With more and more public education dollars going toward employee retirement and
benefit plans, many Michigan school districts are turning to privatization as a
way to secure more funds for their core mission. By privatizing
non-instructional services — janitorial, food and busing — districts can more
easily balance budgets without laying off teachers or eliminating programs. As
of August, 37.8 percent of school districts surveyed by the Mackinac Center for
Public Policy contract out at least one of these services.
With savings of this magnitude, it is not surprising that superintendents are investigating privatization.
Over the summer, the Mackinac Center contacted all 552 school districts listed
in the Michigan Education Directory, which has published school district data
since 1936. Only one district, Detroit, has yet to respond to the Center’s
inquiries. The White Pine school district in the Upper Peninsula was excluded
from the survey because its schools have closed. Each district that reported
contracting out for one or more of the three services was contacted at least
twice to ensure accurate reporting.
The total number of districts that contract out for at least one service — 208
of 550 surveyed — rose from 35.7 percent in 2005 to 37.8 percent. Only five
districts brought a contracted service back in house since completion of last
Food service outsourcing is something of a perennial favorite among school
districts seeking to hire private vendors. Across the Great Lake State, 158
school districts (28.7 percent of districts surveyed) contract out for some type
of food service. This total is unchanged from last year. Some districts contract
for management of their existing program and district staff, while others remove
themselves from the service altogether by allowing a private firm to provide
everything from employees to menu design.
For the second year in a row, there
was significant growth in custodial privatization, increasing from a revised 50
districts in 2005 to 63 this year, a percentage increase of 26 percent. The
savings school districts can achieve with competitive contracting is
substantial. Officials at Muskegon Reeths-Puffer expect to save about $480,000 a
year with private custodians over the life of the contract. That works out to
about $114 per student. In Auburn Hills, a new contract may save the Avondale
School District up to $490,000 — $128 per student — in fiscal 2007. In Jackson,
a new custodial contract is expected to annually save $1.3 million, or about
$193 per student.
With savings of this magnitude, it is not surprising that superintendents are
investigating privatization. It is hard to imagine any district turning down an
extra $100 to $200 per-student in state funding were it offered. Why then are
competitive contractors providing these services in only 37 percent of Michigan
school districts? Center researchers have been given answers ranging from fears
of increased costs to union opposition.
One school official, who asked to remain anonymous, said "The contracts
certainly make us more efficient and provide a level of expertise that (the
district) could not otherwise expect. We are currently satisfied with both of
our contractors. In my opinion the largest barrier to privatization is the
highly effective MEA (Michigan Education Association) campaign against
contracting. I think that good arguments can be made for contracting and that
efficiencies can be achieved, but it is a hard sell against the MEA public
relations machine." The school district he works for contracts out for food and
The number of school districts that secured competitive contracts for
transportation services this year grew to 24, an addition of three new contracts
to the survey. This was a significant turnaround; between 2003 and 2005 district
contracting for busing had fallen by three.
The reality is school privatization
is here to stay. By adopting privatization to some degree — and at greater
percentage rates than ever before — school officials are showing a "revealed
preference" for a particular management technique. In other words, privatization
appears to save money and/or improve services more often than not. Otherwise,
why would officials be willing to endure the special-interest opposition that
inevitably accompanies it?
Officials who choose the privatization route are apparently doing so because it
provides an expected real benefit.
Ben Stafford is a research assistant with the Mackinac Center for Public Policy,
a research and educational institute headquartered in Midland, Mich. Michael D.
LaFaive is director of the Morey Fiscal Policy Initiative for the Center. Permission to
reprint in whole or in part is hereby granted, provided that the author and the
Center are properly cited.