| August 27, 2012

Clear thinking on public education's 'fixed costs'

When arguing against parental choice in education, members of the education establishment often raise the subject of “fixed costs.” If a student leaves, they remind us, the school district still has to pay the electric bill and so on.

“The implication of their argument is that all costs of running public schools are fixed,” economist Benjamin Scafidi writes in Perspective. “Interestingly, I have never heard that argument made when there is an increase in the number of students. If a public school adds only one student, do the lobbyists for public school leaders suggest that the district should not receive any extra funding?”

Of course not. Fixed costs aren’t fixed forever, Dr. Scafidi explains. “In the long run, all costs are variable.”

Oklahoma’s average spending per student was $8,715 in 2008-09. I estimate that 33 percent of these costs can be considered fixed costs in the short run. The remaining 67 percent, or $5,860 per student, are found to be variable costs, or costs that change with student enrollment. The implication of this finding is that a school choice program where less than $5,860 per student is redirected from a child’s former public school to another school of his or her parents’ choosing would actually improve the fiscal health of the average public school district. And, it would provide more resources for students who remain in public schools.

I have also done analogous calculations for the Jenks and Union school districts. Jenks spends more per student than the Oklahoma average—$9,265 per student for Jenks versus $8,715 for the state average. However, Jenks spends fewer dollars on instruction and other variable costs than the state average. For example, Jenks spends only $3,667 per student on instruction versus an average of $4,508 per student in the state, about $841 less per student. Jenks spends significantly more money per student on capital and overhead than the state average. Consequently, the estimate of short-run variable costs for Jenks is $5,225 per student, or 56.4 percent of total expenditures per student.

Union spends a bit less than the state average, $8,567 per student. Like Jenks, Union spends more on overhead than the state average and less on instruction. Also like Jenks, this leads the estimate of short-run variable costs for Union to be less than the state average. For Union, short-run variable costs are estimated to be $5,041 per student.

As I never tire of repeating, school choice saves money. Which is one more reason Oklahoma’s budget-conscious policymakers should expand it.

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