Throughout the first quarter of the 21st century, schools built up capacity to accommodate growing student populations, adding classroom space, teacher positions, and the many resources that go into educating a child. The Covid-19 pandemic accelerated the build-up through the injection of giant sums of federal money to supplement state and local budgets. In 2025, more students graduated from high school than in any other year in American history. Today, however, the population of young people is sharply declining, and the trend shows no signs of slowing.

Districts around the country are seeing what happens to schools funded by per-pupil formulas when there are simply fewer pupils to go around. It’s a concern for teachers unions, with leaders desperately trying to strong-arm blue-state governors to keep existing budgets intact. It’s a concern for rural communities, who have seen this play out before. And it’s a concern for families who feel their children are pawns in an opaque and disruptive process that has the largest impact on communities already struggling.

It’s very easy to find emotional reasons to argue against closing underenrolled schools; it’s trickier to argue against the cold, hard fact that keeping empty schools running costs a lot of money while leaving students with less access to high-quality programming, safe facilities, and the non-academic resources that can help put struggling students on a better path.

This background makes a new analysis from Stanford’s Francis Pearman compelling. Using a synthetic difference-in-differences model, Pearman examined 796 California districts between 2011 and 2019 to see whether closure decisions led to balanced budgets. The sample design is important: Pearman looked at school district finances after the Great Recession but before the pandemic. He excluded districts with school closures underway at the beginning of the study period because the analysis requires a pre-treatment baseline, plus dropped single-school districts and any districts with missing data. These choices allow for a sophisticated statistical analysis but potentially exclude some districts facing circumstances similar to those making closure decisions today.

Pearman found that the closures in California reduced the number of students within a district by an average of 287 students, and reports that closures “left districts’ funding deficits and probability of achieving a balanced budget unchanged.” The null result held for districts in financial distress and for financially stable systems.

Why? Spending went down by about $447 per pupil, with a standard error of $388—nearly as large as the estimate—but revenue fell at effectively the same rate. California’s Local Control Funding Formula (LCFF) creates a large degree of state allocation variance based on local student counts, as state funding (about 55 percent of total funding at the start of the study period) drops when students leave the district with no hold-harmless cushion. Plus, closing schools had no effect on the total number of teachers and staff despite shuttered buildings and a drop in enrolled students. Fixed costs like required salary and benefits payments did not change following the closures.

Rather than truly right-sizing schools, it appears the districts just moved around adults.

With over three-fourths of all public school expenditures going to personnel costs and the average public school teacher salary in California during the 2024–25 school year reaching six figures, district leaders have limited tools to adjust their budgets. California has the second-strongest teachers union in the country according to Fordham’s latest analysis, working hard to protect its members’ jobs and raise salaries even when those costs extend beyond what districts can afford. Beyond union pressure, the regulatory environment in California limits the ability to repurpose closed buildings to optimize revenue—a point Pearman considers in discussing how the state’s surplus land policies constrain local districts.

It’s hardly the case that as goes California, so goes the nation. Other states facing enrollment-related financial pressure may have very different results if local school leaders have flexibility to optimize revenue and right-size their workforce based on student needs rather than collective bargaining conditions. While anti-closure advocates have been quick to latch on to an oversimplified conclusion that school closures have no fiscal benefit, Pearman’s analysis points to a much more complicated picture of school closure decisions, particularly after looking at how regulatory pressure in California hamstrung local leaders in ways that do not apply to many other states.

That said, the impact of closures on communities is real, and school board members facing tension between their fiduciary responsibilities and the vocal desires of their constituents would be wise to walk through the reasons why consolidations often better serve children rather than staring at spreadsheets and announcing a top-down decision.

Leaders can make the case for fiscally responsible decisions with both compassion and tangible benefits for the families most impacted. Consolidations can expand access to better classes, more extracurriculars, safer facilities, and stronger wraparound support—gains too often underdiscussed amid emotional conversations about closures.

State and local leaders can also create conditions for smart facility reallocation like affordable housing for teachers and community services that support children and families. There is a role here for philanthropists aiming for broad impact to help ensure closed buildings become a boon rather than a blight in impacted neighborhoods.

Tough choices lie ahead, and voters should keep leaders accountable rather than sending tax dollars toward poorly maintained, empty buildings where costs will rise as student enrollment continues to fall. Pearman’s findings suggest that conditions in California hindered financial savings from closing schools, but do not support the conclusion that closing schools doesn’t save money in an era of demographic decline. Instead, his analysis underscores the need for a holistic understanding of the factors impacting school budgets—from statehouses on down—and a policy approach that looks at both revenue production and cost reduction. Leaders should take heed quickly: Kicking the can further down the road leaves bigger problems for affected communities, while wise decisions today provide an opportunity to build out improved programs that are right-sized and tailored to the children they serve.

Alicia Anderson is a policy and editorial associate at the Thomas B. Fordham Institute.

This post originally appeared on the Fordham Institute’s Flypaper blog.