School Services Contracting Continues Rise in Michigan

Commentary

School Services Contracting Continues Rise in Michigan

Two-thirds of Michigan school districts contract out food, custodial and/or transportation services

The privatization of non-educational school support services-primarily food, custodial and transportation services-is a common occurrence in school districts nationwide but has been infrequently studied, with the notable exception of Michigan, where the Mackinac Center for Public Policy has conducted an annual survey of local school districts dating back to 2003. The 2014 edition of this report-available here-was released earlier this month and found record levels of school service outsourcing in Michigan, which has generally been on an upward trend for over a decade.

The report found that among Michigan school districts in 2014:

  • 211 districts (38.7 percent) contracted out food services;
  • 259 districts (47.5 percent) contracted out custodial services; and
  • 131 districts (24.0 percent) contracted out transportation services.

The current figures show a dramatic growth from 2003, the first year that Mackinac Center began conducting the annual survey. “Support service contracting in Michigan school districts exploded over the past decade,” according to James Hohman, the lead author of the report and Assistant Director of Fiscal Policy at the Mackinac Center. “Back in 2003, just a third of Michigan school districts contracted out for food, custodial or transportation services; since then, two thirds of districts now contract out.”

Hohman added that this trend is especially pronounced in custodial and transportation services. “One out of 15 districts contracted out for custodial services in 2003,” Hohman notes. “Half of districts contracted out this service in 2014.” A similar dynamic can be seen in transportation services, where one out of 26 districts contracted out for transportation services in 2003, increasing to nearly a quarter of districts by 2014.

What’s even more notable is that each contracting category saw year-over-year increases in the number of school district adopters in 2014, despite the fact that 15 school districts chose to end their contracts in food, custodial or transportation services in 2014, bringing those services back in-house. By contrast, in 2014 a totally of 16 districts began new food contracts, 15 districts began new custodial contracts, and 24 districts began new transportation contracts. On balance, that’s 55 new outsourced service contracts among Michigan school districts in 2014, relative to 15 service insourcings.

Cost savings are the typical rationale prompting the move toward competitive contracting, but the Mackinac survey contains a finding that may explain why the trend-while slowing-has largely stuck. Overall, 90% of school district respondents reported satisfaction with their private service providers, compared to a 4% dissatisfaction rate. Further, this is consistent with a long-term trend of satisfaction that has hovered in the 88-93% range since 2007.

The annual Mackinac Center surveys provide a useful snapshot into an often used, but poorly understood, phenomenon. Given the rising costs that many school districts face in various forms-pensions and retiree health benefits, administrative costs, facility maintenance, infrastructure modernization, and the like-administrators should avail themselves of every opportunity to shed non-educational costs in order to be able to devote more resources to the classroom. In Michigan, at least, it appears that many districts have gotten this message.

Leonard Gilroy is director of government reform at Reason Foundation and is the editor of the Privatization & Government Reform Newsletter, available here. This article was featured in the October 2014 edition of the newsletter.

Leonard Gilroy is Senior Managing Director of the Pension Integrity Project at Reason Foundation, a nonprofit think tank advancing free minds and free markets. The Pension Integrity Project assists policymakers and other stakeholders in designing, analyzing and implementing public sector pension reforms.