The Education Exchange: School Districts with Declining Enrollments Have Higher Funding, More Staff Per Pupil

PAUL PETERSON, HOST:

This is the Education Exchange with Paul Peterson. I am the director of the Program on Education Policy and Governance at Harvard University. Thank you for joining us. Well, U.S. schools are facing a crisis as the number of children drops. So says the New York Times. News media outlets everywhere are saying districts are suffering because kids are leaving. And it’s true that teacher unions are demanding higher salaries for teachers as inflation drives up the cost of food and fuel. The federal government’s cutting back billions. Property owners are resisting tax increases. Immigration from abroad is slowing down. Fertility rates are falling. Voucher programs are attracting kids away from public schools. States are cutting school funding when enrollments decline. But is this all really leaving school districts that are losing students in a state of financial disaster? Well, two scholars at Georgia’s Kennesaw State University, Matthew Lee and Benjamin Scafidi, said no way. In their paper, “Enrollment, Fiscal and Research Public School Districts,” they say, that things are just fine in declining districts. This paper was presented at a conference at Harvard just this past week. So I’m very pleased to have Ben Scafidi with me today on the Education Exchange. Thank you, Ben, for joining me.

BENJAMIN SCAFIDI: Thanks for having me, Paul.

PETERSON: Well, Ben, are you saying that the fuss in the New York Times story is just utter nonsense?

SCAFIDI: I think it’s even bigger than nonsense. I think they have the story backward.

PETERSON: Backward? So you need to unpack that.

SCAFIDI: Yes. It’s not like you said, it’s not just the New York Times. It’s pretty much everyone. You know, the news media, school district leaders, teachers’ unions, very prominent think tanks and academics are saying with the enrollment declines public schools have been facing that there’s to be giant fiscal problems and there’s going to be less resources for students who remain in public schools. The paper that Matt Lee and I did that we presented at your great conference the other day shows that when a district experiences enrollment declines, they actually get a fiscal benefit that students who remain in district public schools, after enrollment declines, have more resources for their education because of the particular, the details of school funding. But districts with growing enrollment actually have trouble keeping up. They have trouble keeping the resource increases to match the increases in students. And so if we should be worried about anyone, it should really be districts that are growing enrollments, not districts with declining enrollments.

PETERSON: Okay, so let’s look at your analysis. What is the data set? Did you make this data up, or is this real data?

SCAFIDI: This is real data. This is data that school districts and states report every year to the U.S. Department of Education and the U.S. Census Bureau. And so this data has been collected for decades. It’s publicly available. Researchers use it all the time.

PETERSON: So if I wanted to prove you wrong, I could just look up this data and I could show the opposite if I had the will to do that.

SCAFIDI: Absolutely.

PETERSON: So you’re using public information collected by the U.S. Department of Education to make your statements about the fiscal situation for school districts across the country.

SCAFIDI: That’s correct.

PETERSON: So now listen, what’s the period of time that you’re looking at?

SCAFIDI: So we looked at 1998 up through 2019. So we wanted to stop before the pandemic because we were concerned people would just say, oh, this is a Covid thing or what have you. And we could only go back to 1998 because that’s as far back as the fiscal data is collected consistently. And that time period is great to look at…I don’t think a lot of people know this. Actually, a slight majority of school districts in the United States were experiencing enrollment declines during that time. Overall, in the…

PETERSON: Percentage were experiencing a decline in enrollment.

SCAFIDI: Yeah. A majority of districts during that time.

PETERSON:  A majority.

SCAFIDI: Yes, but overall enrollments were going up. So everyone was just looking at that top line, 48 million students, 49 million students, 50 million students.

PETERSON: So there’s a steady increase in the total number of students across the United States between ‘98 and 2019, but that was uneven across districts.

SCAFIDI: Correct. A lot of rural districts were losing students. Many urban districts were losing students. Districts in the Northeast and the Midwest were losing students, you know, disproportionately relative to the rest of the country.

PETERSON: Okay, now let me ask you this question. What if you extended your analysis now down to 2026? I suppose the data is not yet available. Do you think you would get the same results or do you think things would change?

SCAFIDI: I actually think it would be more dramatic because there was a huge influx of billions of dollars of additional federal funding during that time period. And so they distributed that based on enrollment, but then districts with declining enrollment didn’t get a cut in that funding. And property values went up pretty dramatically in the United States. And so districts tend not to roll back the property tax millage rate. They might do it a little bit, but if property values go up 10 percent and they cut the millage rate 1 percent, that’s a big increase in property tax payments. So I think when the data does become available, I fully expect it to be even more dramatic than our findings.

