In 2001, contracting out for school support services by Michigan school districts was a rare practice. Less than one in three districts used private providers for food, custodial or transportation services. Today, 16 years later, the tables have completely turned: it is more unusual to find a district that does not outsource at least one of these support services than to find one that does.
The 2017 survey results contained in this report show that 71.5 percent of Michigan school districts outsource at least one of the three services, a slight increase from last year’s 70.6 percent. While food service contracting stayed stable, the number of districts outsourcing custodial and transportation services increased slightly from last year. All have trended upwards in recent years, with custodial services showing the largest increase, growing from 6.6 percent in 2003 to 52.6 percent in 2017.
The survey was first conducted in 2001, then again in 2003 and every year since 2005, making this year’s report the 15th edition. It covers all conventional school districts in Michigan, though the 2015 survey also included results from four additional states.
Private companies provide more for school districts than just these three support services. They often provide special education transportation, grounds maintenance, bus repairs and substitute teachers, among other duties.
There are many reasons why a school district may choose to contract out for certain services, but the most common is the price tag. Private companies specialize in the services they provide, meaning they are often more efficient than a school district. A school district’s primary purpose is to provide educational services to students, and all other services they provide are secondary.
Not all privatization arrangements are the same. Some districts do not outsource the entirety of their services, but use private employee leasing agencies to supply them with employees. This means the agencies hire workers, oversee them and provide administrative duties, such as payroll. This frees school districts from these overhead costs and the extra expense of funding state-mandated retirement benefits for these workers.
Getting around retirement mandates can save a decent amount of money, considering that employer contribution rates amount to about 37 percent of payroll, though districts receive a supplement from the state to pay for 11.7 percentage points of that contribution. Employer contributions for private sector retirement contributions, on the other hand, are often just 5 percent to 7 percent of payroll.
Quality of service is another advantage of contracting. A vast majority of school districts who outsource food, custodial or transportation services report that they are satisfied with their services. This makes sense: if the district is dissatisfied, they can shop around for a new provider.
Effective contracting helps school districts by letting them put more money and attention toward their primary purpose.
 “FY2016-17 Employer Contribution Rates” (State of Michigan, 2017), https://perma.cc/65QS-PYW7.
 Richard C. Dreyfuss, “Michigan’s Public-Employee Retirement Benefits: Benchmarking and Managing Benefits and Costs” (Mackinac Center for Public Policy, Oct. 25, 2010), https://perma.cc/JE62-57M9.