Education is one state budget area with tremendous potential for privatization. Possibilities include: contracting out educational instruction and support services; public-private education partnerships in which the private sector donates infrastructure or services to public schools; and vouchers to allow children to attend private schools.[31]

In cities, counties, and states throughout America, these privatization options are increasingly being considered and implemented. The interest in privatization comes in response to rising costs of public education and an increasing dissatisfaction with current public school operations.


There are considerable opportunities for increased private-sector involvement in nearly every facet of education. For instance, numerous educational services can be contracted out. Cost savings, efficiency gains, increased flexibility, and, in some cases, more specialized educational instruction are among the benefits that can be expected by such contracting out efforts. The best contracting opportunities are:

  • School bus transportation. Private contractors bus 35 percent of American public school students.

  • Management of schools and school districts. A number of cities and counties are experimenting with turning over the management of schools or even entire school districts to private schools. Example: Baltimore Public Schools has contracted with the consortium of Education Alternatives Inc. (EAI), KPMG Peat Marwick, and Johnson Controls World Service, to administer eight of the city's elementary schools and one middle school.[32] EAI previously had temporarily managed the public school district in Duluth County, Minnesota.

  • Custodial services.

  • Instruction. Public schools in Wade County, North Carolina and Upper Saddle River, New York contract with private firms for foreign language instruction. The Milwaukee public school district has contracted with the Wisconsin Institute of Science and Technology (WIST), the nonprofit arm of MacDonald Research, to formulate a program to provide science education for eight Milwaukee public schools.[33]

  • Drop-out education. A for-profit firm called Ombudsmen Educational Services contracts with over 70 school districts to provide educational instruction for drop-out students.[34] The company educates 2,000 drop-out students in Illinois, Minnesota, and Arizona. Contracting for alternative education rather than running a district program can yield notable cost savings. Ombudsmen Education Services, for instance, educates drop-out students for 50 percent less per student than school district programs.[35]


The private sector can also help alleviate the infrastructure needs of public schools. Classroom space, land, equipment, furniture, and buildings can be provided to schools by the private sector in the form of public/private partnerships.[36] The Mail of America in Minnesota, a new 4.2 million square foot shopping complex, is providing classroom space at modest rates for public school districts, and maintenance and utilities costs are being paid for by a group of businesses, private individuals, and foundations.

In Dade County, Florida, approximately 275 public school children are enrolled in worksite schools or "satellite learning centers." These worksite schools serve the children of employees, or the children of college students, for the Miami-Dade Community College, the Miami International Airport, and Mt. Sinai Hospital. By assuming the financial burden of providing the school facilities, these businesses saved the school district $1.9 million in construction costs alone in 1990, according to the school district.[37]


The most well-known means of turning over more responsibility in education to the private sector is by establishing a statewide voucher plan that empowers parents to send their children to a public or private school of their choice. State education money would follow the children to their schools of choice rather than going straight into local school boards.

Vermont has had a limited voucher system since 1869, and recently Milwaukee, Wisconsin adopted a pilot choice program. Overseas, Holland and Denmark have long had systems of school choice, while Sweden and a number of the newly free nations of Eastern Europe are planning to adopt school choice. California voters will have the opportunity to vote on such a system in 1994.


By injecting competition and market forces into the public school system, educational choice could both improve education and likely result in substantial cost savings. A report by the New York State Senate Advisory Commission on Privatization found that implementation of a statewide voucher program could result in savings of $4.7 billion to the taxpayers.[38] An August 1992 Reason Foundation study estimates that California could save $3 billion by adopting a statewide voucher program.[39] This is equal to a savings of approximately 17 percent from the state's current general fund expenditures on K-12 education. The savings estimate was based on a survey of Los Angeles residents that showed that 52 percent of those surveyed would use a $2600 voucher to send their children to private school.