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Privatization of support services has been a method that Michigan school districts have used for several years to lower costs. More than ever before, Michigan school districts are privatizing the three main support services they offer — food, custodial and transportation. Our annual survey finds that 48.8 percent of Michigan school districts are contracting out for these services. This is an 8 percent increase over 2009.
The largest impetus for contracting is cost savings. The survey found that first-year contracts alone are expected to save districts $16.7 million cumulatively.
Privatization of support services has been a method that Michigan school districts have used for several years to lower costs. More than ever before, Michigan school districts are privatizing the three main support services they offer — food, custodial and transportation. Our annual survey finds that 48.8 percent of Michigan school districts are contracting out for these services. This is an 8 percent increase over 2009.
The largest impetus for contracting is cost savings. The survey found that first-year contracts alone are expected to save districts $16.7 million cumulatively.
The Mackinac Center has surveyed Michigan public school districts about their use of private contracts since 2001 and annually since 2005. More and more each year, districts contract out to save money. They also consistently report satisfaction with the contracts they have in place.
New to the 2010 survey is a question on shared services. House Bill 6488 has been introduced that would establish a shared services commission to study district consolidation and allow the state superintendent to force consolidation. But there had not been a comprehensive list of the services that districts are currently sharing and the advantages of those arrangements. The 2010 survey found that a majority of districts share at least one service, with frequent sharing among business, transportation, technology and food services.
The survey is a centralized source for data regarding the growth, cost savings and satisfaction of Michigan school districts use of private contractors. The survey has documented the steady trend towards privatization of school support services.
The privatization survey was conducted between May 14 and Sept. 3, 2010. The majority of survey responses were administered via telephone. Those responding to the survey were superintendents, business managers, assistant superintendents, administrative directors and administrative assistants. Districts requesting that the survey be provided in written form or administered through a Freedom of Information Act request were sent letters requesting the information. All 551 public school districts in Michigan responded to this year’s survey.
The districts provided answers to a series of questions on their service providers. If a district began contracting out or brought a service back in-house, they were asked follow-up questions, including the reasons for changing and expected savings.
These districts were asked to provide documentation on cost differences. Unfortunately, not all districts provided comprehensive documentation, nor was the method of documenting these costs uniform across districts. Where applicable, figures were annualized and estimated for the first year of service provision. The districts’ published figures may not be directly comparable to each other, but a cost accounting analysis of district savings figures is beyond the scope of this survey.
Whether the district was new to contracting or had been contracting for several years, the district was asked whether they were satisfied with the services the private company has provided.
It is common for districts to only contract out part of its services, whether through attrition as workers leave the job or whether for the management of the service. Districts contracting out with private vendors to provide normal services are included as having privatized services in this survey, even if the majority of the service is provided by in-house staff. However, districts contracting out special services support with private contractors, such as for the cleaning of administrative buildings or for special education busing, are not counted.
Our definition of privatization also includes districts that contract out with employee leasing agencies.
Many districts contract with another district, their intermediate district, municipal government or some other governmental agency. These districts are not counted in the numbers because they are not contracting to private companies.
Privatization continues to increase this year as 246 districts contracted out for food, custodial or transportation services. Contracting has increased 44 percent since 2001 and displays a steady trend, growing an average of 6.3 percent each year.
Graphic 1: Outsourcing by Michigan School Districts
Fifty districts began new support service contracts. These were evenly split between districts that already contracted out a service and districts that are new to support service contracting.
One district, Bentley Community Schools, contracted out for all three services since the 2009 survey. It is using an employee leasing firm to employ its substitute bus drivers and to replace any of its current drivers who end their service with the district. It also began using an employee leasing firm to provide custodians and selected a private food service manager.
Districts reported that the new contracts are expected to save $16.7 million, though not all districts were able to provide quality figures and were thus excluded from savings calculations. Details on expected savings from contracting out are included in the following sections.
Food service continues to be the most frequently contracted service, with 172 districts using private contractors. Twelve new districts contracted out food service this year.
Graphic 2: Districts Contracting Food Service
The number of
districts contracting out for food service was stable for the 2007 to 2009
surveys. This year’s survey found that this trend was broken as
4.9 percent more districts contracted out for this service.
The new contracts for
food services are expected to save Michigan school districts $929,379 this
year. Savings range from $4,280 at the Chassell Township School District to
$563,403 at Rochester Community Schools, and are listed in graphic 3.
