Two Connected Paths for School Districts to Thrive in an Era of Enrollment Decline and Heightened Competition

America’s school districts are serving a shrinking share of a shrinking market. The K–12 population is declining overall, families are leaving high-cost cities, homeschooling has expanded since the pandemic, private school enrollment has rebounded, and charter school enrollment continues to grow.

Over the past six years, district schools have lost nearly two million students nationwide, while charter schools have gained roughly half a million. Private schools have added thousands more students, and available evidence suggests homeschooling participation remains well above pre-pandemic levels. These trends differ across states and regions, but few districts are unaffected.

Policy changes amplify these demographic shifts. In many states, families now have meaningful opportunities to choose options outside their assigned district schools through charter schools, education savings accounts, tax credit scholarships, and increasingly expansive open enrollment policies. Districts in both red and blue states can no longer assume that children living within their boundaries will attend a school they operate.

These trends demand a fundamental rethinking of what it means for a school district to succeed.

Districts face two connected but distinct challenges. One, they must offer schools and programs that families actively choose in an increasingly competitive market. Two, they must ensure that public education continues to function well for all students, including those educated in schools and settings the district does not run.

Ultimately, states will determine whether districts can meet both challenges or whether they slide into decline. To ensure districts adapt and improve, states should do everything within their power to provide incentives and flexibility at the local level. They must stand ready to provide political cover for local leaders who have a compelling vision for adaptation. In some cases, states should be ready to step in and exert their authority to force adaptation via temporary receivership or by putting limits on local school board authority or labor union agreements. 

The risks of standing still

Enrollment decline puts districts under intense fiscal and political strain. Fixed costs remain even as student counts fall. Political pressures often keep under-enrolled schools open. Central offices must still support legally mandated services, particularly special education. Over time, districts pull resources away from classrooms to preserve basic operations.

As families with greater agency opt out, the concentration of higher-need students increases in the schools least able to adapt. Staffing becomes more difficult. Fiscal stress, workforce instability, and rising student needs reinforce one another, creating a downward academic and financial spiral from which some districts cannot recover without dramatic state intervention. 

If states don’t develop a new playbook, then these dynamics will worsen. States will confront growing risks of district insolvency, widening gaps in access and outcomes, and fragmented education marketplaces in which families struggle to navigate the choice process and identify quality schools.

Districts must pursue two paths simultaneously.

Historically, state policy treated districts as vertically integrated monopolies that provided nearly all instruction and services within their boundaries. That model no longer reflects reality.

To thrive in the present, districts must pursue two paths simultaneously.

First, they must compete for enrollment by offering schools that families want to attend. This requires understanding local demand, improving existing schools, and creating new models that reflect how families’ expectations are changing.

Second, they must support a broader ecosystem of publicly funded education, using their assets and expertise to serve students, families, and schools beyond those they directly operate.

CRPE’s research on portfolio districts demonstrates that systems that separate governance from school operation—while maintaining strong accountability and equity guardrails—can make progress on both fronts. These systems depend on state policies that encourage adaptation rather than protect the status quo.

Path one: Compete by offering schools that families actively choose

Districts can no longer assume loyalty from the families within their boundaries, even in places with limited charter or private competition. Population loss alone makes adaptation unavoidable.

Successful districts begin by listening carefully to family demand and responding with new options. In Orange County, Florida, leaders who are currently confronting their first enrollment decline in decades are exploring offerings such as screen-free microschools and other specialized programs. Elsewhere in Florida, districts have launched classical education schools, adopting pedagogical approaches that have gained traction in private and charter sectors. In Houston, the district’s Texas Connections Academy now enrolls more than 11,000 students and helps offset enrollment losses in traditional schools.

These efforts differ from past attempts at competition. Rather than rebranding existing schools, districts are studying their local education markets and, where necessary, creating entirely new school designs that appeal strongly to some families, even if they are not a fit for all.

Cities such as Denver, New York City, Indianapolis, and New Orleans offer additional examples. Through unified enrollment systems, common accountability frameworks, and shared services like transportation and special education, these portfolio districts expanded choice while improving outcomes and access for underserved students. More recently, many school districts are offering microschools and other nimble offerings to respond to parent demand. 

States can accelerate this work by granting districts targeted flexibility. Waivers from seat-time requirements, staffing rules, or program regulations can enable microschools, career academies, hybrid homeschooling models, and co-located programs within existing facilities.

Path two: Support a broader ecosystem of publicly funded learning

As more families assemble education across multiple providers, districts face a choice: serve those families partially or lose them entirely.

In Florida, more than half of districts now offer classes or services to students using state scholarship or ESA programs, earning revenue on a fee-for-service basis. This shift allows districts to remain connected to students who are no longer enrolled full-time and helps stabilize district finances.

