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Study: Consolidating nonteaching services doesn't always equal savings

Monday, July 21, 2014

LAWRENCE — In an era when school districts are under near-constant pressure to improve budget efficiencies, they are increasingly looking at alternative solutions such as the consolidation of school districts, or, more recently, the consolidation of selected services. A study by a University of Kansas professor shows that consolidating noninstructional services, an increasingly common tactic, may produce financial savings in some but not all cases.

Thomas DeLuca, assistant professor of educational leadership and policy studies, authored a study in which he analyzed Michigan’s efforts to consolidate noninstructional services such as accounting, payroll, transportation, human resources, food service and custodial services. He wanted to determine whether these service consolidations did indeed produce financial savings, and, if so, if those savings were then re-allocated to instructional services.

While he found the arrangements did in fact produce savings in some cases, it was not across the board. And in cases where savings were realized it did not always equate to more funding for instructional services, but in other cases, the result was service quality improvement.

“I was expecting to see some substantial savings, but they just weren’t there,” DeLuca said. “I was also expecting some improvement in service quality, but not to the extent I found.”

DeLuca recently presented his findings to a conference of Michigan lawmakers and has published the findings in the Journal of Education Finance. A former teacher, principal, school finance director and Michigan native, DeLuca presented his findings to Michigan policymakers who are considering alternative service delivery solutions, some based on school district organizations such as county-based school districts. DeLuca surveyed school districts on their service delivery models and analyzed historical numbers of those that have already made the transition, comparing current spending with preconsolidation figures.

Among the most significant findings were that while the intent was to save money, service consolidation did not always equal automatic savings. However, when they did not, service quality often improved. In many cases this was due to certified public accountants providing services that previously were not available, especially in smaller districts. They were able to create efficiencies as well as applying professional accounting standards to situations where previous employees may not have had accounting expertise, and more specifically, the rigors of public school accounting.

“Often the districts would have someone who started as an aide or parent volunteer, moved to a secretary and eventually became the district’s bookkeeper who just didn’t have the public school accounting training,” DeLuca said.

While in some cases savings were re-allocated into instructional services, the amounts were typically very small. But the improvement in quality sets up a classic dilemma for policy makers, school boards and voters. Is it more important to save money, or improve services, and are the two mutually exclusive? For some districts and community members, the savings choice might be paramount, while for others, improving service quality may be worth offsetting any minor savings.

Service consolidations are often enacted to achieve savings through “economies of scale,” or reducing redundancies. The key to that goal, however, is that service quality must remain the same, if not improve, for it to be a true savings due to economies of scale. The research showed that services did not always maintain their quality, and in some situations, such as special check requests, accounting assistance to parent teacher organizations or extracurricular booster clubs declined.

A variety of factors including technological innovations such as Internet access and virtual private networks play into whether consolidation of certain services such as accounting, payroll and human resources accomplished savings. In other words there is no black and white, one-size-fits-all answer to whether such consolidation is the universal right move.

“We’ve talked about this in my school finance class. Some times the answer is simply ‘it depends,’” DeLuca said.

In future research, DeLuca, who specializes in studying how districts allocate funding once they receive it from the state, will analyze how states are making similar consolidations of noninstructional services. An initial sample shows that states such as Texas, Illinois, Michigan and Minnesota are pursuing service consolidation, usually with the stated intent of reducing spending.

Any states or districts looking to make such a move need to carefully evaluate their intended goals: saving money, improving service quality or a combination of the two.

“That’s the key to any policy initiative, setting the right expectations,” DeLuca said. “Policy makers should identify and articulate the goals of any policy initiatives designed to reduce spending or improve service quality through consolidation.”

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