Declining Enrollment – Government Schools Need to Adjust Accordingly

Government School Monopolies – Insulated from the Marketplace
Today, the Sacramento Bee carried a story by Peter Hecht about declining enrollment in California schools. The way public schools deal with declining enrollment demonstrates just how insulated the government school monopolies are from the reality of the marketplace. Most businesses, when faced with declining customers, adjust and do so quickly or face the reality of going out of business. Government schools, on the other hand, are given a year of “cushion” and then seek other ways to avoid dealing with market realities.

For the uninitiated, to fully understand the year of “cushion;” a quick “primer” in funding might be useful. School districts receive funding based upon average daily attendance (ADA). Their revenue limit (basic funding) is based upon the number of students who actually show up for school each year (some may remember the days before ADA when schools were funded based upon enrollment rather than attendance and they were not nearly so concerned about whether your child actually showed up for school each day). School districts that experience declining enrollment are provided a one year “cushion” by allowing them to choose to accept their revenue limit calculated on the current year ADA or the previous year ADA; this allows the school district one full year to make needed programmatic changes to adjust serving fewer customers.

The declining enrollment “cushion” was originally designed to accommodate school districts that suffered sudden and unanticipated enrollment losses caused, for example, by the closing of a military base in the area served by the school district. When declining enrollment is caused by changing demographics in a community it is supposed to be recognized by the district, anticipated and addressed in long-term planning. Some school districts have done this well, others (like San Juan Unified School District) have instead operated with their proverbial head in a hole. When a business makes such a dramatic error in planning it either makes drastic changes or it goes out of business. When government school monopolies make such errors they declare a “crisis” and appeal to lawmakers for a bailout.

An Opportunity Missed - Or... An Opportunity Enhanced?
This year the Legislature passed SB 1133 (Torlakson) which was the “settlement” of the lawsuit filed by the California Teachers Association (CTA) against Governor Schwarzenegger to “recover” $2.9 billion the CTA argued was owed to schools (based upon an agreement between the CTA and the Governor in 2004). SB 1133 was written by the CTA and spends the entire $2.9 billion on an experiment called the “Quality Education Investment Act of 2006” – in short, the $2.9 billion (ostensibly "taken" from all schools) will be spent over seven years in approximately 600 schools to reduce class sizes and provide professional development. To accommodate the class size reduction approximately 2,500 teachers must be hired – when the one-time funding runs out in seven years there will once again be a “crisis” that requires more money.

It would have been wiser and more equitable to use the $2.9 billion in “settlement” funds to address issues like declining enrollment in all schools rather than establish ongoing, expensive programs for 600 (out of nearly 10,000 schools) with one-time funds. Ironically, SB 1133 creates a need to hire more teachers at a time when overall enrollment is declining – could the government schools have enjoyed a less market-driven reality?

[An aside, SB 1133 represents the “dream child” of the CTA – establishing new jobs through class size reduction which means more dues payers which allows more funding for the CTA to play in political campaigns. The ability of the CTA to be an influential financier of political campaigns ensures that more money will be doled out to mitigate the ravages of declining enrollment and other marketplace inconveniences. While this does not help taxpayers, it is a boon to government school monopolies.]

Questions to Ask
When your school district declares it is a “district in crisis” because it is losing funding based upon declining enrollment ask a couple of questions. First, what caused the declining enrollment? Was it a sudden change or was it due to changing demographics? If the latter is the case, what has the school district done in anticipation of the declining enrollment? How many new schools were built in the district despite projections of declining enrollment? Is the school district acting rationally to anticipate future enrollment growth (for example, leasing out closed facilities rather than selling them)? Ultimately, if the marketplace demands reduced operations; why should the school district be insulated from making needed adjustments?

The Story by Peter Hecht can be read here.