Yet districts often navigate this terrain with little guidance. Questions about accountability, pricing, class size limits, and campus security are frequently unresolved. States can reduce uncertainty by establishing clear rules for part-time enrollment and unbundled services. Doing so lowers barriers for districts that want to serve ESA and homeschool families while protecting students and staff.

Districts can also simplify choice for families who want flexibility without complexity. Many families prefer a “just works” experience: straightforward enrollment, high-quality materials, and confidence that instructional choices are effective. Districts are well-positioned to offer that promise. Quality vetting at the state level can support this role. Louisiana’s tiered curriculum reviews and Texas’s Bluebonnet Learning curriculum, for example, reduce duplication and create shared baselines for quality, making it easier for districts to stand behind the options they offer.

Using district assets to serve all publicly funded schools

Districts possess extensive infrastructure—buildings, buses, food service operations, special education expertise—that will be increasingly underused as enrollment declines. These assets can support a wider range of publicly funded schools if states allow districts to deploy them flexibly.

Districts that partner with charter schools offer a template. In places like Miami, Indianapolis, Camden, New Jersey, and San Antonio, Texas, charter schools have been able to lease space, opt into transportation or food service, or purchase maintenance and security services. This lowers barriers for new providers, improves use of taxpayer-funded infrastructure, and creates revenue streams for districts.

Realizing this vision will require updates to facilities policy and finance. Bond financing, planning assumptions, and governance structures must reflect a future in which districts both educate students directly and serve as infrastructure providers to learning environments operated by others.

Districts can also play a central role in delivering specialized services, particularly special education. Small schools often lack the capacity to provide these services at scale, and all students must have access to appropriate evaluations. With the right levels of funding and flexibility, districts can offer tiered service models that ensure student access while compensating districts for the work they do, drawing on examples such as California’s Special Education Local Planning Areas.

Finally, states and districts can strengthen the educator workforce by extending access to group health insurance and retirement systems to independent educators. This supports both career stability for independent educators and fiscal sustainability for public employee benefit plans that face growing risks of insolvency.

What must states do to make both paths viable?

Districts did not become rigid by accident. State laws, funding formulas, and accountability systems shaped their current form. Now, states must update those policies to reflect how public education is actually delivered.

A state agenda to support district evolution should include five core actions:

1. Shift funding toward flexibility and student-based formulas. Reduce categorical restrictions and allow districts to align resources with enrollment realities, while maintaining outcome-focused accountability. Create financial incentives for districts to innovate, compete, and adapt. Ensure a level playing field by having all state dollars follow students and provide weighted funds to account for more expensive services and student needs. 
2. Create a policy infrastructure that enables unbundling and competitive strategies. Ask district leaders how staffing and certification rules, accountability systems, seat time requirements, and other “red tape” prevent them from responding to parent demand or unbundling services. Create a task force to remake the policy infrastructure.

3. Clarify rules for partial participation. Define how part-time students, accountability, pricing, and safety operate across districts, charters, and choice programs. In high-choice environments, consider incentivizing or mandating shared services and access to facilities (see, for example, HB 1423 to create a Public Education Corporation in Indiana).

4. Pay for shared responsibilities. Fund district obligations to serve non-district students,  like those participating in special education programs, or allow districts to charge transparent fees. Unfunded mandates are no longer sustainable.

5. Modernize facility policies. Enable school buildings and transportation systems to serve multiple providers and be financed with diversified revenue in mind. Florida’s Schools of Hope policy is an example.

6. Intervene when adaptation fails. When districts cannot adjust, states may need to reconstitute leadership or redefine district roles to protect students and taxpayers. States may also have to consider new governance and support structures to help support school providers and families if districts cannot play that role. 

Private providers have an important role to play in providing technical assistance, such as pricing district services. State advocacy organizations and foundations can help by providing leadership pipelines to develop school board members and district leaders with an adaptive mindset and political courage. 

New methods to fulfill an enduring mission

Districts can choose to ignore the proliferation of publicly funded alternatives. But then states might have to step in with additional oversight to regulate schools, direct public funding, or allocate building space fairly. If school districts want to make sure every child has an appropriate publicly funded learning opportunity, then they have to find ways to carry out that mission in a more competitive environment—and many do.  

The era of districts as monopolies is clearly over. Still, districts provide a vital public service: ensuring access to high-quality education for all students in their communities. Like other institutions that have survived disruption, districts must remain true to that mission while changing how they carry it out. If states help ensure districts pursue both paths—competing effectively for families and supporting a broader public education ecosystem—then districts can remain central, trusted institutions in a far more dynamic education landscape.