This graph shows the typical date milestones in a school district’s decision to contract out a service. For more information, please see "A School Privatization Primer
public school districts receive a stable stream of revenue from Lansing, but
face increased demands for employee salaries and benefits, so it comes as no
surprise that a record number of districts contracted out for food, custodial
or transportation services in 2010. According to the Mackinac Center's 2010
School Privatization Survey, 48.8 percent of Michigan school districts
contracted out for one of the three main noninstructional services, an 8.0
percent increase over 2009. Privatization of these services has increased by
57.5 percent since 2001.
Some districts have arrangements where, as employees retire or leave the district, the positions are replaced with leased workers.
And it's no
surprise that more districts contract out for these services, as those that did
so expect large savings. Novi Community Schools, a 6,000-student district in
Oakland County, expects to save more than $3.5 million in the next 30
months by contracting out custodial services with GCA Service Group. That
is effectively a $233 per-pupil funding increase. Novi was one of 32 districts that began contracting out for custodial services.
While custodial service is the fastest growing
area of contracting, food service remains the most frequently contracted
service, with 31.2 percent of districts contracting out. This year, 12
districts began new food service contracts. This reverses the trend from the
past two years, when the number of districts with private food service managers
One of the districts that contracted out for food
services was Rochester Community Schools. The nearly 15,000-student district
said it expects to save $563,403, or about $38 per student, by contracting its
food services out to Chartwells.
districts contracting out their transportation service has been significant in
the past few years. This year, 13 districts began new contracts for busing,
increasing the proportion of districts that contract for this service to 9.3
percent. Five of those districts were in Houghton County. Districts there had
looked at a consolidation and joint contract for transportation services, but
when complications arose, the districts took action themselves and bid out
their own services. Portage Township Schools, Tamarack City Schools,
Calumet/Laurium/Keweenaw Public Schools, Adams Township Schools and Chassell
Township Schools expect to save a combined $334,136. The savings of all five
school districts amount to an average of $87 per pupil.
are a financial drain on school districts. Districts must pay about
19 percent of payroll to support retirement benefits of public school
employees. This is one reason why contracting out with employee leasing
services for noninstructional services is attractive to districts. The
companies usually offer retirement savings benefits through 401(k) plans, which
can save the district up to 10 percent. Employee leasing agencies accounted for
three of the new food service contracts, seven of the transportation contracts
and seven of the custodial service contracts.
have arrangements where, as employees retire or leave the district, the
positions are replaced with leased workers. The arrangement is working in
Chassell Township Schools, where its cook and food service assistant retired
and became leased employees through GMS. The district had been losing $30,000
in its food services but now is running a $10,000 surplus.
has not been the only cost-savings idea explored by districts trying to control
costs. As a new addition to the privatization survey, districts also reported
on services they began sharing with other districts and their ISD. Food service
sharing was popular, with 52 districts sharing parts of food service, either
through sharing a food service director or by setting up a food purchasing
with neighboring districts.
James Hohman is a
fiscal policy analyst and Dustin Anderson is a research intern 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.