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Chrys Dougherty
University of Texas at Austin

About the Author

Dr. Chrys Dougherty obtained his Ph.D. in economics in 1992 from Harvard University, with a research focus on economic growth in advanced industrialized countries. He teaches courses in microeconomics, econometrics, and education policy at the LBJ School of Public Affairs at the University of Texas at Austin. His current research focuses on school effectiveness, public information on school performance, and school choice; and the contribution of human and physical capital investment to economic growth.

Prior to teaching at the LBJ School, Dr. Dougherty worked as an economic consultant for Magee, Inc. In the 1970s he taught elementary school science at the Oakland Community School in Oakland, California. He has written or co-authored papers on educational accountability, school choice, and international comparisons of the sources of economic growth.

A Study of Administrative
Expenditures in Texas
Public Schools

Chrys Dougherty
University of Texas at Austin

This paper reports on the results of a 1992 study of administrative expenditures in Texas public school districts in the 1990-91 school year. A research team at the LBJ School of Public Affairs at the University of Texas at Austin sought answers to the following questions:

1. What definition of "administrative expenditure" makes sense if the goal is to impose state limits on administrative expenditures by local school districts?

2. What is the relevant variable to analyze: the administrative expenditure per student, or the ratio of administrative expenditure to instructional expenditure?

3. What student or school district characteristics are associated with high administrative expenditure?

4. Is there a relationship between administrative expenditure and student learning?

5. What do districts with unusually high or low administrative expenditures do differ- ently?

6. What administrative expenditure limits make sense?

We used data from the Texas Education Agency's Public Education Information Management System (PEIMS) to analyze school district expenditures. PEIMS classifies expenditures into 18 functional categories. We classified six of these categories as administrative expenditure: General Administration, School Administration, Instructional Administration, Curriculum and Staff Development, Communication and Dissemination, and Data Processing Services. In school year 1990-91, these combined expenditures represented about 13 percent of public school expenditures in the state of Texas.

Our study was funded by the state legislature through the Educational Economic Policy Center. Overall, the study recommended specific administrative expenditure limits that would redirect an estimated $289 million per year (approximately $80 per-pupil) to the classroom by school year 1996-97.

An Overview of Administrative Expenditure in Texas School Districts

In school year 1990-91, Texas had 1,053 school districts. Although several of these districts are large (Houston, with almost 200,000 students, is the fifth largest school district in the nation; Dallas, with 138,000 students, is the 10th largest school district), most are very small. The median Texas school district contained 775 students in 1990-91, and there were 393 districts with less than 500 students. The smallest district, Allamoore, had only two students (see Table 1).

Table 1. A Profile of Texas School Districts

                                	School Year
    Characteristics      	1990-91   1991-92   1992-93
Number of districts       	1,053     1,050     1,048
Number of districts with:
     Less than 2,000 students  	  778       766       760
     Half the students     	   46        46        46
     More than 20,000 students 	   35        37        38
     Smallest district     	    2         2         7
     Largest district         194,208   196,512   198,013
Total spending per student
     95th percentile          $8,136    $8,330    $8,522
     75th percentile      	5,203     5,605     5,893
     50th percentile      	4,454     4,724     5,084
     25th percentile      	3,978     4,247     4,547
     5th percentile       	3,542     3,774     4,051
State average (Texas)     	4,200     4,452     4,774
U.S. average             	4,890     5,103     5,334

Represents spending in the 95th percentile district, not spending in the 95th percentile student. The latter number would be substantially lower, since many of the highest-spending districts are very small

Texas and U.S. average spending per student are not adjusted for differences in the cost of living between Texas and the U.S. as a whole.

SOURCE: Texas Education Agency, Snapshot 91', Snapshot 92', and Snapshot 93'.

This proliferation of small districts has an impact on administrative expenditure per student. Even very small districts are likely to hire a superintendent or principal, or both. Of the 211 districts in Texas that had only one campus in 1990-91, 92 employed both a full-time superintendent and a full-time principal. State funding formulas provide extra money per student for districts that are very small and/or have very low population densities. As a result, the administrative spending per student and the ratio of administrative to instructional spending are higher in small districts, as shown in Figures 1 and 2. Beyond a district size of around 2,000 students, however, these apparent economies of scale vanish. Table 2 compares administrative expenditures for large and small districts in Texas.

Table 2. Spending in Large and Small Texas School Districts

					        Districts with:
                                          More than      Less than
Spending                  		2,000 students 2,000 students  All districts
Spending per student        		$4,128         $4,611          $4,200
Administrative spending per student	   451            594             472
Administrative /instructional spending	    22.90%         27.60%          23.60%
Administrative/total spending  		    10.90%         12.90%          11.20%

SOURCE: Texas Education Agency, Snapshot 91', Snapshot92', and Snapshot 93'.

