Reducing Costs in K12

Computer Dimploma

MOOCs have recently inspired educational policymakers to think about cost savings and new efficiencies as technology enhances pedagogy. Yet all K12 education units can become more cost-effective by improving their delivery systems. Butler, Haldeman, and Laurans (2012) illustrated how the traditional school model spends over half of its budget on labor, with the remainder mostly allocated to school operations. A blended, partial on-line schooling model could offer yearly savings of approximately $1,100 per student; and a virtual school could save approximately $3,600 per student. Considering that most urban high schools have thousands of students, the savings from an effective blended learning program could be sizable. Also, as demand creates a larger supply of online course content, the online costs will decrease further.

District Business and Administrative Costs

Cochran et al. (2011) acknowledged district reorganizations do not always result in significant savings, however, there are numerous savings opportunities in purchasing costs, and also in personnel costs associated with multiple layers of management and decision making. The Council of the Great City Schools has performed industrial benchmarking on 340 performance indicators for the nations largest urban schools and finds it is possible for districts to save between $50-$100 million annually by bringing their business services, finance, and technology operations in line with best practices (Casserly and Carlson, 2011). Further, for-profit colleges spend less than a third of what public universities spend on educating students, yet they charge nearly twice as much (Aud et al., 2012, p. 104). Public schools may extract additional cost efficiencies from best practices used in the for profit sector.

Per Unit Costs

Examining spending in per unit terms requires uncovering key cost drivers, deconstructing spending patterns, and creative thinking about tradeoffs (Hill & Roza, 2010). Historical practices in school finance become legacies when each department, program, or school summarizes its expenditures in terms of personnel, counted as full-time equivalents, or FTEs. These are bulky allocations that make incremental cuts difficult. Districts rarely merge or scale back programs so for district leaders trying to make spending cuts the only options are to eliminate an entire program, which is politically very unpopular, or to make smaller decreases in each unit’s budget (Hill & Roza, 2010). Budgeting in per unit terms can stabilize the budgeting process. Managing budgets in per unit terms might even be a way of containing costs and avoiding built-in cost escalators, which typically run 4.5 percent annually (Hill & Roza, 2010, p 25). What inefficiencies have you noticed in the school budgeting process? What productivity gains do you envision as teachers flip their classrooms and professional development moves into the MOOC-space?


Aud, S., Hussar, W., Johnson, F., Kena, G., Roth, E., Manning, E., Wang, X., and Zhang, J. (2012). The Condition of Education 2012 (NCES 2012-045). U.S. Department of Education, National Center for Education Statistics. Washington, DC. Retrieved July 1, 2012 from

Butler, T.B., Haldeman, M., and Laurans, E. (2012). The costs of online learning. In Education Reform for the Digital Era (pp. 55-76). Eds. Chester E. Finn, Jr. and Daniela R. Fairchild. The Thomas B. Fordham Institute. Washington, D.C.

Casserly, M., and Carlson, R. (2011). Managing for results in America’s great city schools: A report of the performance measurement and benchmarking project. Council of the Great City Schools. Washington, DC.

Corcoran, J., Gilyard, R., MacBride, L., and Powell, J. (2011). Large-scale cost cutting and reorganizing. Conference paper prepared for the American Enterprise Institute and Thomas B. Fordham Institute conference: A Penny Saved: How Schools and Districts Can Tighten Their Belts While Serving Students Better. January 11, 2010. Washington, DC.

Hill, P., and Roza, M. (2010). Curing Baumol’s disease: In search of productivity gains in K–12 schooling. Center on Reinventing Public Education. University of Washington Bothell. Seattle, WA.