Smaller school districts may also be more efficient (Barrow and Rouse 2002, p. 29, Fowler and Walbert 1991). This may result from the difficulties in dealing with a large organization that may not benefit from economies of scale. For example, the problems facing school budgets--that they are often opaque and convoluted, inhibiting proper management and parental engagement--may be exacerbated in large districts (Roza and Hill 2004).
Where I live, the school district is ginormous. The teachers' union won again in this election, booting off the two school board members who were the most independent of the union. My guess is that the larger the school district, the less likely it is to serve its customers rather than the unions.
The paper by Furman and friends was referred to by Nicholas Kristof, to which I was referred by Greg Mankiw. It is mostly a "can-do" paper about education policy. Such papers are easy to write if you ignore on-the-ground reality of who has real power in the public education system.