Book excerpt: School district consolidation enjoys a unique status among strategies to reduce education costs. It promises to cut spending, without lowering service quality, by improving the efficiency of service delivery. In contrast to strategies aimed at lowering employee salaries or benefits--which are hard to avoid when cutting spending in any labor intensive service--consolidation's savings are often presented as essentially free, with no obvious losers. School district consolidation is not new. Indeed Michigan (and the United States) experienced a great wave of school consolidation after World War II. In fact, the number of school districts fell by about 85 percent between 1940 and 1970; the pace of consolidation has since slowed considerably. In this paper, the author offers some observations intended to inform the discussion of school consolidation in Michigan. He will start by reviewing the very limited evidence on the magnitude of potential consolidation savings in Michigan. Next, he will suggest factors that policymakers ought to consider when assessing whether consolidation is appropriate. He will argue that, while there are untapped consolidation savings, the magnitude of those savings is surely smaller than commonly imagined and some are concentrated in unexpected places. Finally, he will turn from economic to political considerations and ask who should decide where consolidation takes place. (Contains 16 footnotes.) [For its related report, "Reaction to "Observations on School District and Service Consolidation in Michigan. Working Paper #17". Working Paper #18," see ED537162.].