News Story

Speed Bump in Way of School Savings Could Be Removed by Republican Wave

If a local school board wants to competitively bid out to a private business the work of driving its buses, serving its food or sweeping its floors, should a government employee union have the power to delay and sidetrack the bidding process? And should these unions be able to act as both a bidder for the work AND be able to set the ground rules for the bidding?

The tentative answer is "no," following a recent legal ruling that went against a pair of government unions. School boards hoping to realize substantial savings from hiring outside contractors now have more reason to believe that they can do so without fear of union obstruction. And because Republicans will soon to be controlling sizeable majorities in both chambers of the state Legislature and the governor's chair, it is possible that state law could soon and easily be changed to more definitively stop these practices from going on.

Allowing school district unions to micro-manage the business affairs of school boards in this way is at the heart of a unfair labor practice charge filed by government school employee unions against two Michigan school districts. The unions don't wish to relinquish these non-teaching jobs to private - often non-union and much less expensive - competition. But the school districts won an important victory on Oct. 1 in a hearing before Administrative Law Judge David M. Peltz of the Michigan Employment Relations Commission. 

The unions based their legal attacks on a recent change in state law that they believe allows them more authority to dictate to school districts how competitive bidding for non-teaching work should occur. The Lakeview Community Schools are being sued by an affiliate of the Michigan Education Association and the Mount Pleasant Public Schools are being sued by an affiliate of the AFL-CIO.

Prior to 1994, private businesses seeking to compete against the unions for these jobs could be artificially frozen out of the market because the union was permitted to negotiate a contract that banned the district from working with outside contractors. But the practice of inserting such restrictions into school union contracts was banned by Public Act 112 of 1994. Since then, a school board in Michigan has had what ALJ Peltz refers to as "extraordinary discretion in managing and directing its operations, including the right to subcontract non-instructional support work" without bargaining with unions at all.

An ever-growing number of districts have exercised this option as a means of saving money. An annual survey released by the Mackinac Center for Public Policy last December revealed that 44.6 percent of districts hired private businesses for at least one of the three most costly non-teaching services: transportation, food and custodial work.  This is up from just over 30 percent nine years earlier. Significant cost savings have been realized by many districts, but at the cost of lost jobs and thus union dues for the government employee unions that no longer have the work.

One good example of this conflict occurred in 2009 at the Southfield Public Schools. The district contracted out for food, janitorial and transportation services, with an estimated savings to taxpayers pegged at between $14.7 million and $21.5 million over a three year period. This savings would equate to between $557 and $814 annually per student, at a time when state government was considering a $59 reduction in the per-student payment for each district.

But while such dramatic savings would result in keeping more money directed at the classroom rather than to support services, the Michigan Education Association fiercely resists these changes. Commenting to the MIRS News Service (, an MEA spokesperson referred to the private contractors in Southfield as part of a "dangerous trend" and pledged that the union would fight such efforts with "all the resources we can possibly provide." The MEA has made good on this threat in some districts by mounting election challenges against school board members who support privatizing non-teaching jobs.

But last December, Public Act 112 was modified during an attempt to secure "Race to the Top" education funding from the federal government. Government school unions believed this change gave them a powerful new weapon to use against school boards seeking outside help for non-teaching services.

The new language effectively mandates that schools give unions an opportunity to compete for the work "on an equal basis as other bidders." If that is not done, then the law now allows for union contracts to include a prohibition on school board negotiations with outside contractors, effectively a return to the pre-1994 standard that made outside contracting much more difficult.

In their charges, government union lawyers asserted that unions - based upon them being fundamentally different from private businesses - could not submit bids in the same fashion. As such, the union lawyers stipulated that districts could not offer an "equal basis" bidding process unless the process allowed special bidding rules to advantage the unions. An example would be to give the union the right to submit a contract offer with wage or benefit concessions that would equal the best bid from any private contractor.

The school districts disagree, and allege that the practical effect of allowing the unions to help write the bidding rules is to allow them to drag out and delay the bidding process itself, thus making it far less likely that school districts - let alone any competent private business - would deem an attempt to outsource as worth the time and aggravation.

ALG Peltz ruled against the union claim, noting that nothing precludes unions from forming their own company to bid on the work on an equal basis as any other private business. He also cited an example from the Detroit Public Schools where precisely this arrangement was created. Peltz concluded that the new change to the law requires a "level playing field" for all bidders, but that it does not require school districts to even up the opportunities for winning a bid if a union isn't up to the task of competing.

Many legal and procedural squabbles are still to come following Peltz's ruling. While his decision went against the unions, it is just an early round in the battle they have mounted against the school districts. Including the two cases regarding Lakeview and Mount Pleasant, there are at least 18 similar suits that have been filed against other school boards, and more are expected.

However, Peltz's ruling does give school boards across the state a clear signal that they can continue to explore privatization savings with some reasonable expectation that courts will ultimately strike down these union charges aimed at delaying and micromanaging their business decisions. 

Additionally, the ultimate blow against the union charges would be for Lawmakers to reverse course and remove the change that they made last December. That provision was inserted into the law with the support of the generally more union-friendly Democrats holding control of the Michigan House and governor's office. But both of those supports were kicked out by voters during the November mid-term elections, leaving Republicans with a firm grip on power in the Michigan House.

If the new Republican governor and Legislature decided to let school boards know that the coast is indeed clear for privatization savings to continue again in earnest, they will have an opportunity to show it very soon.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.