Clare Schools Using Privatization to Keep Teachers

Clare schools Superintendent Thomas Moline and his colleagues on the Clare Board of Education have been working to close a projected operating deficit of about $500,000 for the next fiscal year. But unlike many school districts struggling with budget deficits throughout Michigan, Clare has its priorities in order.

While other districts have laid off teachers — the lifeblood of the education system — without first assessing the savings and benefits to be realized through outsourcing non-educational services, Clare has outsourced its food service operations to Chartwells, Inc., of Ada. And the district is giving serious thought to seeking competitive bids for providing health insurance to district employees, instead of accepting the extremely expensive coverage offered school employees through their union. These moves are designed to keep teachers teaching in Clare.

Moline has been superintendent for only two years. Shortly after beginning work he discovered that the wages and benefits of non-teaching staff were unusually generous and expensive relative to nearby school districts. He also recognized that his district was going to be facing a serious cash deficit that would have to be addressed. Moline decided early to make every effort he could to protect educational quality by keeping teachers in the classroom. This decision led him to the idea of privatizing school food services.

Clare schools already had a working relationship with Chartwells — it had contracted with the company for a food service supervisor for 18 years. Moline contacted Chartwells in March of this year and asked what the company could do for the district if it ran the program from top to bottom. Moline was pleased with Chartwells’ plan for savings — but he wanted to be sure he was getting the best service for the taxpayers’ money. He opened an official bidding process but found no competitors who could beat Chartwells’ bid.

On April 21, 2003 Moline took the Chartwells offer to his school board for debate and approval. On May 5 the Board was scheduled to take public comments on the proposal and vote to approve or refuse the Chartwells offer.

The hearing was not pleasant. Some school district employees vehemently objected. So contentious was this opposition that the Board voted to delay its vote on the matter until May 19 to reconsider. But despite continued opposition to the proposal by union activists, the contract was approved.

Chartwells is expected to save the district $180,000 in its first year on the job, which is enough to save as many as four teachers’ jobs. Chartwells will not only make and serve food, but also take over personnel duties, including background checks on food service employees.

According to the 5-year contract, the price of lunches will not go up. Indeed, Chartwells says it will make its profit by increasing student lunch participation. Chartwells will offer five meals to choose from each day, as opposed to the single one previously offered by the district staff. And if Chartwells increases student participation in the lunch program from the current 30 percent to 70 percent, as it expects to do, the district will be allowed to keep $50,000 of the additional revenues generated, for total savings of $230,000. This is enough revenue to cut the Clare district’s current operating budget deficit nearly in half.

The ability of Chartwells to operate less expensively isn’t hard to understand. It has advantages that the district does not have, such as the ability to pay wages and benefits more in line with private sector.

Moline is also debating whether or not to contract out for health-care benefits. Currently, the district health benefits package is provided the Michigan Education Special Services Association (MESSA), which is subsidiary of the Michigan Education Association, the school employees union.

In July, Moline contacted Gregory Bailey of Bailey Insurance in Royal Oak to discuss alternatives to MESSA. Bailey has two decades in the health insurance business and has experience competing with MESSA in other school districts. On July 28 Bailey presented options to the traditional MESSA benefits package to Moline, the Clare Board of Education, and members of the public. Bailey showed he could provide an alternative to MESSA that offers superior benefits and save the district a minimum $165,000 annually – enough to save another three or four more teachers’ jobs. The final decision on whether or not to competitively contract MESSA benefits has not yet been made.

If every district in Michigan would do the same it could save schools more than $90 million per year, which could go a long way toward solving budget problems without laying off teachers.

Tough times can call for tough decisions. Superintendent Moline and his school board have made difficult calls against strenuous opposition. As a result, Clare parents can take some comfort in the fact that their children’s teachers will remain in the classroom, rather than in an unemployment line, and that an anticipated half-million-dollar deficit has been eliminated.

Michael LaFaive is senior managing editor of Michigan Privatization Report and director of fiscal policy for the Mackinac Center for Public Policy.