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Lift Restrictions on School Outsourcing in California

Other states and school districts are saving millions by contracting out non-instructional support services

Lisa Snell
June 30, 2009

Faced with a $24 billion budget deficit, California voters seem to finally be calling for an end to out of control state spending. And Gov. Arnold Schwarzenegger is actually looking for opportunities to curb the deficit. Schwarzenegger recently proposed privatizing many of California’s prisons, selling unneeded state assets and property - including the Los Angeles Memorial Coliseum and the State Fairgrounds, and said he’ll even consider a flat tax. But, it’s California so there are still calls for more spending, not less.

Last month, Californians rejected Proposition 1B, which would have provided $7.9 billion for education spending. And yet, a number of state legislators have proposed mandating that the money that would have gone to schools via 1B go to them anyway.

The state’s schools don’t need more money.

If California legislators are really serious about directing more scarce dollars to classrooms, they should help repeal California’s restrictive school outsourcing law.

In 2009, school districts across the nation are utilizing outsourcing to reduce costs. Troy Public Schools in Michigan is privatizing transportation services to save an estimated $2.5 million over the next three years. The Roanoke, Virginia, city school board voted to contract with a Pennsylvania-based bus company to provide transportation services at a cost reduction of approximately $250,000 annually.  In Columbus, Ohio, the school district is contracting out food operations to bring the indebted department back to solvency. In Leominster, Massachusetts, they are in the process of selecting a private company to take over the school lunch program.

Outsourcing non-instructional support services, such as transportation, food or janitorial and maintenance services, is a management tool used by school boards nationwide, because it allows them to sharpen their focus on providing core educational services while simultaneously right-sizing the academic bureaucracy. In Anchorage, Alaska, school board members recently voted to extend an outsourcing contract for custodians that saved the district $1.7 million a year. Board member Colleen Hamblen pointed out that "$1.7 million will buy us a lot of teachers in this budget, in any budget."

A 2008 survey of Michigan's 552 public school districts by the Mackinac Center for Public Policy found that 42 percent of the districts were contracting out food, janitorial and/or busing services. The research also identified one Michigan district that estimates a three-year savings of between $14.7 million to $21.5 million from privatizing all three services. A 2007 survey found that 78 percent of Michigan’s school districts contracting out services reported cost savings from privatization, and nearly 90 percent reported that they were satisfied with their privatization experience.

California could redirect a significant amount of resources to the classroom through outsourcing. According to the U.S. Department of Education, the National Center on Education Statistics, and the California Department of Education, California schools spend about 28 percent of their budgets on non-instructional services such as, operation and maintenance, transportation, and food service. This amounts to more than $15 billion each year spent on non-instructional school-site services.

School districts in other states have realized cost savings between 20 and 40 percent from outsourcing these services. If 25 percent of the more than $15 billion in California’s non-instructional services were outsourced at a savings of 20 percent, California would save approximately $750 million a year.

While privatizing non-instructional school services will not solve the state’s budget crisis, it would empower local school leaders with maximum flexibility to manage their budgets. Unfortunately, a state law cripples the ability of local school officials to target spending cuts to non-instructional services and away from teachers and other instructional programs. The outsourcing law forbids the private firms from paying workers less than district counterparts and prohibits laying off or demoting any school employees as a result of the private contract. Limiting costs and controlling personnel decisions are crucial aspects of most outsourcing efforts so the state law is a huge roadblock to saving money.

In times of severe financial stress, like the budget mess California is in now, school leaders should have every option available to manage their resources and make sure money makes its way to kids in classrooms. Instead of mandating another $11 billion in education spending, legislators in Sacramento should free up district leaders to more effectively manage their resources through outsourcing.

Lisa Snell is director of education at Reason Foundation.


Lisa Snell is Director of Education


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