One policy that the 2023 changes overturned concerns a long-standing, money-saving practice by public school districts: privatization. Districts often contract out for services like custodial, transportation and food services. In 1994, the Legislature forbade unions and school districts from negotiating over whether districts would contract out for these noninstructional services. Unions oppose this practice because employees in these privatized services are no longer public employees and cannot be easily unionized. That means fewer members and less dues revenue for unions.
Privatizing is popular with school officials because it helps them balance their budgets. When school employees are responsible for performing these services, the costs are generally higher, as districts are required to pay about a third of employee salaries to fund the state’s school employee retirement system.[32] This drives up costs, which, coupled with declining enrollment, can create significant financial strain on schools. Districts can lower costs while still providing the level of service expected by students, parents and the broader community by contracting out.
Since 1994, districts have embraced privatization. The Mackinac Center surveys districts annually to estimate privatization rates. About 70% of districts used private subcontractors for at least one major noninstructional service for the past eight years. Almost half (45%) of districts contract for food services, half (51%) subcontract custodial services and nearly a third (28%) contract out for transportation needs. This is a significant increase since 2001, when the Center first researched this question. Only about 30% of districts contracted out at that time.[33]
The widespread adoption of privatization may have led to relatively strong compliance with the prohibition against bargaining over these decisions. Of the contracts reviewed, 6% contained terms that discussed privatization. Another 6% contained language that was questionably related to the topic or could be interpreted as hampering a district’s discretion. The rest of the contracts, nearly 90%, were compliant with the law by either not discussing a prohibited subject or expressly acknowledging that the term was to be left to the district’s discretion. Only 2% of contracts contained language that either automatically revived these terms or could easily be adapted to do so.
Districts would be wise to ensure they maintain the option to contract with outside parties. As of the Mackinac Center’s most recent survey, fewer than 2% of districts were unsatisfied with outsourcing. Privatization also serves taxpayers. Districts can avoid unnecessary costs while still providing comparable or even improved services.[34]