economists matched expenditures per student with district size, they found costs per student generally rise as district sizes fall below about 750 students. They calculated the average per student expenditure for the 208 districts with fewer than 750 students at $6,619.

The ISU study also analyzed how school districts spend their budgets in categories such as instruction, administration, transportation and operations and maintenance. Statewide, instruction accounts for nearly 69 percent of the total budget for school districts. The second largest category is administrative services, at about 9.5 percent of the budget.

Otto and Imerman said there was no clear evidence that smaller districts spend a larger proportion of their budgets on instruction. But they did find districts with lower enrollments spend larger proportions of their funds on administrative services.

Another part of the study considered revenue sources and district size. About 39 percent of public school district revenues comes from local sources, with 32 percent of that total coming from local taxation. The researchers found a tendency for local tax revenue per student to increase as district size declines, meaning smaller districts shoulder a larger share of the expenditures from their own sources than larger districts.

Discussions about school funding and size are underway in the Iowa Legislature. In his "State of the State" speech, Iowa Governor Tom Vilsack said districts with high schools having less than 100 students should have financial incentives to "collaborate or consolidate." He also called for a study of Iowa's school finance system. The Iowa State Board of Education has recommended the state provide financial incentives for public school districts to consolidate high schools with fewer than 200 students.

The report on the ISU study is on the Web at: http://www.econ.iastate.edu/research/webpapers/paper_10183.pdf

Contacts: 

Dan Otto, Economics, (515) 294-6147
Mark Imerman, Economics, (515) 294-5781
Susan Thompson, Communications Service, (515) 294-0705