Increase Consolidation Incentives for School Districts ;

Incentives should be increased for local school districts to consolidate, allowing for the realization of economies over time.

Texas currently has just over 1,050 school districts; 752 of those districts contain fewer than 1,6 00 students. Since there is a higher cost associated with providing a comprehensive educational program in districts with fewer than 1,600 students, Texas spends approximately $325 million each year (through the small-district adjustment) to help those sma ll districts. Even with additional funding, it appears that some districts are unable to offer the minimum number of courses required by the state. 1 Through the years, many smaller districts have consolidated, either out of necessity or because of incentives offered by the state. On the other hand, efforts to force consolidation have been widely opposed by Texans.

Since 1963, the Texas Legislature has provided financial incentives for school districts to consolidate. Breaking the Mold recommended increasing funding for voluntary incentive aid payments to school districts. Legislators responded by appropriating $16.0 million (an increase of $12.8 million over the 1990-91 biennium) in estimated consolidation incentive aid. Proposed statu tory changes that would have removed some of the current barriers to school district consolidation were not enacted, however. Some school districts, for example, would consolidate if they were not required to do so with a contiguous district. 2

Scarce state funds could be more wisely spent to provide financial incentives for consolidation than to fund the small district adjustment, since consolidation usually results in a higher quality educational program.

For example, the Comptroller s Texas School Performance Review pilo t project identified critical issues for the effective and efficient operation of the three small school districts in San Saba County. Operational and educational areas were operated as effectively and efficiently as possible, given their small enrollment and limited tax base. 3 The pilot report recommended that the operational areas of transportation, general purchasing and purchasing for libraries and instructional materials be provided by one district in order to increase efficiency. Vocational educati on programs, gifted and talented programs and counseling were either not offered or inadequate in the two smallest districts (with enrollments of 143 and 153 students), even with additional funding from both special program weights and from the small distr ict adjustment. The report recommended that the students in these three districts would benefit by offering consolidated vocational education programs and gifted and talented programs and by sharing a full-time guidance counselor. The report concluded that sharing educational resources could provide better educational programs to those very small districts. 4

A. The Texas Education Code, Sections 19.051(a)(1) and (2), governing school district consolidation should be modified to remove the requirement that two or more school districts must be contiguous to consolidate.

B. Texas Education Code, Section 23.993, restricting eligibility to receive incentive aid payments to districts which contain at least 750 students or a majority of st udents in the county containing the majority of the land area following consolidation, and Section 23.994, restricting the use of incentive aid payments to the retirement of existing bonded indebtedness, should be repealed. Section 23.999, which deals with county-line school districts whose consolidation results in fewer than 750 children in average daily attendance, should also be repealed.

Consolidation of even very small school districts can result in a higher quality educational program for the students and a more efficient use of scarce resources.

Smaller school districts would qualify for consolidation incentive aid payments, making it more attractive for some to consolidate than to remain independent. Increasing numbers of districts which are eligible for consolidation incentive aid payments could increase the demand for consolidation incentive aid funds. These additional funds could be partially offset by savings in small district adjustment payments to very small districts.

Fiscal Impact
There could be a greater number of school districts that consolidate and become eligible for consolidation incentive aid payments by the removal of qualification restrictions. However, since these would be local decisions, it is not possible to predict whi ch districts would consolidate and what the additional need for incentive aid would be. The additional funds required for financial incentive aid could be offset by the decrease in funds required for the small district adjustment; therefore, the recommendation could have a neutral fiscal impact on the state.

There could also be savings of local tax money through increased efficiencies due to greater economies of scale after consolidation of districts.

1 Texas Education Agency, Long-Range Plan for Public Education 1991-1995 (Austin, Texas, March 1991), p. 27.
2 Interview with Kevin O Hanlon, General Counsel of the Texas Education Agency, October 26, 1992.
3 Comptroller of Public Accounts, Texas School Performance Review Pilot Program (Austin, Texas, July 1991), pp. 31, 32.
4 Ibid.