The Chassell Township
Schools’ cook and an assistant retired and came back through Good Marks for
Schools, and the district expects to save $4,280 from the move.
Meridian Public
Schools did not provide enough information to obtain a savings number. The district submitted its contractor’s bid, however, which
guarantees that the district will operate its food services with a $49,000
annual surplus.
Swartz Creek Community Schools had one individual overseeing both the food and transportation services. After the employee retired the district rehired her through K-12 Kitchens to continue as the food service manager. The district shifted the transportation oversight duties to a different employee.
Graphic 3
|
Districts new to food service contracting |
Savings |
|
Rochester Community Schools |
$563,403 |
|
Mona Shores Public Schools |
$200,000 |
|
Inkster Public |
$96,000 |
|
Kearsley Community Schools |
$28,389 |
|
Durand Area Schools |
$27,802 |
|
Crawford Ausable Schools |
$9,505 |
|
Chassell Township Schools |
$4,280 |
Davison Community Schools |
Insufficient documentation |
Bentley Community Schools |
Insufficient documentation |
Flat Rock Community Schools |
Insufficient documentation |
Meridian Public Schools |
Insufficient documentation |
Swartz Creek Community Schools |
Insufficient documentation |
Contracting out for custodial services grew substantially this year. From 2009 the number of those districts contracting out their custodial services increased 5.4 percentage points.
Graphic 4: Districts Contracting Custodial Service
Since 2003 custodial service contracting in Michigan public schools grew 300 percent, from 6.6 percent of all districts contracting to 26.3 percent.
Savings from the districts contracting out custodial services range from $11,000 to $3.5 million or $5.35 to $318.37 per pupil.
Baldwin Community Schools had gone eight years without a custodial manager. This year the district decided to hire a custodial and maintenance manager with At Your Service. District officials report that they plan to continue to contract custodial services as custodians retire or otherwise leave the district.
Utica Community Schools contracted out its custodial service to GCA Services and expects to save $4 million through using both contractors and the district’s current employees. The district solicited bids to provide services to give it an expected savings figure. It selected a vendor and a savings target, and worked with its employees providing the service to come up with commensurate savings. The district accepted some concessions, but also contracted out a portion of its custodial services, which is expected to save the district $1.6 million in its first year.
By contracting with Hi-Tec Building Services Inc., Les Cheneaux Community Schools expects to save $62,230 in its first year. After accounting for a couple of continued salary expenses and increased unemployment insurance expenses, the district expects to save $97,337 annually for the remainder of the contract, a savings of $302 per pupil.
In addition to its 2010-2011 cost savings, Novi Community Schools provided a 30-month projected cost savings of $3,622,676. For the 6,000-pupil school district, this amounts to a $233 per student annual savings, though its 2010-2011 school year savings are only expected to be $1.1 million.
Wayland Union Schools expects to incur severance and retirement costs when transitioning to its contract with CSM. After those first-year costs, the district expects to save $400,000 annually for the remainder of the contract.
Pennfield Schools started leasing workers with PCMI, which saved $2,400 from the start of the contract on March 1, 2010. The district estimated savings for the entire 2010-2011 school year will be $11,000, which works out to an annual savings of $5 dollars per pupil.
Tecumseh Public Schools expects to save $380,000 by contracting out custodial services. The superintendent reported that the district receives superior service from the private contractor for nearly half the price.
Graphic 5
|
Districts new to custodial contracting |
Savings |
|
Walled Lake Consolidated Schools |
$3,535,132 |
|
Utica Community Schools |
$1,581,120 |
|
Royal Oak Public Schools |
$1,295,753 |
|
Novi Community Schools |
$1,118,915 |
|
Oak Park School District |
$1,063,379 |
|
Oxford Area Community Schools |
$814,635 |
|
Mt. Pleasant Public Schools |
$795,448 |
|
Mona Shores Public Schools |
$719,817 |
|
Wayland Union Schools |
$400,000 |
|
River Rouge School District |
$389,890 |
|
Tecumseh Public Schools |
$380,000 |
|
Lakewood Public Schools |
$316,678 |
|
New Haven Community Schools |
$300,000 |
|
Gladwin Community School |
$232,291 |
|
Homer Community Schools |
$151,629 |
|
Adrian Public Schools |
$147,760 |
Holton Community Schools |
$133,531 |
| Hart Public Schools | $115,000 |
Eau Claire Public Schools |
$113,214 |
Buena Vista Schools |
$70,000 |
East Grand Rapids Public School |
$65,000 |
Les Cheneaux Community Schools |
$62,230 |
Mancelona Public Schools |
$51,447 |
Freeland Community School District |
$44,662 |
Three River Community Schools |
$39,793 |
Pickford Public Schools |
$34,286 |
East Jackson Community Schools |
$31,672 |
Pennfield Schools |
$11,000 |
Baldwin Community Schools |
Insufficient documentation |
Bentley Community Schools |
Insufficient documentation |
Elkton-Pigeon-Bay Port Laker Schools |
Insufficient documentation |
Lamphere Schools |
Insufficient documentation |
While transportation is the least contracted-out service, privatization is growing considerably. Since 2003 transportation service contracting more than doubled (growing 139 percent), though less than 10 percent of districts contract out for this service.
