News Story

70 Percent Of Michigan Schools Outsource Noncore Services

The number doubled from 2001 to 2014, but then stopped rising

A recent survey found that 70 percent of Michigan’s school districts outsource one or more noncore services to private contractors, primarily those providing food, custodial and transportation services. The number is up dramatically from the 31 percent of districts that reported using privatization in a similar 2001 survey.

The surveys have been conducted in most years since 2001 by the Mackinac Center for Public Policy.

“The 2018 privatization survey found that 70.5 percent of Michigan’s school districts — 380 of the 539 districts in the state — contract out for food, custodial or transportation services. This is a slight decline from 2017, when the number was 71.1 percent,” the report concludes.

But after many years of significant increases, 2018 is the fourth year in a row in which the privatization rate has stagnated, hovering at around 70 percent. It is unclear why the rate has stopped growing.

Cost savings are not the only reason districts outsource services. John Fattal, superintendent of Corunna Public Schools, said the district contracted out food services after the former food services director left.

“We’re a small district and it’s hard to keep things stable when you lose a good person,” said Fattal, explaining that the decision to contract out was made to ensure stability and the continuity of service.

Fattal said the arrangement is working well for the Shiawassee County district, and “it’s a little bit more expensive right now, but quite honestly, it’s too early to tell.”

Districts continue to report high levels of satisfaction with privatization; 95 percent report they are satisfied with their vendors.

When they are not satisfied, districts can bring outsourced services back in house. Most that have done so reported it was largely for quality reasons. Only one district has brought services back in house with the aim of saving money, according to the survey.

Some districts have moved to share the management of outsourced services with other districts. At Center Line Public Schools in Macomb County, Food Services Director Theresa Elya said that’s what her district did at the urging of the state several years ago. Center Line also oversees food services at Eastpointe Community Schools.

“It is a definite savings for the district that is getting the service,” said Elya. “It is definitely a lot of work for the one doing the service.”

Privatization of school support services has increased from being something rare in 2001 to a common practice by 2015, according to the survey. The proportion of districts that contracted out food, custodial or transportation services increased from 31.0 percent in 2001 to 69.7 percent in 2015.

The Mackinac Center’s fiscal policy director James Hohman is a co-author of the report. “Privatization moved from a rarity to something practiced by a majority of school districts in Michigan,” he said.

Hohman offered an explanation for why the growth of school outsourcing has slowed: “A better economy has tightened the labor force and provided school districts with more revenue, but it also has slowed the growth of contracting,” he said.

Michigan’s unemployment rate declined from 14.6 percent at the height of the Great Recession to the current 4.0 percent, according to the U.S. Bureau of Labor Statistics.

“Insourcing may be a sign that a district’s financial condition is improving,” according to the survey.