Educators in Iowa say another round school district consolidation is likely in the years ahead due to dwindling rural populations and the expiration of a state provision that allows districts with declining enrollment to recoup some budget losses. The Des Moines Register reports 14 districts will merge to become seven in July. Iowa will start the 2014-15 academic year with 338 school districts. The state had 367 districts a decade ago. In 1990, there were 430.

Merging two or more neighboring school districts brings both benefits and challenges. Larger districts can offer more courses and extracurricular activities. But consolidation also can result in long bus rides for students, lost jobs at shuttered schools and weakened hometown ties. Education officials predict Iowa will see an uptick in consolidations in coming years, reigniting conversations about how to best serve rural students in a state that’s seen significant urban migration in the past decade.

Budget troubles play a big role in the reason for consolidation. In Iowa, it is illegal for a school district to operate in the red. State officials sent notices to roughly 65 districts last year that were in danger of deficit spending. Twelve of those districts — all in rural areas — recorded negative balances in the 2013 fiscal year.

Districts receive state money on a per-pupil basis. More than half of all Iowa districts reported a decrease in student enrollment last fall. Financial incentives from the state encourage small districts to share resources. Extra money is given to school systems that enter whole-grade sharing agreements, a partnership where students from two or more districts attend all or most of their classes together.

Districts that share superintendents or other key personnel are also eligible for additional state money, helping small districts stay afloat. A fiscal tool called the budget guarantee passed by lawmakers in 2001, expired this year, putting further pressure on rural schools. The budget guarantee had allowed some districts to use local property tax revenue to boost their spending authority despite declining enrollment.

Data from a 2010 report by the Iowa Policy Research Organization suggests that districts operate best with at least 500 students. Districts with 500 or more students benefit from operational cost-savings, increased course offerings and an increase in property values, the report said. The East Mills district, formed in 2011 when the Malvern and Nishna Valley districts merged, educated 494 students in preschool through 12th grade this year. The western Iowa districts had participated in whole-grade sharing for four years before the reorganization.

State officials don’t have a threshold for how small is too small, but Iowa code requires newly formed districts to enroll at least 300 students.