With 13 districts new to contracting out, transportation experienced 27.5 percent growth over last year’s survey. The savings estimates for districts new to transportation privatization range from $10,000 to $810,436 and are listed in Graphic 7.
Graphic 6: Districts Contracting Transportation Service
The largest gain in transportation contracting came from districts in Houghton County. Five of these Upper Peninsula districts began using contractors to provide busing services to the districts’ students. The districts, Portage Township Schools, Tamarack City Schools, Calumet/Laurium/Keweenaw Public Schools, Adams Township Schools and Chassell Township Schools reported a combined savings figure of $334,136, approximately $87 per pupil.
Chassell Township Schools did not provide documents on cost comparison between in-house and contractor costs. However, it reported that its contractor will purchase the district’s aging bus fleet, which was expected to require significant updates. The district will lease the buses for its use. Not all districts choose to sell their fleets to contractors, though, and opt only for transportation management or simply leasing employees.
On June 28 the Harbor Springs Public Schools board of education voted unanimously to approve a third-party contract with METS for its transportation supervisor. The district did not provide savings documentation.
Graphic 7
|
Districts new to transportation contracting |
Savings |
|
Oak Park School District |
$810,436 |
|
Garden City Public Schools |
$375,000 |
|
Houghton-Portage Townships Schools |
$156,403 |
|
Adams Township School District |
$141,854 |
|
Lakeview Community Schools |
$136,000 |
|
Holton Public Schools |
$104,617 |
East Jackson Community Schools |
$29,125 |
Calumet/Laurium/Keweenaw Public Schools |
$25,879 |
Dollar Bay-Tamarack City Schools |
$10,000 |
Chassell Township Schools |
Insufficient documentation |
Bentley Community Schools |
Insufficient documentation |
Au Gres-Sims School District |
Insufficient documentation |
Harbor Springs Public Schools |
Insufficient documentation |
While contracting out has tended to save districts money, some districts find that changing service provision back in-house or sharing services with other districts may be less expensive. This year, eight districts ended contracting arrangements and either brought services back in-house or began sharing its support services with other districts or through an intermediate school district.
East Grand Rapids Public Schools had a private company providing its food service. The district decided to end the contract and entered into a food service sharing agreement with Grand Rapids Public Schools. The difference between the previous food service director’s management fee and the district’s share of the GRPS director is $140,000.
Comstock Park Public Schools had contracted out to clean two of the district’s buildings. Officials saw a drop in enrollment which allowed them to move their kindergarten and preschool children to a different building. With fewer buildings to clean, they were able to provide the services with existing staff. Officials expect this to save the district $44,000.
After several years of contracting out its food service to a private company, North Branch Area Schools brought its food service manager back in-house. The district expects to save money by dropping the company’s management fee and hiring a less expensive food service director, but final figures were not available.
Oscoda Area Schools decided to bring its food service back in-house in February. Believing that the contractor’s management fees did not justify the expense, the district began sharing a food service director with Tawas Area Schools. District managers estimate that this will save the district $115,799 for its first full year.
Pinckney Community Schools ended its transportation services contract and began busing its students through agreements with the Livingston Educational Service Agency. The superintendent said this allows him to maintain local autonomy and save money while being able to maintain flexibility and collaborate with other school districts. The district expects to save $174,073.
Armada Area Schools had contracted out the transportation director to a private company. The district decided to end the contract with the private company and add the positions responsibilities to a bus dispatcher’s duties.
