The State’s Backward Ways

Refusal to allow privatization of some services hurts students

The state budget deal contains some devastating compromises, including one that will hit California’s kids hard: Republicans agreed to drop their demand to revise a 2002 law that largely prohibits schools from hiring private firms for food, transportation, and janitorial and landscaping services.

The failure to repeal this law and give districts more control over funding puts California at odds with national trends in utilizing public- private partnerships to improve public education and condemns many districts to financial straits.

Schools across the country have saved millions through outsourcing, thus directing more resources to classrooms. When the St. Louis school district faced a $90 million deficit, the school board hired William Roberti and his corporate turnaround firm to fix the district’s financial troubles and return more money to the classroom. A July 2004 report on the corporate management experiment found that in 13 months, Roberti’s team cut $80 million from the budget, privatized divisions such as maintenance and food services, and fixed the district’s snarled bus system. Among the major services outsourced were payroll handling, warehouse operations, buildings and grounds maintenance, and electronic purchasing. Outsourcing saved the schools $60 million out of a $450 million budget, enabling them to add 131 teachers, hire literacy coaches for each school, begin computerized reading tests for students in grades 3-12 and fill vacancies in magnet schools.

Similarly, in 2002, the Philadelphia school district faced a $28 million deficit. However, by relying on privatized transportation, custodial, food service and other support services, the district saved $29 million over two years and quickly erased its deficit. Philadelphia made these financial cutbacks while running a robust teacher recruitment program and without firing any teachers.

Contrast those examples with the California Legislature’s approach to school district deficits. Since 1991, California taxpayers have paid almost $220 million to bail out seven districts because of financial mismanagement and fraud. Last year, the state took over the Oakland Unified School District and the Legislature OK’d a record $100 million state bailout. All of these districts would have benefited from a corporate turnaround team and a serious consideration of outsourcing.

The St. Louis turnaround model could be replicated in some of California’s most deficit-ridden districts. In fact, Roberti’s firm was asked by the Oakland district for a proposal. However, California’s current school contracting laws make most of Roberti’s cost-saving reforms from St. Louis illegal here.

California will be left behind as other states continue to partner with the private sector to revitalize failing schools. This summer, Chicago Mayor Richard Daley introduced a plan to open 100 of the city’s worst performing schools to competition. By 2010, Daley intends to make over more than 10 percent of the city’s schools – one-third as charter schools, one-third as independently operated contract schools, and the remainder as small schools run by district officials.

Meanwhile, the California Legislature won’t even allow school leaders to decide for themselves whether or not a private firm can run their bus system more efficiently. California schools spend more than $13 billion on non-instructional services. Across the country, school districts typically save between 20 and 40 percent from outsourcing of these services.

The state has missed a great opportunity to save money – and get more money flowing into classrooms. Let’s hope that the latest California budget deal won’t be the last word on school contracting. For now, California has taken a step backwards, and we’ll have to watch as other states move forward with school contracting arrangements to help failing schools and direct more resources to the classroom.

Lisa Snell is director of education and child welfare at Reason Foundation. She formerly taught speech courses at California State University, Fullerton.