Michigan Privatization Digest - April 25, 2007

Contents of this issue:

  • State is looking to contract out foster care

  • Corrections support service contractors testify to saving

  • Milan contracts for groundskeeping and wastewater management

  • Bay City holds off bridge contracting

  • Holly starts aggressive privatization program

  • Midland Public Schools moving on custodial and food service contracting

  • Ishpeming considering custodial contracting

  • Northville investigating support service contracting

  • Sparta looks to save with custodial privatization

  • Carrollton Schools considers contracting

  • Jackson Public Schools renews cleaning contract

  • Fenton proposing privatization

  • Morenci Area Schools privatizes substitutes

State is looking to contract out foster care

LANSING — The Senate Human Services Appropriations subcommittee has recommended that the Michigan Department of Human Services contract more of its foster care and juvenile justice services to private companies, according to the Associated Press. Proponents say that the move will save the state $36 million.

Department of Human Services officials contended that the state would have to extend its oversight of the private providers, which may end up costing the state more, according to Gongwer News Services.

Corrections support service contractors testify to savings

LANSING — In March, contractors testified before the Senate Judiciary Committee that outsourcing food services in the Department of Corrections to private entities could save the state millions of dollars, according to the Michigan Information & Research Service. Contractors also testified that contracting-out for some mental health services within the department could attain savings.

Corrections facilities across the state offer food services to inmates that are often run by private companies. Many jails also offer commissary services — additional snacks, toiletries and clothing that can be purchased by inmates — that are operated by an outside vendor.

One company, Canteen Services, provides services to 22 Michigan county jails already, according to MIRS. A company representative estimated that it could save the state $54.75 million if it provided services throughout the corrections department, MIRS reported.

The company representative also read a letter from Oakland County Sheriff Mike Bouchard, who stated that contracting at state prisons would save $40 million.

A representative of MHM Services testified that contracting for mental health services will save the state some money in prescription costs, and in outsourcing the litigation costs.

An MDI Healthcare representative testified that hiring a company to oversee billing costs could save roughly $27 million, MIRS reported.

Milan contracts for groundskeeping and wastewater management

MILAN — Facing budget constraints, the Milan City Council looked to privatization for savings. The city contracted out for lawn maintenance and the operations of its wastewater plant. The moves are expected to save the city $500,000 annually, according to city administrator Dan Bishop.

In addition to the budget problems most cities are facing, the city faces additional problems. Milan had borrowed $13.6 million to expand its wastewater treatment infrastructure to cover the needs of four new housing developments. However, those developments did not produce as many houses as expected and the city did not have the additional revenue from tapping fees to cover the $932,000 bond payment due June 1.

To deal with its problems, the city has also cut subsidies for its Downtown Development Authority, its parks commission, and is looking at eliminating its transit department. It also issued an RFP to privatize its department of public works, but decided to keep that in house. "We do realize that we are dealing with people here, it’s not just all numbers," said Bishop.

Bay City holds off bridge contracting

BAY CITY — Bay City’s mayor vetoed a 5-4 city council vote to privatize bridge operations, according to The Bay City Times. The move would have saved the city, which is facing a $1.2 million deficit, $193,000 in the first year.

The city owns two drawbridges that are operated from March 15 to December 15 to coincide with the shipping season, according to The Times. The contract would have provided savings by laying off bridge operators between December and March, The Times reported. Those employees currently are given other jobs by the city during the off time.

The city is estimated to spend $1.2 million to operate the bridges, the bulk of which is in labor compensation. The private firm was planning on offering comparable wages and benefits, The Times reported.

Since the veto, city officials removed cable television connections to the bridge towers. The only city employees that had been provided taxpayer funded cable television were the bridge operators, The Times reported. "The city should not pay them $18 an hour to sit there and watch TV," city manager Robert Belleman told The Times.

Holly starts aggressive privatization program

HOLLY — Holly Area Schools is looking to privatization as part of its plan to close its projected $2.15 million deficit, according to the Tri-County Times.

Superintendent Kent Barnes gave budget recommendations that included outsourcing for food, custodial and counseling services that would save the district $715,000. The bulk of the savings — $625,000 — would come from janitorial services.

The district already has contracted out the management of its food services with Chartwells and is exploring extending the contract to include labor. If it proceeds, it will be one of only 21 districts in the state that contract for both food and custodial services.

