Wednesday, August 5, 2015

Structural Barriers to Efficiency: Target Denstiy

If you can't tell by reading this blog, my inspiration often comes from Twitter.  This post is a result of what happens when I see something on Twitter, have free access to data, and decide to look into things.  The tweet that spurred this:


So, if you don't know these regional politics, Dave Trabert is the head of the Kansas Policy Institute, which is the local think-tank, sponsored by the Koch Brothers.  Yeah, those Kochs.. they're from Kansas.

Anyways, if you go back to that tweet, and read the responses around it, you see a lot reference to high administrative costs for Kansas schools.  This spurred two questions, 1. is that accurate? and 2. if so, is it explainable?

BACKGROUND

I've looked at school funding a couple of times before, a lot of times actually, you can check some of my other posts on this blog, so I have a bit of knowledge on this subject.  I grabbed some national data, and found that Kansas does have higher than average administrative costs than other states by about 1.5 percentage points.  

Whenever I see numbers that are different, I think of reasonable explanations, specifically explanations that would structural, and outside the control of school districts.  Is it possible that it is not the fault of being Kansas educators being inefficient?  

What would create high administrative costs (specifically by %).  This is a business question:  What makes business operations have higher administration costs?  Other than wasteful spending, the main threat to administrative efficiency is lack of economies of scale.  So in this case, what gets in the way of creating large "economy of scale" school districts?  Sparse population, something Kansas has plenty of.  So I created a quick bi-variate model, controlling for population density.

MODEL

My model was simple and regressed percent Administrative costs against population density. 



The red dot is Kansas.  What I found was that Kansas is a sparsely populated state, and controlling for density, admin costs are only 0.3% over expectations.  Essentially, when you control for population density, Kansas education is more efficient than it initially looked.  

I had some other data on my desktop by individual Kansas school district, and the small, low density districts have much higher administration costs.  The model holds up, meaning that there are a lot of small districts, impacted by the structural differences.  See chart below:






POTENTIAL SAVINGS?


So far, I've demonstrated that Kansas has higher administrative costs, but most of that difference is due to exogenous structure (poplation density).   Specifically, sparse population density not allowing for larger school districts which have low relative administrative costs.  But just because Kansas is in line with national averages after the control, doesn't mean that there isn't potential for savings. 

In fact, I find Trabert's notion from his tweet of regional administrative centers to be interesting.  My second model shows the specific low density districts with those high costs, where maybe administrative centers would make sense. What he is trying to do is hack his way around the structural disadvantage of Kansas, and make those identified low density districts behave like high density ones. 

To put Trabert's idea in different terms, if this were the business world and I wanted to provide services to a sparsely populated area I would either:

  • Not create a physical presence.  Try to reach out and recruit customers in the online space, have them manage their account and purchases online.  (This sounds like something that could go terribly wrong if implemented in education).
  • Create small stores with minimal field management.  If you're from rural Kansas think about a Shopko or Alco model.  Basic bare bones small stores in small towns with regional admin centers/managers.  (This is effectively Trabert's idea; everyone keeps their schools; regional management centers)
Education experts and a pilot-test is the only thing that could tell us if option two would work without decreasing service levels.  One option would be to replicate the interlocal/coop model currently used in special education for other top-level administrative tasks.  I know that agreeing with Trabert won't be popular, but if we can direct money elsewhere by saving costs, why not try a pilot?





Additional plots from analysis above:


7 comments:

  1. We appreciate your interest in this issue. FYI, we are an affiliate of or operated by any outside organization or company, including Koch Industries. Kansas Policy Institute is an independent organization.

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    Replies
    1. sorry...left out "not". Kansas Policy Institute is NOT an affiliate of or operated by any outside organization or company.

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    2. Thank you for your clarification Dave, will be more careful with wording in future.

      Delete
  2. I think that the term "administration" has not been properly defined, and when comparing changing administrative staffing over the years, there isn't a common denominator.
    Interesting work, nonetheless!
    -Devin Brick Wilson
    Public Schools Advocate

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  3. You might check this out: https://www.kasb.org/assets/Publications/Research/2015-05_Staff_Changes.pdf

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  4. Herein lies the difficulty in applying research to practice. In reality, combining multiple districts, separated by hundreds of square miles, into one district takes away local control (not to mention disregarding the histories of these schools, their patrons, etc...). I think those in charge of proposing consolidation to be in charge of implementing it, especially since they are advocating the elimination of administrative positions (who would normally facilitate this extremely difficult process), they will have to explain why they are advocating for local control but taking it away, and why they are earning more money running a non-profit than most administrators earn in the state.

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  5. I enjoyed the Freudian slip, Mr. Trabert.

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