Public-Private Partnerships

The Private Sector and Innovation in Education

Executive Summary

The U.S. public education system is in trouble. While elementary and secondary school enrollments continue to rise, states are struggling just to prevent an existing deficit from widening. Meanwhile, overall education expenditures are sky-rocketing. At $600 billion, or 12 percent of Gross National Product (GNP), the United States spends more on education than do most competitor countries whose students outperform U.S. students on standardized tests.

Continually rising costs, coupled with constraints on revenues, leave many school districts with few options other than to cut back expenditures on classes, teachers, teachers' salaries, and infrastructure; or to raise money through additional taxes. Neither option is desirable nor simple to implement.

There is, however, a third viable option—partnerships between the public schools and the private sector—that may alleviate some of the pressures on school districts, enabling them to continue to provide vital services and infrastructure.

For many years, school districts have contracted out ancillary services (for example, transportation, maintenance, labor negotiations, and data processing), saving 20 to 30 percent in operating costs. Current patterns in private provision of school lunch programs, for example, suggest 30 percent growth per year during the next 10 years. Today, building from these successful partnerships, a growing number of school districts are expanding the concept to more fundamental education services. The key areas that offer state officials opportunities to realize cost savings through privatization and contracting out are: 1) infrastructure and 2) curriculum.

The emergence of diverse privatization responses to inadequate public resources, coupled with some legislative restructuring (school choice and open enrollment plans) in public schools, has already resulted in substantial cost savings. Satellite schools, for example, in Dade County, Florida, save the district between $7 million and $15 million each time three small satellites are opened in office buildings or untenanted office parks. A partnership between Minnesota's Mall of America and five school districts saved the state $15 million in set-up costs alone.

Financing options offered by the private sector are varied and flexible. Some require an open enrollment or school choice plan; others depend on private philanthropy; still others depend on the willingness of school districts to contract out in areas traditionally met by the districts themselves.

School districts could further explore savings potential from public/private partnerships, as an alternative to increased taxes and service cuts and in response to growing school enrollments and increasing costs.

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