Last year, the Mackinac Center for Public Policy conducted a fiscal analysis
of the Grand Rapids Public School System to see whether private contracting
could help the district dig itself out of a runaway budget deficit, which
registered an $18 million shortfall for the 2001-2002 school year.
This analysis showed that by restructuring the district's health benefits
plan and privatizing non-instructional services, Grand Rapids could achieve
savings amounting to nearly a third of its deficit and possibly whip itself into
financial shape within a few years. The alternative would be draconian budget
cuts-and possibly teacher layoffs-that might affect the quality of education
offered to Grand Rapids students.
Unfortunately, district and union politics prevented district officials from
adopting the Mackinac Center plan.
The budget documents from Grand Rapids made clear why the school district was
in financial arrears. Like many districts throughout the state, it maintains a
bloated bureaucracy that has outstripped its incoming revenue. Its total budget,
which currently stands at $265 million, is subject to runaway health-care
benefits that have increased in cost by 10.5 percent each year for the last
three years. The cost of other benefits has increased by from 5 to 8 percent.
Overall, expenses for the Grand Rapids Public Schools are rising at an annual
rate of 6.2 percent. Yet, its revenues are growing at a rate of only 3.9
Part of the reason for this is that students are leaving for better education
alternatives elsewhere. In Michigan, when a student leaves one school district
for another, the "foundation grant" money provided per pupil by the
state goes with them. That grant currently amounts to $6,582 per student. In the
2001-2002 school year, Grand Rapids Public Schools lost 222 more students than
anticipated. That comes to a loss of around $1.4 million. The district
anticipates losing even more students in the 2002-2003 school year. It also
expects to run a $16 million deficit if it cannot successfully make changes to
reduce the cost of operating the district.
After examining financial and operational information from the district, the
Mackinac Center recommended that Grand Rapids competitively contract with
private vendors to provide bus and food service for its students, janitorial
services for upkeep of its schools, and health-care benefits for its employees.
The Center conservatively estimated the possible savings from such a plan at
$5.2 million per year, nearly a third of the district's projected deficit. The
actual savings would almost certainly be more.
Competitively bidding out such services is a common-sense management practice
used in business, government, nonprofit corporations, and school districts
across the country. Indeed, in a 2001 Mackinac Center survey of 228 Michigan
school districts, 71 reported outsourcing at least one of their major
Even the Michigan Education Association (MEA) union, which officially opposes
school district efforts to save money and improve service by contracting out,
has itself contracted with private vendors for food, security, janitorial and
mailing services at its headquarters in East Lansing. Presumably, the union does
this to save money, improve quality, or both.
This was not the first time that the Mackinac Center had offered its
assistance to a school district. In January 2001, parents in the Redford Union
Schools made statewide news when they began hosting bake sales in an
unsuccessful attempt to raise money to preserve teachers' jobs that were being
eliminated due to budget woes.
Mackinac Center Senior Vice President Joseph P. Overton contacted the
district and suggested that privatization might offer a way to keep the teachers
and save money at the same time. After conferring with the district
superintendent, the Center drafted a proposal containing cost-saving
opportunities. "We sometimes lose sight of the simple fact that children
are the focus of our school system, and that teachers are the ones who work hard
each day to make a difference in their lives," Overton told the Detroit
News. "If we have to choose between overly expensive support services and
teachers, we say protect the teachers," he said.
The Mackinac Center was so certain that its plan to outsource
non-instructional services would cost less while delivering higher quality that
it guaranteed $350,000 in savings to the Redford Union Schools. In other words,
if the district, having kept its teachers and following the Center's savings
plan, failed to reap this amount or more in savings, the Center would give the
difference to the district out of its own pocket.
Regrettably, district and union politics prevented Redford Union from
accepting the offer, and administrators followed through with their plans to do
away with teachers' jobs. The same appears to be happening now in Grand Rapids.
Grand Rapids Public Schools Superintendent Dr. Patricia Newby and Carol
Crawford, chief financial officer, have indicated that the district has been
exploring many elements of the Mackinac Center's recommendations and agreed that
there are substantial savings to be found in non-instructional outsourcing.
Unfortunately, neither believed that implementing the changes was possible,
mainly due to opposition from the MEA, which currently collects union dues and
fees from the district's custodians, food service workers, bus drivers, teachers
and clerical workers.
The union and its subsidiaries receive revenue of more than $12 million
from the district and its employees each year. If Grand Rapids Public
Schools were to privatize their non-instructional services, or competitively bid
out for health insurance, the MEA would probably lose much of this sum and the
political leverage that comes with it. The union typically will fight
tooth-and-nail to prevent a school district from taking this kind of action,
whether or not it would help the schools keep more teachers in the classroom.
School district representatives justifiably fear a negative MEA public relations
campaign that would put severe pressure on the school board to reject any
Instead, public school officials often follow the path of least resistance.
In the current public school political environment, it is easier to blame budget
cuts on stingy taxpayers rather than it is to stand up to labor unions and other
vocal opponents of sound management. In Grand Rapids, this has already taken the
form of an outright denial of services: The district no longer provides bus
transportation for its high school students. Next year it intends to close the
deficit further by packing more students into each classroom. Such steps would
probably not be as necessary if the district had taken the Mackinac Center's
Of course, those who lose most from this situation are the students, who
never see the additional teachers and facilities that school districts' wasteful
overspending could have paid for. Over time, such policies cause a stagnation
and deterioration of educational quality that adds fuel to the school choice
movement, and causes more and more students to take advantage of the choices
already out there.
Grand Rapids Public Schools are facing a budget crisis that requires
extraordinary action. But before any real progress can be made, district
officials have to muster the courage to stand up to the school employees' union
and do what is necessary to benefit their district and its students.
Nathan Crosslin is coordinator of the Mackinac Center for Public Policy's
Education Reform Leadership Project.