Figure1.--Spending per student on administration in small and large Texas school districts

figure 1, part a

figure 1, part b

SOURCE: Texas Education Agency, Public Education Information Management System (PEIMS) data.

Figure 2.--Administration/instruction spending ratio in small and large Texas school districts

figure 2, part a

figure 2, part b

SOURCE: Texas Education Agency, Public Education Information Management System (PEIMS) data.

Definition of Administrative Expenditure

Since the policy issue we were concerned with was whether to penalize districts with excessive administrative expenditures, we used a broad definition of these expenditures to discourage creative accounting. We thought it particularly important to include school administration (category 23) in our definition, since measured administrative expenditure could be reduced by paper reassignments of central office personnel to specific campuses. Likewise, omission of instructional administration (category 21) from the state's definition of administrative expenditure might result in a proliferation of curriculum coordinators in school district offices. Table 3 shows the types of expenditures that were classified as administrative and non-administrative expenditures.

Table 3. PEIMS Expenditure Categories

Expenditure Categories Defined as Administrative Cost:
Category Number           Definition
21                        Instructional Administration
23                        School Administration
25                        Curriculum and Staff Development
26                        Communication and Dissemination
41                        General Administration
75                        Data Processing Services
Other PEIMS Expenditure Categories:
Category Number           Definition
11                        Instruction
22                        Instructional Resources and Media Services
31                        Guidance and Counseling Services
32                        Social Work Services
33                        Health Services
34                        Student Transportation
36                        Co-curricular/Extracurricular
37                        Food Services
42                        Debt Services
51                        Plant Maintenance and Operations
52                        Facilities Operation and Construction
81                        Community Services

SOURCE: Texas Education Agency

We considered several types of administrative expenditure ratios for use in our analysis. In particular, we might have focused on:

Defining instructional expenditure as category 11 in the PEIMS data, we based most of our recommendations on the ratio of administrative to instructional expenditure, for three reasons:

1. Districts could improve their ratio in four ways, all of which are desirable:

a. reduce administrative expenditure per student;

b. shift resources from administration to instruction;

c. shift resources from other non-instructional areas to instruction; and

d. use increased tax revenues to increase overall spending for instruction.

Use of a per-student administrative spending measure sacrifices the incentive for options (c) and (d), while the administrative/total operating expenditure measure does not provide an incentive for (c).

2. There would be no need to change the "allowable" ratio every year to adjust for inflation and increases in school district expenditures and revenues, as would be the case with a per-pupil measure.

3. Fewer variables would need to be taken into account in adjusting allowable district administrative expenditure for factors that are beyond the district's control. A per- pupil measure would require consideration of seven such variables, while the ratio measure requires adjustment only for size and the district's percentage of Limited English Proficient (LEP) students.

School spending in Texas consists of expenditure from the general fund (Fund 10), and a large number of special revenue funds dedicated to categorical programs, such as Chapter 1 and the Job Training Partnership Act. The administrative expenditure ratio for all of these programs combined is only slightly higher than for the general fund; however, this ratio varies widely across programs. For example, a grant to write a new curriculum might be counted almost entirely as administration.

In order not to penalize districts for receiving those grants, we separated the general fund (Fund 10) from categorical funds, and recommended excluding the categorical programs when calculating the ratio of administrative to instructional expenditure.

Variables Associated with Administrative Expenditure

We used ordinary least squares regression to determine which variables are systematically associated with administrative expenditure, measured on a per-pupil basis or as a ratio of administrative to instructional expenditure. Our working assumption was that causality runs one way from each of the variables in Table 4 to administrative expenditure per student or the administration/instruction expenditure ratio. Our initial hypotheses are shown in the right-hand column of Table 4.

Table 4.--Variables which might affect administrative expenditure

Variable                      Initial hypothesis
District size                 Larger districts should have lower administrative
                              costs per student relative to instructional costs.
                              However, beyond around 2,000 students, there
                              are no additional cost savings from additional size.
District wealth               Wealthier districts should spend  more per student,
                              but it is not obvious whether they would spend more
                              relative to instruction.
Average campus size           For a given district size, a larger campus size implies
                              fewer campuses, saving on both measures of the
                              administrative cost.
Student-teacher ratio         A higher student-teacher ratio implies fewer teachers
                              per student to supervise, lowering the administrative
                              cost per student; it is not obvious what happens to the
                              administrative/instructional cost ratio.
Percent of LEP students       More bilingual students implies more expense in
                              curriculum development, raising the administrative
                              cost per student; it is not obvious what happens to the
                              administrative/instructional cost ratio.
Percent of students in        Same as for LEP students.
special education
Percent of low income         Same as for LEP students.
Percent mobil students        Higher student mobility increases the cost of keeping
                              track of students, raising the administrative cost per
                              student and the administrative/instructional cost ratio.
Administative salary index    Higher administrative salaries in neighboring districts
                              increase the administrative cost per student; if teacher
                              salaries are also higher, it is not obvious what happens
                              to the administrative/instructional cost ratio.
Five-year percent change      Districts may adjust their administrative spending with
in enrollment                 a time lag when enrollments increase, causing a
                              negative relationship between this variable and both
                              measures of administrative cost.

