Mr. Chairman, members of the committee I thank you for your invitation today, allowing me to speak before you. It truly is a pleasure to be back in the Palmetto state.
Before I begin, I'd like to spend a few moments to explain who I am and where I come from. Reason Foundation is a non-profit research group, a think tank if you will, based in Los Angeles, although I am headquartered in Arlington, Virginia. We have over 37 years of experience working with state and local governments—helping them seek alternative public policy solutions to pressing issues. We seek to make government work better—more effectively and more efficiently, but most importantly, drive performance and results.
Primarily I work with various state and local governments around the country helping them deliver performance and results from their public policy challenges. In many cases, this is done through competition and contracting, however, the focus remains on more efficient and effective policies. Most recently I've had the pleasure of working in Florida with Governor Jeb Bush and his Center for Efficient Government on developing and implementing a comprehensive competition plan for public services.
Simply, competitive sourcing is a process to determine the most efficient and effective source for providing services. At the federal level, billions of dollars have been saved by subjecting public services to competition—resulting in a twelve-to-one return on investment i.e., for every one dollar spent on competitions, the federal government saves twelve. Indeed, noted government reform expert ads, "the fastest way to save money and improve services is to subject them to competition."
It's been my experience that competition, contracting out, privatization, or competitive sourcing work. They provide high quality services while adding flexibility and accountability and saving money. In fact, governments at every level have been relying more on the private sector. The Council of State Governments (CSG) recently conducted a national survey of state government officials to identify recent privatization trends. In the past five years (1998-2002), the amount of privatization has largely remained the same or increased slightly. When budget directors were asked about the primary reasons for privatization, a majority pointed to cost savings—while agency heads said that a lack of personnel or expertise was the number one reason for privatization. The survey also noted that privatization will likely continue in state agencies. Nearly half the state officials who responded said privatization in their state or agency was likely to increase, and the other half said that it would remain the same.
Looking specifically at education, Transportation services have been one of the services contracted most often in the past five years. According to a survey conducted by American School & University magazine, over 42% of school districts expect to increase their use of contract services and outsourcing in the next few years. Over 40 percent of K-12 schools are most likely to outsource transportation.
It makes sense because of the availability of private firms to provide the service, especially in metropolitan areas, and because oversight of in house busing operations is a major task for school administrators. It is easier to contract with a qualified private firm instead of hiring drivers, designing routes, and other day-to-day responsibilities. Bus services are also simple to monitor because parents, teachers, and students will quickly notice poor quality and report to the administration.
A 2002 Alabama Policy Institute survey of school districts in Alabama reported that approximately 390,131 students rode some form of public transportation to school, at a cost to the state of $180.9 million. On average, school districts in Alabama that earmark money to transport students during spent about $602 per rider. Ten districts in Alabama contract out some or all of their transportation services. While districts that outsource transportation comprise only about 8 percent of all districts, they represent three of the state's 10 districts with the lowest per-student rider costs.
A study by economists at Ball State University estimated that the costs for public ownership of school bus services can be as much as 12 percent more costly than contracting. A similar study in Illinois confirms these figures—ancillary education support services are more often being subjected to competition and contracting out.
In fact, just last year the Virginia general assembly considered and continued discussion to this year on HJ182 "Outsourcing of Non-instructional Services." Furthermore, the American Legislative Exchange Council even has model legislation to help states do so.
Believe me; you're not on an island.
As an outsider, I likely come from a different perspective than many here today. South Carolina operates its school bus system unlike every other state. In this case, you are on an island. No other state has as central or as big a role in school bus operations than South Carolina does. While other states may provide funding or assistance they are not as involved or integrated as the system is here.
With that said, I think we can all agree that the current system is broken. Again, from an outsider's perspective the first committee meeting was very instructive—where the state department of education and various school districts were unable to accurately account for each others relative input into the system.
The facts are simple. Operations are centralized here in Columbia, buses are too old, the costs run rampant, and there are very serious legitimate safety concerns. The capital costs alone could break the state and make this task almost untenable. Doing nothing is not an option. The system needs to be righted, and it starts with correcting the structure.
Essentially, the solution lies in two steps. First, school bus transportation is inherently a local issue—one that is best administered by the individual districts. State education officials should spend their time and resources on setting and administering education policy, not transportation policy. In addition, centralized operations often result in a one-size-fits-all approach and removes local conditions and flexibility from operations.
Second, competition needs to be introduced into the provision of bus services. It's a management tool that has been applied elsewhere as I've already indicated and it certainly is an attractive option here in South Carolina. With local control each district could determine the best course for themselves and I believe many will utilize private partners.
There are several issues and options at play. However, it is my opinion that the most important is getting the state out of the day to day operations—school bus administration and decisions should be made at the local level. There is no reason why transportation decision for all students are made here in Columbia.
Once the state is out, the individual districts should be encouraged to seek alternative options through competition. The state can help here, with writing RFP's, evaluating bids, and providing resources and expertise to generally manage the competition process.
I firmly believe that doing this will result in:
- Enhanced performance;
- A newer, safer bus fleet;
- More department and agency focus on core mission and goals;
- More accountability at the local level
- More flexibility;
- Invite more innovation; and
- Lower costs.
These echo the American School & University survey that listed the top five reasons for outsourcing: to save money (90.1%), improve operations (89.0%), improve quality (70.3%), save management time (67.3%), and to provide greater accountability (59.3%).