Public school districts are government entities, but they rely on the private sector to support their function of delivering educational services to students. Private contractors, for example, construct district buildings, write textbooks and manufacture the supplies necessary to keep the district operational, among other things. And over the past several years, there has been a slow and steady increase in the number of school districts tapping the private sector to perform services that were once performed directly by district employees.

The results of this latest survey show that 70.1 percent of districts in Michigan use private sector contractors to provide food, custodial or transportation services — a slight increase from last year’s findings. These supporting operations are performed by an array of businesses, some even specialize in providing services to public schools.

This is the 14th edition of this survey of school districts, which has been performed in 2001, 2003 and every year since 2005. It has documented a steady increase in contracting out, from 2001 when 31 percent of districts contracted out services to the more than 70 percent today. Also, it found that districts rarely contracted out custodial and transportation services when the survey began. Now more than half of districts use private vendors to provide custodial services and more than a quarter contract out transportation services.

The primary reason school districts contract out for these noninstructional services is so that school officials can stretch public dollars further. There is a powerful incentive to use private vendors if a competitive bidding process identifies that contractors can deliver quality services for less than the district can provide itself.

Michigan school districts also use employee leasing agencies to deliver services. Under this type of arrangement, a school district hires a private company to provide the employees the district needs for certain services. Since the employees work for the private firm, school districts are able to avoid having to pay the rising cost of state-mandated retirement benefits for such employees.

Private companies tend to offer retirement benefits that cost about 5 percent to 7 percent of an employee’s salary. Meanwhile, school districts have to pay between 31 percent and 36 percent of an employee’s salary to fund the state’s pension system (although some of these costs are paid directly by the state). While these high costs may seem to imply a more lavish set of benefits that could help attract high-quality employees, this is not necessarily the case. The majority of these costs — 87 percent — go towards paying for previously earned benefits that have been underfunded by the state. Essentially, school districts have to pay such a high cost for pension benefits because the state has repeatedly failed to fully fund the school employee pension system.

The steady move to private provision of school support services after a competitive bidding process helps districts drive more money towards their primary objective: delivering educational services.