School districts face pressure to privatize services

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Capital News Service
LANSING – For better or worse, school districts throughout Michigan are facing pressure to privatize the purchase of services through for-profit companies in an effort to balance budgets.
Supporters of privatization argue that districts, by and large, pay employees salaries and benefits above the market rate.
By privatizing services such as transportation, custodial and food, districts can cut costs through increased competition from the private sector.
“Privatization is something that many districts have to look at in order to balance their budget and ensure they are providing their educational services,” said Linda Wacyk, communications director for the Michigan Association of School Administrators.
However, critics such as the Michigan Education Association (MEA) argue that privatizing support services doesn’t necessarily yield cost savings.
“Paying less for custodial, transportation and food services most often results in a reduction in the quality or quantity of those services,” said Doug Pratt, communications director for the state’s largest union of public school employees. “In some cases, privatization actually results in higher expenditures for those services.”
Pratt said that most school boards, after weighing the costs and benefits of privatization, have previously chosen to keep support services in-house to ensure quality. However, recent cuts to state aid have sparked a renewed interest in privatization.
“Theoretically, a good contract with a private firm could provide the same services with the same quality, responsiveness and accountability as an in-house operation,” Pratt said. “The problem is that to achieve this end, a private contractor will likely charge more than it costs the district to provide the service.”
Pratt said the need for contractors to earn profits and pay taxes and overhead costs typically drive costs up and quality down.
“Time after time, districts that try to save money by hiring private contractors end up with inferior service, higher costs or both,” he said.
Citing cuts in state aid, Grand Ledge Public Schools obtained bids to outsource transportation, food, custodial and maintenance services, according to Tom Goodwin, chief financial officer for the district.
“Regrettably, when you’re a district at the bottom of the funding continuum you’re forced to look at these issues to balance your budget,” Goodwin said. “In this labor market, basically what’s happening is our bidding is bringing down our costs to whatever the relevant labor market price is.”
Grand Ledge obtained a single bid from Dean Transportation to provide bus staff, management and mechanical services.
Once Dean placed its bid, the school district allowed its transportation employees the opportunity to meet the lower cost Dean had proposed. The district’s bus drivers negotiated to reduce their salary and benefits to meet the lower cost.
“There wasn’t any need to privatize our bus drivers because the only purpose was to save money and our employees matched the costs,” Goodwin said.
However, Grand Ledge has contracted with Dean to run its bus garage management, mechanics and special education transportation.
The district also accepted bids to privatize its general custodial staff.
“We wanted to maintain control of the head custodians and maintenance crew, but looked to cut costs with our general custodians,” Goodwin said. “However, our general custodians made enough concessions for us to keep them.”
Goodwin said the district has already shifted its food service management to Chartwells Food Services and is in the process of accepting bids to outsource its food service workers. Goodwin said the district will allow its employees the opportunity to match the bid.
“Regrettably, what we’re seeing is the race to the bottom in regard to salaries and benefits,” Goodwin said. “It’s sort of the law of unintended consequences because what typically happens through outsourcing is people lose their health care coverage in order to retain their job.”
The Legislature may vote to require privatization of services for schools receiving state aid.
Rep. Pam Byrnes, D-Lyndon Township, is the sponsor of a bill that would require public schools, intermediate districts and charter academies receiving state aid to adopt strict written policies governing the privatization of materials, services, insurance, utilities and all other goods or services used by the district.
“We need to make sure our school districts are taking the initiative to decrease their expenditures in every way possible,” Byrnes said. “Requiring privatization guidelines is one of the most effective ways to ensure that districts are being cost-efficient.”
Under her proposal, districts would have to use competitive solicitation and bidding to buy any product or service worth $50,000 or more.
“The Legislature seems to think that school districts aren’t looking to be cost-efficient. I would beg to differ,” Goodwin said. “We’re always looking to reduce costs and it’s not like the Legislature created efficiency and cost containment.”
Byrnes’ bill is pending in the House Appropriations Committee.

© 2010, Capital News Service, Michigan State University School of Journalism. Not to be reproduced without permission.

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