Other changes include eliminating some teaching positions. This will save the district $300,000, but also push the district to the edge of the maximum class size allowable in its labor contracts.

Midland Public Schools moving on custodial and food service contracting

MIDLAND — Midland Public Schools have been investigating privatizing its custodial and food services. The move to contract out custodial services is expected to save the district $700,000 to $900,000 in the first year alone, according to the Midland Daily News.

Through tough budget times over the last few years, the district has reduced maintenance and custodial positions by 10 percent, the Daily News reported. The district is currently facing a projected deficit of $5 million.

The district has identified Grand Rapids Building Services as the top candidate for privatization. Custodians would start at a wage of $9.25 per hour and the company would include a benefits package, according to the Daily News.

Ishpeming considering custodial contracting

ISHPEMING — Ishpeming Public Schools has started to explore contracting for custodial services. The district has been operating at a deficit and without change, its reserve funds are expected to be depleted at the end of this school year, according to the Marquette Mining Journal.

The district is still acquiring information and has not issued a request for proposals.

Custodians attended a recent school board meeting and voiced concern over possible privatization. Their union contract with the district ends this summer, according to the Mining Journal. Under state law, outsourcing is a prohibited subject of bargaining.

Northville investigating support service contracting

NORTHVILLE — Northville Public Schools has hired a consultant to see whether it makes sense for the district to contract out for its food, maintenance, custodial and transportation services, according to the Plymouth Journal.

The district hired Rahmberg, Stover & Associates to perform the analysis. The firm gathered information about the district’s costs of providing these services and solicited information from vendors to show if savings could be found in privatizing its support services.

Its food service budget had a deficit of more than $40,000 last year due to an unexpected increase in food costs. It had been meeting expenses for around a decade prior to that, according to Assistant Superintendent Dave Bollitho.

Sparta looks to save with custodial privatization

SPARTA — Sparta Area Schools is exploring custodial contracting, according to The Grand Rapids Press. The district is facing a $1.2 million projected deficit for next year. The move is expected to save the district approximately $275,000.

Thirteen firms that have responded to the district’s request for proposals.

The district may also cut two teaching positions, cut back on special education and cut a few administrative positions, according to the Sparta/Kent City Advance.

Carrollton Schools considers contracting

SAGINAW — Carrolton Schools is looking to contract out a number of services. It has made a request for proposals for its lawn care and its cleaning services, according to Superintendent Craig Douglas. It is also restructuring its daycare, which will include a private firm handling some of the operations.

District officials are looking at any support operations for savings in order to be prepared for funding problems from the state. "At this point, in the middle of March, we don’t know what our revenue is going to be for this school year," business manager Janet Swanson told The Saginaw News.

Jackson Public Schools renews cleaning contract

JACKSON — Jackson Public Schools extended its contract with Enviro-Clean Services for two more years, according to The Jackson Citizen Patriot. The contract will extend through end of the 2009-2010 school year.

The company was hired by the district in December 2004 with only six days notice.

The services have saved an estimated $1.2 million per year, Deputy Superintendent of Finance Bill Hannon told The Citizen Patriot. The newspaper calculated this to be the equivalent of $179 in savings per pupil.

Fenton proposing privatization

FENTON — The Fenton Area Public Schools is looking to outsource its transportation services to close its budget deficit, according to The Flint Journal. The district hopes to cut $1.6 million to $2.3 million out of next year’s budget, The Journal reported.

Other plans included laying off 18 full-time teachers and shifting grades to different buildings.

Superintendent Peggy Yates told The Journal that the district cannot afford the health and retirement benefits it offers. "We have to evaluate what’s the best way to balance the budget," she stated.

Morenci Area Schools privatizes substitutes

MORENCI — The Morenci Area Schools contracted its substitute dispatching services to a private company, according to the Morenci Observer. The move is expected to save the district approximately $6,000 annually.

The company, Professional Education Strategies Group, provides these services to a number of school districts across the state. The district will continue to set pay rates for substitutes, according to the Observer. The main area of savings is that districts will not have to contribute to the Michigan Public School Employee Retirement System.

The district will allow substitute teachers that have accumulated several years of experience to stay as district employees, the Observer reported.

Michigan Privatization Digest is a service of the Michigan Privatization Report, a twice-yearly publication of the Mackinac Center for Public Policy with a circulation of more than 22,000. The Mackinac Center for Public Policy is an independent, non-profit research institute located in Midland, Michigan.