The Effects of School District Consolidation on Educational Cost and Quality

We examine the effects of both whole-grade sharing and administrative consolidations of local school districts in Iowa in the 1990s, the majority of which were induced by state fiscal incentives. We find no effects of either sharing or consolidation on the pupil-teacher ratio, enrollments, or dropout rates. In terms of revenues, we find evidence of temporary increases in state aid, as predicted by the state incentives. This increased state aid, however, is not offset by changes in local revenue and thus total revenue increases. We find a corresponding increase in local expenditures, although this increase was smaller than the increase in revenues, resulting in an increased surplus. Although we lack detailed quality data on student outcomes, these findings suggest an absence of efficiency gains from either whole-grade sharing or consolidation.