For too long, Michigan school districts have not considered the needs of their two customers: the taxpayer and the parent. Parents, of course, want their children to be well educated, and taxpayers rightly expect that education be fiscally responsible, not wasting precious tax dollars. With parents increasingly able to select alternative education options such as cross–district public schools, charter schools, private schools, and home schooling, traditional public school districts must be innovative in their spending in order to compete effectively for students.

Financial responsibility starts with school boards and district officials working together to develop new ways of thinking about school finance. Three overarching questions emerge for school districts when considering financially responsibility:

  1. Are public dollars being used most efficiently and effectively in the provision of non-instructional school services?

  2. Can these same services be provided alternatively at a lower cost, or improved services be bought for the same cost?

  3. Are the proper incentives and institutional environment in place to enact these changes?

The fiscally responsible school district will continually revisit these three issues on a regular basis to assure that both parents and taxpayers are getting their money’s worth. This study has analyzed six habits where funds can be saved through proper management. In many cases, various school districts in Michigan already are taking fiscal reforms to heart by implementing one or more of these six habits of fiscally responsible school districts.

Habit 1: Minimize Administrative Costs. The first hallmark of fiscal responsibility starts with front office functions. Many school districts employ a small phalanx of consultants, administrators, assistant superintendents, etc. Does the existence of this sometimes–extensive front office staff help educate children, or could this money be better used in the classroom?

Habit 2: Take Advantage of Cost Savings from Outsourcing Non–Instructional Services. Most schools currently run a broad range of non–instructional services, such as janitorial, food, transportation, etc. When these services are opened up for competitive bidding, many school districts find they can either improve the quality of the services, save money on comparable services, or both.

Habit 3: Manage Employee Health Benefits Effectively. The cost of staff and teacher health benefits has skyrocketed over the past few decades for a number of reasons. First, some districts have allowed the Michigan Education Special Services Association, a third–party insurance administrator controlled by the Michigan Education Association, to administer insurance benefits without a competitive bidding process. Second, the negotiated union health benefit structure is far superior to other locally available health plans. Even the most generous corporate benefits do not compare with the ones typically enjoyed by school employees. School districts that have reformed their benefit structure have saved millions of dollars while offering high–quality benefits for their employees.

Habit 4: Structure Capital Costs Effectively. With many districts needing new school facilities to cope with growth or to replace substandard ones, now is the ideal time to consider innovative and fiscally responsible ways to acquire classroom space. Instead of constructing new school buildings, some schools have opted to lease facilities, which can save the schools money in the long run, while leaving maintenance and major repair expenses to the private owners.

For those schools that decide to purchase or construct new buildings, more effective debt management and bonding policies would allow them to save money on their debt service.

Habit 5: Participate in Michigan’s Schools-of-Choice Program. Participation in schools–of–choice provides the proper incentives for school districts to adopt reforms, because it spurs inter–district competition. Additionally, public schools that can successfully attract and retain students through Michigan’s schools–of–choice program can see more funding flow into their district.

Habit 6: Reform Collective Bargaining. School employee unions can and often do limit the ability of school districts to enact needed reforms. Schools should have more authority to hire and fire teachers, remove mandatory support/exclusive rights to bargain clauses, and strengthen other management rights that are often unwittingly ceded to the unions.

School districts that can effectively implement these six habits in their annual budgeting will see cost savings in their programs, savings that can be used for alleviating budgetary shortfalls, funneling money back into the classroom, or returning funds to the taxpayer. Implementing these ideas to the business of educating Michigan’s children is a meaningful way to improve public education across the state.