Periodic Reports
School District Reorganization Report
February 1995

This report is part of the series of publications that have been written about reorganization since 1980. Every year one or more reports are produced that summarize and analyze current reorganization activities and address special topics about school consolidation. This particular issue includes information about failed reorganization attempts, whole-grade sharing tuition charges, and use of the new account code structure to ascertain actual per pupil expenditures for whole-grade sharing contract negotiations.

Most, But Not All, Reorganizations Pass

In 1980-81 there were 443 school districts, and only one district, Lu Verne, operated without a high school in its territory. It was the first district to engage in what was later to be known as "whole-grade sharing." On July 1, 1995, there will be 384 districts, a reduction of 59 since 1980-81. The number of districts with high schools is down to 354 in 1994-95.

Almost 120 districts reorganized since 1980-81, and more than 170 have signed whole-grade sharing contracts. However, during that period of time there were 31 failed attempts to reorganize or dissolve. This included 24 failed reorganization elections, five dismissed reorganization petitions, one reorganization petition not accepted, and one failed dissolution commission.

Just as the many passed reorganizations depict certain patterns, there are models that tend to emerge from an examination of the reorganizations that did not pass or were dismissed. A few of the more obvious generalizations are:

Most districts that fail reorganization attempts try again, and most pass the second or third time:

Twelve of the failures involved double attempts where districts made two efforts to reorganize, and missed both times. For example, Buffalo Center-Rake and Lakota faltered at two reorganization efforts. One of their petitions was dismissed by the area education agencies involved, and the other was voted down by the electorate. In another example, Central Dallas lost an election to merge with Dallas Center-Grimes, and then failed to carry a similar election with Perry. The districts cited in the above example are now reorganized. Buffalo Center-Rake and Lakota merged with each other, and Central Dallas consolidated on a third attempt--with Adel-Desoto. By combining the double losses, the number of distinct reorganization efforts to fail between 1980 and 1995 is 25.

There were four failed elections that took place from May 3, 1994, through November 29, 1994. These were the initial reorganization efforts in all cases. There has not been sufficient time for a second election, and such action is possible for two of them in the near future. Table 1 lists the districts that failed reorganization elections during 1993-94 and the first half of 1994-95.

Removing the four most recent election losses and the double attempts leaves 21 distinct failures from 1980 through 1993. Table 2 lists the current status of the districts involved in those 21 failed reorganization or dissolution efforts.

Of the 21 distinct merger attempt failures listed in the Table 2, in only four situations do the pairs of districts, or the districts that initiated the actions, remain as independent K-12 operations.

The districts that failed merger attempts and remain independent do not fit within the current reorganization pattern.

The Mt. Vernon, Linn Mar, and Marion districts all enroll more than 1,000 students. Districts that size may accept other districts as sending partners, but they are not initiating the merger actions.

Lisbon enrolls 536 students and is in the size category of those that are consolidating. However, most schools this size that do merge are the ones that house the high schools for the combined districts. In the proposed Lisbon and Mt. Vernon merger, Mt. Vernon would have provided the high school facility.

The Central Decatur and Waco situations came about from forces other than normal attempts to consolidate. Central Decatur was involved in two efforts to have portions of the district moved over to the Lamoni district--basically a secession move. Waco was involved in one reorganization dismissal and a failed dissolution action. According to information given to this consultant when these actions took place during the mid-1980s, the districts were experiencing internal dissention regarding school buildings. Central Decatur's current enrollment is 657, and it is 665 at Waco.

Districts that have been whole-grade sharing prior to the reorganization effort pass their reorganization elections on the first or second try.

The whole-grade sharing phenomenon began with the 1985-86 fiscal year, and at that time there were 436 districts. Since then the number dropped to 484 as of July 1, 1995, involving more than 100 districts in the process. Only the Panora-Linden & Y-J-B; Hedrick; Carson-Macedonia & Oakland; and Clarence-Lowden & Lincoln districts were not whole-grade sharing at the time of their mergers.

Using the New Account Code Structure

In a few recent reorganization consultations and studies, this consultant has been asked by districts for help in determining actual expenditure amounts for high school, middle school, or elementary students. These requests have involved districts that are whole-grade sharing and are wanting to use actual expenditures as bases for exchanging money.

In order to assist the schools, this consultant used their 1993-94 year-end financial accounting summaries. The new account code structure proved to be more than adequate for the purpose.

The key to the process was to determine the major cost centers for management and accounting purposes. Generally explained, dividing expenditures into the various cost centers is a process that uses the facility, function, and program dimensions of the accounting system to reflect management control. For example, a district might have a single elementary school, with a staff of teachers, a principal, and other support staff. The principal is the manager of this operation, and is responsible for the operation and expenditures. This is a cost center.

Accounting for the elementary, middle school, and high school centers is relatively easy. All direct instruction expenditures are charged to them. However, it is important to segregate the expenditures associated with students that go to other districts through open enrollment or other tuition arrangements. The management and staff of the district has little control over these students or the expenditures. Basically, the expenditures are the tuition amounts.

