Of Airline Seats and Classrooms
One of the principles of the airline industry’s business model is “yield management” — maximizing the likelihood that any given airplane would be full with passengers. As much of the cost in flying an airplane is fixed, any empty seat causes almost 100% of that lost revenue to flow to the bottom line.
There is an analogy here to school finance. In the Board Meeting last night, we discussed why, that over the last decade or so, San Carlos has actually been able to increase salaries at a greater percentage than our revenue per student funding increase (the “COLA”) for the State. Because San Carlos is largely a Charter school district, we have flexibility that other school districts do not — we can more easily accept “out of district” students roughly at our whim in any given year. This has the effect of allowing us to more proactively “manage” our enrollment number from year to year. So, if you look at the enrollment in the District, you’ll see a steady growth — much of this was from out of district “charter” students. We then received additional revenue because of the additional students, but even more importantly, we were doing better yield management. A simple example: if we knew there would be 15 more students from San Carlos entering any particular grade in a particular school, we could then let in exactly 5 more from out of the District, and then hire one additional teacher — effectively the classroom, like the airplane, would be full.
Although this has given us much flexibility in the past, unfortunately those days are coming to an end. Why? Simply stated, we are running out of physical capacity in our school campuses. So, barring construction of new facilities (or a dramatic increase in the use of portable classrooms, which would not be a very popular notion), enrollment growth will be modest or flat for the forseeable future. We won’t be able to manage that growth if we’re bumping up into our true capacity. That translates into no more “efficiency gains” and less total revenue relative to our costs. We will of course get more information on this when we get our final demographic study, but no doubt we will have to take all of this into account in planning future budgets and our overall cost structure.
I don’t think I fully understand the relevance of physical space. Isn’t the issue whether or not we are at our targeted student to teacher ratio? If we are below it we have capacity (and yield inefficiency), and if we are at it we don’t. It seems like the relevant metrics then would be our target ratio, our revenue per student, and the allocation of that revenue per student.
I realize the math can get more complicated with electives and such, but the idea would seem to be the same.
I’d appreciate your thoughts.
June 25th, 2008 at 7:35 amMike — you are correct that the target ratio is the main measure of efficiency, but the other dynamic going on is that there are economies of scale as well. In other words, the marginal increase in revenue from 20 (or 32) students exceeds their marginal cost (teachers, textbooks, etc). So, not counting administrative overhead, it would always be beneficial financially to add more classrooms. That is essentially what we have done in the last ten years, and it is that dynamic — combined with the ability to always stay at near peak efficiency through yield management — that has allowed us to fund teachers salaries, additional programs, etc. When the physical space reaches capacity, we can certainly stay “efficient”, but we lose the growth dynamic.
June 29th, 2008 at 5:36 amGot it. That makes sense. Thanks Seth. What is the teacher to total staff ratio for the district?
June 30th, 2008 at 7:50 amIt’s hard to give an exact number, because there are a number of part time employees, and there a number of employees who are not “teachers” per se (such as librarians), but ones I would definitely count in the instructional total. But of the approximately 223 FTE employees in the school district, I would count about 169 in this instructional category (including regular classroom teachers, special ed teachers, libraries, associates, etc.). About 54 FTEs are either principals, administrators, school support staff, maintenance, district counselors, or district office staff. (BTW, note that these numbers do not include the staff at CLC). So, I guess the short answer to your question is about 75%.
June 30th, 2008 at 6:59 pmHow do we handle the over-booked situation? One like the one my kids are in, where we’re on the wrong end of the yield-management curve. Essentially in the over-booked seats on the airplane. Just as Airlines have to deal with that situation, it seems that San Carlos schools now have to work through that situation too.
My assumption is that the school has some way to offer deals to the “out of district” students first. Give them their free flight voucher for next year. How can I get a more accurate picture of what different types of seats we have in the school “airplane?”
September 5th, 2008 at 3:25 pmI’m sorry to hear that your child wasn’t able to get into their neighborhood school. This year had a particular spike in enrollment in certain areas which were unusual. That said, absolutely we need to work on minimizing “over-booked” situations, and it has become more of an acute problem in the last year or two. There is a process that each school uses to accept student for enrollment, which includes priority to siblings, then in-area student, then in-district students, etc. As a practical matter, I don’t believe the district has essentially taken any (or just a few) new out-of-district students in the last year or so. I’m not sure what you mean by “offering deals” to out-of-district students — there has never been a proposal (that I am aware of) to “kick out” existing students, regardless of where they live. Although theoretically the District *could* do that, I find it doubtful that it ever would.
Really the essence of your question is how do we better manage the enrollment and boundaries of the entire district to minimize the likehilood that students will not be able to go to their neighborhood school. That topic will be taken up by the administration and the school board this year. We just received an enrollment study which will be the basis for any policy decisions. I certainly encourage you to attend a board meeting when this topic is discussed. It’s not currently scheduled, but keep checking the district web site (and subscribe to the Superintendent’s newsletter — also done through the web site) so you can stay informed.
September 5th, 2008 at 3:58 pm