295 of 550 districts — 53.6 percent — now contract at least one major service
to the private sector, up from 31.0 percent in 2001. To read more please visit: www.mackinac.org/15574
More than half of Michigan’s public school
districts now contract out for food, custodial or transportation services,
according to new research by Mackinac Center analysts. This is the first time
that privatization of noninstructional services has topped the 50 percent mark.
A survey of Michigan’s 550 local school districts
found that 295 of them, or 53.6 percent, privatized at least one of the three
main noninstructional services. This is a 9.1 percent increase over 2010. Districts began 57 new support service contracts within the past year.
Privatization remains an important option for school districts looking to reduce bureaucracy and save taxpayer dollars.
Center has tracked the growth of Michigan school privatization since 2001, when
roughly 31 percent of school districts privatized at least one support service.
Custodial service contracting showed the largest growth last year, with 29 new
districts privatizing the service. In just the past six years, 122 districts
began contracting out this service.
Food service remains the most commonly privatized
service in Michigan schools, with 182 districts (33.1 percent) contracting for at least some of their cafeteria employees.
Custodial follows close behind, with 173 districts (31.5 percent) contracting
out this service. Transportation is the least commonly contracted service at 67
districts (12.2 percent), although 15 districts did privatize transportation
services for the first time this year.
School boards privatize services for numerous
reasons, but financial savings is far and away the most common. Private firms
have a clear incentive to provide quality services at a low cost. Privatization
can even occur on a small scale: Mason County Central Schools saved $4,500 by
subcontracting two cafeteria workers and hiring them through the private
intermediary company, PCMI.
Districts that take a more expansive approach
typically save more. A contract between Woodhaven-Brownstown School District
and GCA saved taxpayers more than $1.3 million on the district’s custodial
services. Soliciting bids from private vendors often saves money even if
districts choose not to contract out, because market competition often
pressures school employee unions to offer concessions.
boards have found privatization to be an effective tool for cutting costs
without sacrificing service quality. Nearly 93 percent of contracting districts
report satisfaction with the services they have received, and relatively few
districts (only six within the past year) bring services back in-house
following a period of privatization.
Pension and retirement costs often account for a
substantial portion of a school’s labor expenditures. Employee leasing firms,
such as PCMI and PESG, often provide savings in these areas by offering benefit
packages closer to those found in the private sector. Retirement benefits alone
cost public school employers nearly 25 percent of an employee’s salary. Ubly
Community Schools, which contracts for support staff in multiple areas saves a
minimum of 8 percent per employee contracted. Fulton Schools realizes savings
of 10 percent per employee on its custodial contract with PCMI.
Numerous districts have also found savings through
sharing one or more services, also known as inter district contracting. For
example, Saginaw Township Community Schools provides food services both to Swan
Valley School District and to nearby parochial schools. Both districts are
satisfied with this arrangement. Over 100 of Michigan’s school districts share
at least some portion of their food services — most commonly, a single food
service director divides time between two or three districts. More than 250
districts also share support services through their intermediate school
districts, with business, technology and special education services among the
most commonly shared. Some small rural districts, such as those in Huron
County, have no superintendent of their own and rely on the Intermediate School
District superintendent and staff for administration.
significant growth of privatization — and the associated savings — caught the eyes of Michigan legislators, who are now
considering House Bill 4306. Introduced by Rep. Dave Agema,
R-Grandville, this bill would mandate competitive bidding for major non
instructional services. Already, several districts have begun bidding out services in order to qualify for Gov. Rick Snyder’s “best practices” funding, which
offers an additional $100 per pupil
to any district that meets four out of five criteria. One of these criteria is the solicitation of competitive,
private-sector bids for support services.
remains an important option for school districts looking to reduce bureaucracy and save taxpayer dollars. School
employee unions frequently oppose competitive
bidding because it denies them members and dues, but school boards and administrators
have a fiscal responsibility to seek the best and most efficient service providers for our schools. Increasingly,
privatization has allowed them to do just that.
James Hohman is
assistant director of fiscal policy and Josiah Kollmeyer is a 2011 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.