SOURCE:Chrys Dougherty's hypotheses.

Our actual analysis, as shown in Tables 5 and 6, revealed the following results:

Table 5.--Variables associated with administrative expenditure

                                                     Dependent variable
                                Administrative/instructional ratio     Admin exp/student
                                     Small            Large           Small       Large
 Variables                           districts      districts         districts   districts
 Natural logarithm of district size      -              (-)
 Natural logarithm of distric wealth     +               +                +           +
 Average campus size (in hundreds)      (-)              -                +
 Student-teacher ratio                   +               -                -           -
 Percent LEP students                    +               +                +           +
 Percent special education students     (-)                               -
 Percent low income students                                                         (+)
 Student mobility rate                                   +
 Administrative salary index
 5-year percent enrollment change                       (-)                          (-)

Parentheses imply significance at the 10% level; no parentheses imply significance at the 5% level or better.

SOURCE: Chrys Dougherty's statistical analysis.

Table 6. Results of Administrative Expenditure Regressions

                                               Dependent variable
                    Administrative/instructional ratio       Adminexp/student
                    ----------------------------------  -----------------------------
                    Districts with  Districts           Districts     Districts with
                    greater than    less than           greater than  less than
Variables           2000 students   2000 students       2000 students 2000 students
Constant                0.249        0.137                 217.1        -187.8
                       (3.76)       (1.68)                  (1.02)       (-1.14)
Natural logarithm of   -0.060       -0.005                -213.8          -2.26
size                 (-11.5)       (-1.68)                (-12.7)        (-0.38)
Natural logarithm of    0.03         0.013                 217.7          83.2
wealth                 (7.75)       (2.76)                 (17.0)         (8.52)
campsize (in hundreds) -0.005       -0.005                  25.6          -3.69      
                      (-1.77)      (-2.94)                  (2.38)       (-1.01)
stu/tch                 0.006        0.000                 -52.8         -20.0
                       (2.99)       (0.02)                 (-8.76)       (-4.88)
Percent LEP             0.002        0.001                   6.81          2.47
                       (3.41)       (2.62)                  (4.77)        (4.18)
Percent speced         -0.001       -0.001                 -11.1          -3.39
                      (-1.82)      (-1.39)                 (-5.36)       (-1.60)
Percent comped          0.000        0.000                  -0.318         0.662
                        0.69         0.89                  (-0.58)        (1.81)
mobility                0.000        0.001                  -0.583         0.895
                       (0.04)       (2.42)                 (-0.66)        (1.55)
salindex (in thousands) 0.002        0.001                  -3.13          2.53
                       (1.35)       (0.91)                 (-0.80)        (1.37)
Percent sizchg          0.000       -0.000                  -0.412        -0.566
                       (1.29)      (-1.68)                 (-0.79)       (-1.96)
R                      0.462        0.137                   0.762         0.440
Adjusted R             0.455        0.104                   0.759         0.418

Note: T-statistics are in parentheses

SOURCE: Chys Dougherty's regressions using PEIMS and TASS data from Texas Education Agency.

The Relationship Between Administrative Expenditure And Student Learning

To examine the relationship between administrative expenditure and student learning, we regressed test score data on a set of demographic and expenditure variables. The dependent variable we used was the average of the third- and fifth-grade reading, writing, and mathematics scaled scores on the Texas Assessment of Academic Skills (TAAS) test, which was administered in Texas elementary schools in October 1990. These scaled scores had a mean of 1,600 and standard deviation of 73.3. We had data on these scores in 1,323 schools.

Gain scores-- the average difference between individual students' test scores in consecutive years--would be a more appropriate dependent variable to use in this analysis. However, the TAAS at the time was not designed to be gain-scored, and was not administered to the same students in successive years. Thus, we lacked the data to implement this more desirable alternative.

The independent variables we used were:

The results, as shown in Table 7, indicate that there is little association between administrative spending per teacher and student learning. However, there is also no evidence that administrative spending has a negative effect on instruction. We were unable to explain the opposite-sign relationships between campus and instructional administrative spending and student learning.

