“I think you’re going to see [privatizing] happen more and more.”
-Lisa Brewer, Michigan School Business Officials
Every week there are reports of new cost-saving developments
from around Michigan as public schools try to preserve classroom funding and
protect teachers’ jobs by outsourcing non-instructional services.
"I think you’re going to see this happen more and more," said
Lisa Brewer, a spokeswoman for Michigan School Business Officials, a
professional association of school financial administrators. "It’s been going on
for a while now, but it seems people are more aware of it."
Michael D. LaFaive, director of the Mackinac Center’s Morey
Fiscal Policy Initiative and senior managing editor of Michigan Privatization
Report, could not agree more. "We’re stunned by the amount of contracting
activity we’re seeing around the state," LaFaive said. "I’ve been following
privatization in Michigan since 1991 and have not witnessed this much activity
since the proposed sale of the Accident Fund." The Accident Fund, the
state-owned and -run worker’s compensation insurer, was sold to a private
company for more than $225 million in 1995.
A biennial study by Michigan Privatization Report found that
more than one-third of Michigan public schools now privatize at least one
service. That figure has steadily risen, from 31 percent in 2001 to 34 percent
in 2003 and 35.5 percent in 2005.
The most common services privatized by schools are
janitorial, food service and busing. Some school districts, however, are
starting to look at other operations where costs can be cut. Faced with large
annual increases in the state-run pension system for school employees and
high-cost employee health insurance plans, districts are becoming more creative.
Ithaca Public Schools, for example, now privately contracts
for psychological services, a move that saved $32,000 a year. Lakeview Public
Schools, in suburban Detroit, is spending $1 million less on operations and
maintenance after privatizing its custodial work. The decrease takes into
account money not spent on increased wages and benefits, inflationary costs, and
equipment and supplies. (Editor’s Note: For more information on the efforts of
Lakeview and several of the schools mentioned below, see "Around the State,"
starting on page 12.)
"We are starting to see this approach in a number of
different ways," Brewer said. "Administrators and school board members are
focused on how to get the best value out of whatever service they’re looking
Among the most creative approaches to privatization is a plan
to contract out the jobs of three top administrators in the Ypsilanti Public
Schools. The positions of chief financial officer, director of human resources
and superintendent were being considered for just such a move, which the
district said would reduce annual costs by about $130,000.
Over the past year, school districts have reduced expenses by
as much as $250,000, as was the case when Albion privatized custodial services.
In Grosse Pointe, a potential $50,000 loss was turned into $90,000 in revenue
when food services were privatized.
Cooperative approaches also are being pursued. The Muskegon
Area ISD has investigated privatized busing for six local districts that could
reduce costs by up to $280,000. Ypsilanti and neighboring districts Willow Run
and Lincoln have also joined together to investigate cost reductions through
When considering such a decision, schools can look to the
success of Pinckney for direction. Pinckney Community Schools privatized its
busing operations in 1994 and, according to The Ann Arbor News, has renewed the
contract four times. Linda Moskalik, assistant superintendent for finance, said
the contract will be renewed again this year.
Union activists say privatization puts custodians and bus
drivers out of work, although in Pinckney’s case, 90 percent of the drivers went
to work for Laidlaw Transit, all at the same hourly pay rate they had received
from the school district.
Aside from the revenue generated by selling its buses to
Laidlaw, Pinckney no longer must deal with the expenses of union negotiations or
grievances from transportation staff.
"We’re saving a lot of administrative work," Moskalik told
As Ypsilanti, Lincoln and Willow Run discussed potential
savings through privatized busing, the issue of job losses again came up. John
Fulton, Ypsilanti’s director of human resources, told The News that such fears
"If they take over three districts, they need to hire drivers," Fulton said.
"So they’re going to be looking at the three districts to hire the best
Ted P. O’Neil is an education research associate with the Mackinac Center for Public Policy.
The following is adapted from Michigan Education Report
, a quarterly publication of the Mackinac Center for Public Policy.