PETERSON: So you think you’re currently underestimating what you found out. How do you do your analysis? What’s your,…I don’t want you to go into all the technical stuff, but in general, how do you analyze your data?

SCAFIDI: So we have data for every school district in the United States every year from 1998 to 2019. And we separated districts into, did your enrollment decline or did your enrollment increase? And we looked at three-time periods. We looked at, all one-year changes in enrollment, we looked at all four-year changes in enrollment, and then we looked at the 20-year change over our entire time period. And so we looked at growing districts. How much did total revenues per student go up? How much did total expenditures per student go up? How much did different resources, staffing, compensation per employee, et cetera, go up? And then we compared that to districts with enrollment declines. So the key here is we looked at district-level data and we looked at it on a per student basis because the claim is that students will have fewer resources for their education. And we found that students actually had more resources for their education in all respects, except for one. And that one, there was no advantage for growing districts or declining districts. That was complicated.

PETERSON: So bottom line, how much more do students have because of the decline of enrollment in the typical district? Do you have that number or something like that?

SCAFIDI: Yeah. If we want to look at total expenditures per student, so over a one-year period, a district with declines, let’s say a district lost 10 percent of their students. Their total expenditures per student go up 8 percent. But a district with a 10 percent increase in enrollment, their expenditures per student went down 5 percent. Over a 20-year period, it attenuates a little bit. But it’s still a giant, giant change. And that’s true, again, for revenues, expenditures, and resources per student.

PETERSON: Well, some people might say, OK, so maybe the next year you have decline in enrollment, but you still have the money from the past and it takes a while for things to catch up with you. So you might be a little bit better off in the short run, but in the long run, it’s going to get you. And you’re saying, no, that’s not really true.

SCAFIDI: It’s true a tiny, tiny bit. These things did attenuate over the one year, to the four year, to the 20 year period. But even after 20 years, total expenditures per student for a district that say lost 10 percent of their students, their total expenditures per student went up 7.6 percent. But a district with a 10 percent increase in enrollment, their total expenditures per student went down 1 percent. Now this is relative to the baseline. The baseline is, students are getting more resources over the decades. But relative to that baseline, growing districts weren’t quite able to keep up with the national average, whereas declining districts did much better than the national average, even after 20 years.

PETERSON: So you’re saying that in general, you know, revenues across the country have been going up on a per student basis in the 21st century. And they’ve gone up even more in the districts where you’ve got decline than in the districts where they’ve been growing.

SCAFIDI: Correct.

PETERSON: Now, this is contrary to everything I read in the paper. I just think it’s so amazing to read this when it’s so contrary to what I’m being told every day I pick up the papers. So, you know…what is the other side? What’s the other point of view? Some people say, oh, per pupil is not the way to do it. You’ve got to look at total revenues because the costs are there whether or not the students are there. So what do you say to that kind of argument?

SCAFIDI: That’s exactly right. They essentially argue, they don’t phrase it this way, that all their costs are fixed costs. That’s clearly not true. If you have more students, you need more teachers, et cetera. You need more textbooks, more computers, more counselors, more teacher aides. But I think if you’re…

PETERSON: Yeah, but once you’ve got them, you can’t get rid of them. Don’t you have to keep on paying them even if the students leave?

SCAFIDI: You don’t have to. I mean, that’s a choice. I mean, there might be union contracts that say you can’t, but normally these things say, you know, if there’s a reduction in force, that’s a different thing. So if a district lost 20 percent of its enrollment and they had to keep all their employees, that’s a massive increase in access to counselors, access to teacher aides, access to teachers for students. But districts, to some degree, have cut employment a little bit, but not nearly as much as declines in students.

PETERSON: Well, I think it’s important to recognize here that there’s churning in personnel all the time everywhere in our society. People retire, new people come on, people go into different jobs. because they’ve decided they want to do something else in the rest of their life. So you’re always…how much of a turnover in the educational system and just the numbers, percentages of teachers that new teachers that come in and people that retire. Do you know anything about how, you know, what’s the pace at which things turn over?

SCAFIDI: Yes, I’ve studied that to a fair degree. And there was always this statistic about 50 percent of teachers leave in the first five or six years. It’s probably more like 30 percent because a lot of teachers will leave and then…maybe have a baby perhaps and come right back. So if you compare comebacks, people who leave for just a short period of time, probably after about five, six, seven years, probably 30 percent are gone. But there’s also turnover from non-teaching staff as well.

PETERSON: So in other words, what you’re saying is, okay, there’s a 30 percent turnover within five years. So even if you have a 10 percent decline in enrollment, you just don’t have to hire new teachers. You don’t have to fire anybody. You just don’t hire the new teachers or the new staff members when people retire.