With one pair of schools involved in a study, we established five cost centers each. These two schools are whole-grade sharing, and one district provides the high school while the other provides the middle school. Each has its own elementary program. Both districts have resident students that go to other districts for special education or through open enrollment.

All expenditures for District A were grouped into the following accounting classifications by use of the accounting facility, function, and program dimensions:

        Elementary
        Middle School (whole-grade sharing tuition)
        High School
        Out-of-District Students (other than whole-grade sharing)
        Central Overhead and Services

The grouping for District B was as follows:

        Elementary
        Middle School
        High School (whole-grade sharing tuition)
        Out-of-District Students (other than whole-grade sharing)
        Central Overhead and Services

All expenses associated with the elementary programs were assigned to the appropriate facility account code. These included expenses for teachers, principal, librarian, guidance, etc. It is important that all direct expenses be added here. If particular teachers perform services at other levels of instruction, the costs need to be prorated.

District A was the only one operating a high school, so it coded into this classification all direct expenses associated with the high school--just as it did for the elementary unit. District A also designated a middle school as a cost center, but the only expense was the tuition it paid to District B.

District B accounted for the middle school expenses of all students attending middle school there. Since it did not have a high school, the only expense associated with that unit was the tuition to District A.

The out-of-district expenses included tuition paid to the area education agency for special education students taught by the AEA, and to districts that received open enrollment students. This even encompassed open enrollment students between the two partner districts. The importance for management and accounting is that students going to partner districts under whole-grade sharing fall into a distinct category and students going anywhere under open enrollment or under other tuition fall under different governance elements.

The central overhead functions and programs included the superintendent, board of directors, operation and maintenance, transportation, etc. The records of both districts originally coded too many expenditures to this category. Among them were library and some federally funded instruction programs that crossed grade level dimensions. Our study backed these out of the central group and prorated them to the appropriate grade level designations.

Once the procedures were established, it was easy to determine the costs of the elementary, middle school, and high school programs. One district spent $2,549 per pupil on direct elementary functions, and the other spent $2,755. The direct per pupil middle school expense for the district running the unit was $2,932, and the comparable cost for high school was $3,517. The pupil counts were taken from the enrollee data included on the Certified Annual Financial Reports.

The amounts listed in the above paragraph entailed only those expenditures that were directly related to instruction. In addition both districts spent more than one-half million dollars each on the central overhead items. For purposes of the assistance given to the districts it was not necessary to assign the overhead to the instructional cost centers.

The important ingredient that came from the study was the clear understanding that it costs the districts more per pupil to educate the high school students than it did the middle school students. The per pupil elementary costs were the lowest.

The Department of Education does not collect accounting information based upon grade level or school organization structure. Iowa districts vary too much for the data to be meaningful. However, the accounting system allows for schools to use cost center type classifications, and the Department staff encourages such measures. In the cases of the districts mentioned in this report, the information proved to be essential for negotiating the whole-grade sharing contract.

Whole-Grade Sharing Tuition Charges

Since the advent of the whole-grade sharing and reorganization era in the mid-1980s, this consultant has received hundreds of phone calls and other communications about a wide range of topics related to sharing and merging. A frequent question has been about the tuition charges for whole-grade sharing--particularly involving one-way agreements. In these agreements, one school sends all of its high school, or junior and senior high school, students to one or more other districts. In turn, the sending and receiving districts negotiate and establish tuition rates.

The only legislated tuition mandate is that, "For one-way sharing, the sending district shall pay no less than one-half of the district cost per pupil of the sending district." Other than that provision, districts are free to negotiate the tuition amounts.

For many years this tuition topic has not seemed to be one of great concern. This issue has not gone through the court system, and districts have been able to come to agreements without large amounts of rancor. In fact, this consultant has seen more problems arising from the selection of mascot names and school colors that from the tuition topic.

However, within the past year or two, a few of the receiving districts are beginning to voice degrees of unhappiness. These are districts that are already involved in one-way whole-grade sharing, and are re-negotiating their contracts. The receiving districts, which are all larger than the sending districts, are wanting higher tuition rates.

Table 3 is a listing of the one-way whole-grade sharing contract tuition amounts for 1994-95. As noted, the lowest per pupil dollar amount is $2,118, average is $2,735, and the highest is $3,522. Stated in terms of percent of the sending districts' per pupil amounts, the range is from 58 percent to 100 percent. The average is 77 percent.

The determination of tuition rates could partly be related to the Code of Iowa, which sets fifty percent of the sending districts per pupil cost as the minimum amount, and it could be related to the costs of providing the services in the receiving districts. However, it is this consultant's opinion that market price is a more encompassing element in the establishment of the tuition amounts. Simply stated, are the receiving districts willing to take the sending schools' students for the tuition amounts they negotiate. Obviously they are willing, even though they may be less than satisfied. This is not unlike thousands of other business deals that we all participate in every day. The costs of products or services are not always connected to their values. The market often determines what is paid. However, for most of us, overpayment tend to outstrip the bargains. (Written by Guy Ghan, Retired DE Consultant)