In order to keep a finger on the pulse of school privatization
in Michigan, Mackinac Center for Public Policy staff follow regular news
coverage of school support service outsourcing. This year’s news reports suggest
more moderate privatization activity compared to last year. What has clearly
increased, however, is the number of research papers published that attempt to
cast privatization — and even Mackinac Center research — in a questionable
In each of the last four privatization surveys conducted by the
Mackinac Center, the rate at which Michigan’s school districts outsourced at
least one of the big three noninstructional services (food, janitorial or
busing) had increased over the previous year. In 2001, 31 percent of
conventional public school districts were contracting out; today it is 40
percent. According to the federal government’s Centers for Disease Control, the
number of conventional and charter public schools nationwide contracting with
food service management companies alone has leapt from 15.2 percent in 2000 to
20.4 percent in 2006. That is a staggering 34 percent rate increase.
Since our last survey, media reports from around the state indicate that additional schools are using privatization to yield savings.
The growing use of private vendors in public schools and the
2007 Mackinac Center privatization "how-to" manual, "A School Privatization
Primer for Michigan School Officials, Media and Residents," may have spooked
opponents of school contracting. No less than three Michigan-specific papers —
all of which reference Mackinac Center work — have been released this year.
The first and arguably most enjoyable paper of the three was
written by New York-based scholar Clive Belfield and published by the
Lansing-based Great Lakes Center for Education Research and Practice. The
seven-page report by Belfield is a somewhat flattering quasi-rebuttal of the
Mackinac Center’s 107-page privatization primer. It concludes in part by saying:
"This report is useful. It presents credible surveys of current policies across
states showing that contracting out of food, transportation, and custodial
services is widespread, although public provision is still more common."
This is not the entirety of his conclusion. He also argues,
among other items, that the Center failed to examine such things as "transaction
costs" in its analysis. This and other arguments made by Belfield are addressed
in my rejoinder to his paper, "Privatization Review a Mixed Bag."
The other studies released this year are also easy to refute,
but detailed analysis of each goes beyond the scope of this essay. One
consistent suggestion made in each paper, however, is that support service
privatization may not yield savings. That’s true enough. Virtually every human
endeavor contains the possibility that the results will fall short of
expectations. The question before us is, "are savings from doing privatization
right probable?" The answer is a resounding yes.
Consider the increasing amount of anecdotal evidence in favor of
savings. The Mackinac Center keeps a tally on per-pupil savings from
privatization when the data is reported to us in various formats. We have
recorded savings in all three categories from food service in Pinconning ($5.63
per pupil) to janitorial service in Harrison ($232 per pupil). Done right,
contracting should save money every time.
Since our 2007 survey, media reports from around the state
indicate that additional schools are using privatization to yield savings. This
year Southfield Public Schools outsourced for custodial (including maintenance)
and transportation services and are on the cusp of contracting for food
services, too. They expect to save $21 million over three years for all three
services. For more information on this and other anecdotal evidence, see
"Statewide School Contracting Could Save As Much As $500 Million."
The Mackinac Center recognizes that no single metric,
methodology or source is perfect. But to argue that privatization may not save
money because there are no peer-reviewed empirical studies that say so, or that
savings may not really and consistently accrue to schools because of
"transaction costs," defies reasoned logic. It suggests that scores of school
district employees and elected officials from around the state and country are
unwilling or incapable of making sound financial decisions, or that they are
acting in some sort of conspiracy to waste money. The Mackinac Center gives
school boards more credit.
In the coming months readers will be able to find more detailed
responses to published criticisms of support service privatization — as well as
more survey research — involving rates of privatization and financial savings or
losses where the data is available.
Michael D. LaFaive is director of the Morey Fiscal Policy
Initiative at the Mackinac Center for Public Policy, a research and educational
institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.