More than half of Michigan’s public school districts now
contract out for food, custodial or transportation services, according to new
research by Mackinac Center analysts. This is the first time that privatization
of noninstructional services has topped the 50 percent mark.
A survey of Michigan’s 550 local school districts found that
295 of them, or 53.6 percent, privatized at least one of the three main noninstructional
services. This is a 9.1 percent increase over 2010. Districts began 57 new
support service contracts within the past year. The Mackinac Center has tracked
the growth of Michigan school privatization since 2001, when roughly 31 percent
of school districts privatized at least one support service. Custodial service
contracting showed the largest growth last year, with 29 new districts
privatizing the service. In just the past six years, 122 districts began
contracting out this service.
Food service remains the most commonly privatized service in
Michigan schools, with 182 districts (33.1 percent) contracting for at least
some of their cafeteria employees. Custodial follows close behind, with 173
districts (31.5 percent) contracting out this service. Transportation is the
least commonly contracted service at 67 districts (12.2 percent), although 15
districts did privatize transportation services for the first time this year.
School boards privatize services for numerous reasons, but
financial savings is far and away the most common. Private firms have a clear
incentive to provide quality services at a low cost. Privatization can even
occur on a small scale: Mason County Central Schools saved $4,500 by
subcontracting two cafeteria workers and hiring them through the private
intermediary company, PCMI. Districts that take a more expansive approach
typically save more. A contract between Woodhaven-Brownstown School District
and GCA saved taxpayers more than $1.3 million on the district’s custodial services.
Soliciting bids from private vendors often saves money even if districts choose
not to contract out, because market competition often pressures school employee
unions to offer concessions.
Many school boards have found privatization to be an effective
tool for cutting costs without sacrificing service quality. Nearly 93 percent
of contracting districts report satisfaction with the services they have
received, and relatively few districts (only six within the past year) bring
services back in-house following a period of privatization.
Pension and retirement costs often account for a substantial
portion of a school’s labor expenditures. Employee leasing firms, such as PCMI
and PESG, often provide savings in these areas by offering benefit packages closer
to those found in the private sector. Retirement benefits alone cost public
school employers nearly 25 percent of an employee’s salary. Ubly Community
Schools, which contracts for support staff in multiple areas, saves a minimum
of 8 percent per employee contracted. Fulton Schools realizes savings of 10
percent per employee on its custodial contract with PCMI.
Numerous districts have also found savings through sharing
one or more services, also known as inter-district contracting. For example,
Saginaw Township Community Schools provides food services both to Swan Valley
School District and to nearby parochial schools. Both districts indicated they are
satisfied with this arrangement. Over 100 of Michigan’s school districts share
at least some portion of their food services — most commonly, a single food
service director divides time between two or three districts. More than 250
districts also share support services through their intermediate school
districts, with business, technology and special education services among the
most commonly shared. Some small rural districts, such as those in Huron
County, have no superintendent of their own and rely on the intermediate school
district superintendent and staff for administration.
The steady, significant growth of privatization — and the
associated savings — caught the eyes of Michigan legislators, who are now
considering House Bill 4306. Introduced by Rep. Dave Agema, R-Grandville, this
bill would mandate competitive bidding for major noninstructional services.
Already, several districts have begun bidding out services in order to qualify
for Gov. Rick Snyder’s “best practices” funding, which offers an additional
$100 per pupil to any district that meets four out of five criteria. One of
these criteria is the solicitation of competitive, private-sector bids for
Privatization remains an important option for school
districts looking to reduce bureaucracy and save taxpayer dollars. School
employee unions frequently oppose competitive bidding because it denies them
members and dues, but school boards and administrators have a fiscal
responsibility to seek the best and most efficient service providers for our
schools. Increasingly, privatization has allowed them to do just that.
James Hohman is
assistant director of fiscal policy at the Mackinac Center for Public Policy, where Josiah Kollmeyer is a 2011 research
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