SCAFIDI: That’s absolutely right. And, if you think about it from a student perspective, we know from… there’s a lot of, a lot of literature about teacher effectiveness. And the research shows that there’s this big distribution. You have a lot of great teachers, you have a lot of mediocre teachers, and you have a lot of low-performing teachers. What districts could do is, when they have these large enrollment declines, is they could fire the Ben Scafidis and the Paul Petersons, who are obviously not good teachers. I’m being funny here. I mean, I’ve won teaching awards and you probably have too.

PETERSON: You can’t accuse me of that because you’ve yet to witness my stellar performance in the classroom.

SCAFIDI: I’ve seen you speak many times and you’re excellent. It’s easy for me to believe you’re a great teacher. And I’ve won teaching awards too. But to be serious, if districts, you know, were to lay off the very lowest performing teachers and move those students in with mediocre teachers. The research by our friend Rick Hanushek and many other people suggests there would be very dramatic increases in student learning. PETERSON: So tell me where the money…why is the revenue, you know, increasing in these districts with declining enrollment? What’s the mechanism? Does the state keep on paying out the same amount as in the past? Where does the money come from in those declining districts?

SCAFIDI: That’s an excellent question, Paul. So, as you know, districts get funding from the federal government, from the state government, and from local property taxpayers. And all three of them are tilted in favor, all three of those funding mechanisms are tilted in favor of districts with enrollment declines. And I’ll go through each one. All right. Let’s start with the local. If a district experiences an enrollment decline, there’s no requirement that the local school board or the local taxing authority reduce, say, property tax payments commensurate with the decline in enrollment. And what the paper with Matt Lee and I showed is that in practice, they don’t. That districts that have enrollment declines have very large increases in local revenues per student compared to districts with growing enrollment. So it might be the case that school district employees have a lot of power at the local level, and so they don’t….districts don’t cut property taxes when there’s enrollment decline. At the state level, there’s typically hold-harmless provisions or maybe averaging of enrollment over a couple of years. And so when a district experience enrollment declines, they’re getting funding for a little while for students they don’t serve anymore. Some people call these ghost funding for ghost students. But then districts that grow, the state funding doesn’t automatically go up as fast as their growth because of this averaging over time. Also, there’s other state funding outside of main funding formulas, and those are often not enrollment driven. Like a state might say, we’re going to pay for one counselor at every school, one principal at every school, things like that. And so we showed that even over the long term, declining enrollment districts had an advantage with state funding. Federal funding is interesting. It’s a function of the number of students living in the district. So if some students are in a homeschool or in a private school that doesn’t participate in federal programs, the district gets to keep that funding for those students. Also, you know, there’s charter public schools, and there’s private schools that do participate in federal education programs, but they routinely claim, and there’s federal reports that back this up, they claim that districts don’t give them the federal money that they’re entitled to. So districts are perhaps keeping federal money they’re not supposed to. And so when districts experience enrollment declines, they have an advantage with respect to federal funding, state funding, and local funding. School finance experts all know this, so I was kind of surprised that so many people were saying declining districts were going to be at some disadvantage with respect to funding. School finance experts know everything I just said.

PETERSON: So, well, this is money. But let’s talk about real people. How about the number of teachers per student and the number of… counselors and other staff. What’s the staffing arrangements in declining districts and in growing districts? Does that follow the same pattern as the fiscal?

SCAFIDI: Yes, and it’s actually more dramatic. I had this chart in the paper that showed that from the 1999 school year, when our data was 98-99, to 2019, districts that had enrollment declines over that period collectively lost over 3.7 million students. So declining districts lost 3.7 million students. But the funding systems were so favorable to them, they were able to increase their staffing by 17,000 personnel.

PETERSON: Well, 17,000 personnel isn’t that big a number against, you know, the millions of people out there in education. So you basically say they didn’t lose any personnel at all.

SCAFIDI: Correct.

PETERSON: Even though they lost a lot of students, 3.7 million students. Correct?

SCAFIDI: Correct. And growing districts…also, you know, were able to increase staff quite a bit. And so growing districts did experience, fewer, you know, students, per teacher and things like that. So there was an increase in staffing for students in growing districts. But because declining districts didn’t cut their staffing, students in declining districts had much more access to teachers, much more access to aides, counselors, and things like that.

PETERSON: Well, has there been, a problem of getting teachers in the growing districts? So, you know, do we see, you say we’ve got it all backwards, but is there really a problem in these growing districts or are they keeping pace well enough?