Graphic 8
|
Districts that brought services back in-house |
Service |
Savings |
|
Pinckney Community Schools |
Transportation |
$174,073 |
|
East Grand Rapids Public Schools |
Food |
$140,000 |
|
Oscoda Area Schools |
Food |
$115,799 |
|
Comstock Park Public Schools |
Custodial |
$44,000 |
|
North Branch Area Schools |
Food |
Insufficient documentation |
|
Baraga Area Schools |
Custodial |
Insufficient documentation |
|
Stockbridge Community Schools |
Food |
Insufficient documentation |
|
Armada Area Schools |
Transportation |
Insufficient documentation |
Districts contract out beyond food, custodial, and transportation. Every service above saw an increase from last year. This year’s survey also included a new question on maintenance services, though these services are often provided when districts contract out for custodial services.
Many of these services are provided by an employee leasing company that manages the employees and handles the payroll. Contracting out for these positions can save significant money because districts are not required to contribute to the state school employee retirement fund.
Aside from these services, school districts will also often contract out for security, special education, administrative, secretarial, technology and mechanical services among others.
Districts often provide these services in conjunction with others. For instance, district coaches and substitute teacher services may be provided within its teacher contracts and lawn care may be a part of custodial services. Data above represent district-reported private provision of services.
A majority of Michigan’s school districts are satisfied with its contractors. Districts that are unsatisfied with their contracts often end the contract and bring services in-house or re-bid the service and hire a different company. Unsatisfied with the custodial services provided by their previous contractor, Southfield Public Schools re-bid its contract and are now satisfied with its custodial service provider.
Many of the districts new to contracting reported they were unsure or refused to answer whether they were satisfied with the service or not. These districts didn’t feel confident enough to give a solid answer given the short duration the service had been contracted out.
Over the years of performing this survey districts dissatisfied with their contracted service have been rare. Districts satisfied with their private contractors have been between 88 percent and 90 percent over the last four surveys.
Graphic 9: Satisfaction From Outsourcing
While a district’s satisfaction is often due to financial considerations, service quality as measured by satisfaction measures can be used as an important metric when considering best practices in school management.
Gov. Jennifer Granholm has encouraged school districts to share services with each other, and Rep. Tim Melton has introduced House Bill 6488 that would create a commission that can mandate service consolidation. This year’s survey checked on whether districts have been sharing services without additional prompting from state government. The survey found that Michigan school districts share a wide range of services.
Food services are a commonly shared service, with 52 districts participating in food purchasing blocks or by sharing a food service manager. Okemos Public Schools, for instance, shares a food service manager with Springport Public Schools.
Portions of transportation services are also frequently shared, with 124 districts reporting that they share facilities and services. Districts often share their bus garages with other districts and split repair costs. Others work with each other and their ISDs to transport athletes, take students to special events, and provide special education. Bloomingdale Public Schools, for instance, contracts out for bus maintenance with Gobles Public Schools.
Shared technology services are also commonplace, with 85 school districts sharing network maintenance, software purchasing, infrastructure, or technology supervisors.
Many school districts also work with each other in a number of business services, including sharing a business manager or chief financial officer, accounting services, principals, superintendents, labor agreement negotiators, secretaries and payroll services. Districts also frequently join together to get discounts on purchases and to lower transaction costs. There were 146 districts that reported sharing some of their business services.
Other services shared with districts are special education services, psychologists and counselors, maintenance staff, among several others. Sharing services allows smaller districts to tap specialists that it might not be able to employ by itself. The Kaleva Norman Dickson School District and Bear Lake Public Schools share a part-time speech aid and a special education aid.
Districts have largely shared services when the opportunity arises. However, few districts reported that they use another district or an ISD to provide for all technology, business, food or transportation services.
Lawrence Public Schools has been contracting out two of its seven custodial positions since 2009. This meets the definition for having contracted out services and figures for 2009 have been revised to reflect contracting out this service.
Wayland Union Schools has been contracting out for a food service manager. Records for 2008 forward have been updated.
Ann Arbor Public Schools has not been contracting out regular custodial services. This district uses a private contractor for custodial substitutes, which does not meet the definition of a regular custodial service.
Muskegon Heights Public Schools contracted out its custodial management to an employee leasing firm prior to the 2009 survey.
Reading Community Schools has been contracting out its transportation supervisor, a cook and a custodian with an employee leasing firm since 2007.
Algonac Public Schools contracted out two custodial service providers through an employee leasing group.
Concord Community Schools has been contracting out for its custodial and transportation service manager since 2005.
A map of privatization in Michigan school districts is available in .pdf form by clicking the graphic below.
