Monday, February 27, 2006
COST-SAVING HERO: SHARED SERVICES
Q. The more we consolidate and centralize education, the higher our administrative costs are getting and the stronger the educational bureaucracy becomes. How can we enjoy the operating efficiencies of large organizations while still reaping the rewards of decentralized management and local control?
It used to be that more than 80 cents of every tax dollar allocated to public schools went to pay for the teacher and curriculum, and less than 20 cents went for overhead. But now that’s changed: in most states, somewhere around 60 cents or less goes for instruction, and 40 cents or more for non-classroom spending.
Nobody likes it, of course. Responsible school districts have long since looked into privatizing as many non-classroom functions as possible to save money. Since the lion’s share of district spending is in personnel, and for the most part those personnel have to be paid union wages and benefits, though, there’s not much more room for savings with that strategy, other than, of course, to try to reduce the number of people on your staff and make what everybody does more cost-efficient.
But there’s lots more than can be done with shared services – public school districts joining together to share various non-educational functions and split the cost.
With declining enrollment and budget cuts facing many districts today, and pressure from adequacy and equity lawsuits to spend even more money on instruction than before, smart school finance policy is to find new ways to manage the school dollar more wisely.
Shared services is anything but new: consider the one-room schoolhouse of decades ago, where families across a wide geographical area would all share one teacher. But it has taken center stage again as the easy-to-finance Baby Boom era, with its steadily increasing enrollment and tax base, passes by, and the growth of private schools and homeschooling causes school officials to hustle to find new cost-efficiencies because of stagnant or falling enrollment and revenues.
Two small, adjoining school districts may job-share a superintendent or collaborate to build a new gymnasium that both will use, for example. Several neighboring districts may pool their employees for health-care benefits and get better rates.
Transportation, especially for the escalating costs of special education transportation, is a natural candidate for multi-district cooperation, especially with today’s fuel prices.
Other likely categories include human resources, food services, information technology, building maintenance, general administration, and other support functions.
What works best is to work hard to create shared service contracts for all school district expenses that aren’t “mission-critical,” or affecting the educational process itself. And that goes far beyond toilet paper and lightbulbs.
Homework: There is a lot of excellent information about school finance in the October 2005 article, “Driving More Money Into the Classroom: The Promise of Shared Services,” from the Reason Foundation and Deloitte Research, on www.reason.org/ps339.pdf
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