SCAFIDI: They’re keeping pace. They’re just not keeping pace as well as the declining districts. They’re just not keeping up with them. But yes, staffing in growing districts are keeping pace. Like during Covid, everyone was saying we can’t find teachers, can’t find this and that. Staffing in public schools went up during the Covid era. I’ve looked at that. It’s not in this paper, but I’ve looked at that as well. And so districts, again, they had more employees at the end of Covid than they had at the start even though they had a million less students.

PETERSON: Well, Ben, how come we get such a wrong impression when we read the newspaper? Who’s telling the newspaper stories that aren’t true?

SCAFIDI: A lot of it is public school district leaders. If you look at it from their point of view, right. They might care about the total amount of money they have because that’s a measure of their power. Right. If I have a bigger budget, I can hire more people and I have more kind of power in my local community. And so that’s maybe what they care about. In our paper, what we care about is how much resources the students have. But I can’t explain why researchers are saying this. Again, school finance people, they know how federal, state, and local funding systems work. And so while they maybe have never thought about the question, if they were asked, it should immediately pop in their head that declining districts are this large advantage by federal, state, and local funding systems.

PETERSON: So you think anybody who’s running any operation wants to say, I need more money. I mean, that’s just sort of the way it always is, more money will help you grease things one way or another. So is it just plain old greed?

SCAFIDI: I suppose so. I mean, yes, it’s human nature. You’re right. Yeah, I run a small research center. I’d like more money too, right? But, you know, if my university, we’ve had growing enrollment, but if we had declining enrollment, I’m sure my university doesn’t want less funding, correct? You’re right. It’s true in every endeavor.

PETERSON: Yeah, but the news media should be suspicious of these claims. Journalists are basically by nature suspicious. They regard that everybody’s got an ax to grind. So why is the news media sort of perpetuating myths that aren’t consistent with the underlying facts?

SCAFIDI: That seems to be a common theme with reporters with respect to public education. I think everyone has this romantic view of public education. But, you know… they’re good-hearted people in public education, of course. But reporters should be whenever money is involved, reporters should be suspicious, whether it’s private business, federal government, state government, school districts, what have you?

PETERSON: Well, I would suspect the unions myself. You didn’t mention the unions, but unions, whenever they go into collective bargaining, they always say that teachers are just living on a pittance and they make a claim that they’ve got to have a major salary increase just simply to put bread and butter on the table. Isn’t this just a union thing?

SCAFIDI: Definitely the unions are doing a good job from their point of view of putting out things that aren’t true. And with respect to compensation for employees, public schools, as we talked about earlier, have been getting adjusted for inflation on a per student basis, pretty large increases in their revenues per student, over many decades. I mean you know during the great recession for a couple years there was an anomaly but going back many decades they’ve gotten more money and what they’ve done is hired more and more staff which gives the unions more power because they have more members they get more dues. Right? But instead…so instead of using that increase in the revenues they’ve gotten for to give like say teachers more salary what they’ve done is hired more bodies and so, you know, that’s where their teacher raises went. It went to hiring more and more staff. And so if teachers want  a raise, they need to tell their unions and tell their school districts, you know, do we really need all these people and maybe instead use their increases in their resources for more staff?

PETERSON: Well, is this—

SCAFIDI: I mean more salary.

PETERSON: Yeah, yeah. Is this story you’re telling simply a red state, blue state story? Is it the case that in the South they’re underfunding education and that’s where the growth is? Because people are migrating to the southern states and the red states more generally, the mountain states. So you’ve got a lot of migration. So the declining districts tend to be blue and the growing districts tend to be red. Is this really the driving force here or is there something else going on?

SCAFIDI: That’s an interesting question, too, Paul. So in the southern states and western states and districts that are growing, their resources per student are going up. They’re just not going up as fast as they are in declining districts. So, yes, you could think of it as a red state, blue state thing, but it’s really happening everywhere. I mean, growing districts in blue states have this problem too. I shouldn’t say problem, have this phenomenon too.

PETERSON: Well, Ben, thank you very much for laying this out. I think our listeners will be fascinated to learn new facts that are little appreciated. So thank you for joining me on the Education Exchange.

SCAFIDI: Thanks for having me, Paul.

PETERSON: I’ve been speaking with Benjamin Scafidi. He’s a professor at Georgia’s Kennesaw State University. He and Matthew Lee are authors of a paper entitled “Enrollment, Fiscal and Resource Changes in American Public School Districts.” I am Paul Peterson. This is the Education Exchange. Please join me every Monday when our weekly podcast is released on the Education Next website at noon Eastern time.