The Surprising Effects of Enrollment Declines on School Funding 

According to federal estimates, public school enrollments nationally are projected to fall by more than 2.7 million students between fall 2022 and fall 2031—a decline of 5.5%. The natural assumption is that fewer students would mean fewer resources. But what if the opposite were true? 

In The Enrollment Decline Windfall: Enrollment Declines Leave More Resources for Students Remaining in Public Schools, Ben Scafidi, Ph.D., EdChoice Friedman Fellow and Professor of Economics at Kennesaw State University, presents compelling evidence that declining enrollment actually results in more money per student. Districts retain funding for students they no longer serve and reallocate these resources to the remaining students leading to an increase in per-student funding, better staff compensation, and greater access to teachers and other staff. 

This report analyzes short-, medium-, and long-run changes in student enrollment and finds that enrollment declines consistently lead to greater resources available for students who remain in district public schools. 

The report also addresses concerns about the impacts of enrollment declines in rural areas as well. Like other districts, students in rural districts also experience gains in resources when there are enrollment declines. 

Here are a few key takeaways from the study:

1. Increased Per-Student Spending: From academic years 2018 to 2019, districts with declining enrollment saw a 7.1% increase in per-student spending, compared to just 3.7% in districts that gained students. This increase is well above the inflation rate, which stood at 1.5% during the same period. In AY2019, declining enrollment districts’ per-student expenditures were $15,792 compared to gaining districts expenditures of $14,592. The data clearly show that, contrary to expectations, fewer students result in more money for those who remain. 

2. Stable Funding Sources: Many school funding sources are not automatically tied to student enrollment numbers leading to a boost overtime. Property taxes and some state and federal funding streams are not automatically reduced when student numbers drop, so on a per-pupil basis, declining enrollment districts saw greater revenue increases from all funding sources than enrollment-gaining districts. The favorable fiscal environment facing districts losing enrollment extends over time.  

3. Staffing and Compensation Adjustments: The report also reveals that districts with declining enrollment tend to increase both staffing levels and employee compensation. Between AY 1998 and AY 2019, districts with declining enrollment saw a 25.5% increase in staffing per 100 students, reaching 13.3 staff members. In contrast, districts with growing enrollment saw staffing increase by only 14.4%, reaching 12.1 staff members per 100 students.  

Additionally, per-employee salaries and benefits rose 76.7% in districts with declining enrollment, compared to a 72.4% increase in districts with enrollment gains. As a result, students in shrinking districts typically experience smaller class sizes and better-compensated educators.

4. Rural Districts: Rural districts saw some of the largest increases in per-student spending. While between AY 2015 and AY 2019, 59.7% of rural public school districts experienced a decline in enrollment, declining enrollment districts saw increases in total expenditures per student by $1,117 per student more than enrollment-gaining districts.

5. Long-Term Implications: The historical evidence in the report indicates that policymakers need not worry about the effects of declining public school enrollments, as districts that lose enrollment receive a fiscal windfall when enrollments decline.

The Bigger Picture: What Does This Mean for Education Policy? 

These findings challenge the prevailing view that declining enrollment spells disaster for public school finances. In reality, districts that experience enrollment losses have more resources to allocate per student. This has important implications for policymakers, especially in states considering school choice programs or facing shifts in student populations. 

The data shows that declining enrollment doesn’t typically result in a financial crisis. Instead, it can be an opportunity for districts to reallocate funds more efficiently, invest in staff, and ultimately improve the educational experience for the students who remain. This perspective is crucial as lawmakers, school leaders, and advocates continue to navigate the future of K–12 education. 

To learn more about these findings and explore the data in detail, read the full report.