Table 7.--Results of Test Score Regressions

                                  TASS		   TASS
Variables                     Scaled Score     Scaled Score
Constant              		1,658.70 	1,649.24
Percent low-income students        -1.83   	   -1.84
                                 (-16.8)         (-17.00)
Percent black students             -0.592          -0.571
                                  (-5.64)         (-5.45)
Percent Hispanic students          -0.236          -0.216
                                  (-2.25)         (-2.06)
National logorithm of 
district size                       4.778           5.798
                                   (4.48)          (3.98)
campus size                        -0.012          -0.009
                                  (-1.64)         (-1.12)
Student-teacher ratio              -2.37           -2.244
                                  (-3.28)         (-3.03)
Teachers average years              1.223           1.358
of experience                      (2.07)          (2.30)
                                    1.36              --
Expenditure per teacher            (1.34)
on total administration
(in thousands)
Expenditure per teacher              --             1.311
on central administration                          (0.80)
(in thousands)
Expenditure per teacher              --             3.877
on school administration                           (2.3)
(in thousands)
Expenditure per teacher              --            -5.57
on instructional administration                   (-2.10)
(in thousands)
Expenditure per teacher             0.573           0.449
on classroom instruction           (1.38)          (1.08)
(in thousands)
R                                  0.636           0.638
Adjusted R                         0.632           0.634

Note: T-statatistics are in parentheses. Variables which were not statistically significant are not shown: percent LEP students, percent special education students, percent mobile students, and expenditure per teacher on counseling, health, and social work services.

SOURCE: Chrys Dougherty's regressions using PEIMS and TAAS data from the Texas Education Agency.

What Do Districts With Unusually High Administrative Expenditures Do Differently?

We selected seven Texas school districts with unusually low or high ratios of administrative to instructional expenditure. For site visits our judgment about which districts' administrative costs are unusually low or high was based on residuals from a regression equation similar to that used in Table 5.

When administrative expenditures are especially high, how do school districts spend the money? In some cases, the district uses the school district administrative budget as an employment program. One high-expenditure district with 18,000 students had a staff of 2,500 of whom 995 were teachers. This district had the state's 13th-highest ratio of non-teachers to total staff. Judging from interviewees' comments in a number of districts, "kicking the bad principals upstairs" into the central office is a fairly common practice.

Other districts have special circumstances. One small, suburban high-wealth district hired extra staff to process the thousands of job applications received each year from teachers anxious to work in that district. Another district was paying three superintendents, two of whom had been dismissed from multi-year contracts in the previous two years. One of these former superintendents had sued the district for wrongful termination, creating high legal costs as well.

What Do Districts With Unusually Low Administrative Expenditures Do Differently?

Districts with below-average administrative expenditures employ several expenditure-saving measures. First, they limit expenditures on instructional administration, relying on their teachers or the state's Regional Educational Service Centers for curriculum development services. Second, they expect senior administrative staff to share clerical and support staff. Third, they pay their administrators less. This option may not be available to districts that hope to attract top-flight principals and superintendents, however.

An underutilized option is the formation of multi-district cooperatives to share expenditures in areas such as curriculum development and data processing. To examine the use of cooperatives, our study contacted 48 school districts, 25 with a high administrative/instructional expenditure ratio and 23 with a low administrative/instructional expenditure ratio. While 46 of these districts participated in cooperatives to pool resources for special education and several do the same for vocational education, only two districts were members of cooperatives designed to achieve economies in general administrative expenditures. One district was part of a seven-district cooperative designed to share data processing expenses. The second cooperative served 13 districts, providing services in data processing, staff development, and technology support.

Recommendations Made Based on the Administrative Expenditure Study

As a result of our study, we made the following recommendations to the Texas legislature in 1993:

We projected that this approach would redirect $269 million into the classroom by the 1996-97 school year, or about $70 per student based on an enrollment of 3.8 million students in Texas. Compelling small districts' administrative/instructional expenditure ratio to conform to the state average would redirect an additional $20 million.

What Passed the Legislature in the 1993 Session

Distracted by school finance issues and the threat of a court-ordered shutdown of public schools, the 1993 Texas Legislature paid relatively little attention to administrative expenditure. The administrative expenditure control measure that passed was considerably different from the one recommended in the Administrative Expenditure Study. The Legislature divided school districts into five size categories, and specified that the Commissioner of Education would set allowable ratios of administrative to instructional expenditure for each category. "Administrative expenditure" as defined by the legislature excludes campus administration, but includes state and local categorical programs.

This legislation was first implemented in the 1993-94 school year. As actual expenditure data from subsequent years become available, it should be possible to assess the impact of this legislation.


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