Michigan’s public school districts are government entities that occasionally use private contractors to provide them with support services. The 2018 privatization survey found that 70.5 percent of Michigan’s school districts — 380 of the 539 districts in the state — contract out for food, custodial or transportation services. This is a slight decline from 2017, when the number was 71.1 percent.
This is the fourth consecutive year in which roughly 70 percent of districts contracted out at least one of these three services. A dozen districts started a contract for one or more services and 15 districts brought a service back in house between our 2017 survey and our 2018 survey.
It is not clear why privatization has been stuck at 70 percent recently. Districts officials reported that finding staff, whether directly or through contracting, has been a challenge. This may because of the tightening labor market. The state’s unemployment rate declined from 14.6 percent at the height of the Great Recession to the current 4.0 percent, according to the U.S. Bureau of Labor Statistics. In a tight labor market, employers have a hard time filling low-wage jobs, such as those in school support services.
While savings tended to drive the districts to contract out services, districts cited quality and staffing concerns as reasons for bringing services back in house. Only one district that insourced services expected to save money from the move. Insourcing may be a sign that a district’s financial condition is improving. Total per-pupil revenues at public school districts in Michigan — from all sources, not just state funding — increased from $11,550 in 2012 to $12,822 in 2017, an 11 percent increase. The decision by several districts to insource for increased quality may indicate that fewer districts struggle to balance their budgets.
Likewise, the lower number of districts that recently entered into a contract may also be a sign that school finances have improved. Tight fiscal conditions lead districts to seek savings, and contracting out support services was one way districts saved money.
That is more likely the case than an alternative explanation that districts have contracted out when it made sense but now it does not make financial sense. The districts that contracted out continue to expect savings.
Support service privatization increased from a rare practice in 2001 to something commonplace by 2015. The proportion of districts that contracted out food, custodial or transportation services increased from 31.0 percent in 2001 to 69.7 percent in 2015. That was an extraordinary change in the relationship between conventional school districts and the private sector.