How Much Privatization is Too Much?

The extent of privatization is one that is hotly debated as budgets continue to be strained and legislators and elected officials are constantly putting pressure on school administrators to give more attention to privatizing school services where and when possible.

Contracting out food, janitorial, landscaping, or transportation services to an outside vendor shifts the business equation from the district to competing private firms. Private firms have incentive to compete on price and quality, and thereby offer a more efficient model than could ordinarily be produced within the school district itself. Some criticize private industry’s ability to do so.

Privatization, a term attributed to management pundit Peter Drucker, doesn’t just produce benefits through cost savings, but also by reallocating fiscal resources so that they may be put elsewhere within a school system — namely instruction. If you can save money on your food services, you may have more in your budget to pay teachers a very competitive wage and therefore recruit and retain them.

Competition Has Dividends for Schools

Savings that can be recognized by privatizing another service such as transportation or landscaping can be used to fund educational field trips and other events that directly impact the learning experience of the children. So, even if privatization doesn't result in a lower operating budget, it indirectly improves the quality of the education at the school.

Transportation, food service, and janitorial services are the three areas most often considered as targets for privatization. The reasons usually revolve around the fact that there is enough competition in these industries to attract interest in a request for proposal when the district goes out for one. With more interest, they’re pressure to be competitive and provide a quality product, thereby benefiting the district.

In Long Beach, CA, the New City Public School is a charter school run by Ted Hamory, who entered education in the“Teach for America” program where he taught k-5 classes in the underprivileged area of Compton, CA.

Hamony’s school recently investigated the contracting out of their food services. When they issued a request for proposal, they received for responses. They whittled the field down to three vendors, and are in the process of selecting one with an intention of providing a quality, healthy lunch to students at his school. According to Hamony, it should result in approximately $70,000 in savings. He believes this action is beneficial to the school as well as the supplier.

Another benefit of the privatized service is the fact that environment influences learning. Turning over food services creates an environment that is more amenable to a healthy lifestyle and that has an impact on their educational experience.“That’s the only reason to do it,” says Hamony who is very big on privatizing for its long run benefit to the pupil.

Political Climate

In Massachusetts and Connecticut, certain services such as transportation have been privatized for many years, explains Michael LaFaive, of the Mackinac Center for Public Policy in Midland, MI. LaFaive says that approximately 90 percent of the busing in certain New England states has been outsourced to a private vendor. He feels that it is just a part of the school administration’s culture as it is the way business has been conducted. He also points out that Michigan outsources about 30 percent of some type of foodservice in public schools.

According to LaFaive, culture plays a big role in the propensity of a district to privatize. If a district has a labor heavy staff for a functional area, and has had that staff in place for many years, it is more difficult for change to be implemented.

While New England states may have embraced privatization, Michigan struggles to reach a satisfactory consensus among its constituents that privatizing is the way to go.

Michigan's governor, Jennifer Granholm, a Democrat, has been in office for about five years and opposes privatization. She contends that her state government has been cut to the bone and that it is necessary to maintain a workforce of dedicated public servants. Her comments came upon her introduction of one of the largest state budgets in the state’s history and the introduction of new service excise tax of about $1.5 billion to pay for it.

According to Michael LaFaive, Michigan has experience at deep recession and the state gross domestic product has been one of the lowest in the nation. Because of this recession, taxpayers and parents are looking to municipal entities such as school districts to take proactive measures to reduce their costs and not strain their existing tax burden. Therefore privatization is often in the limelight.

The Mackinac Center has estimated that the outsourcing of custodial services in Michigan Schools could save from between $100 and $200 per pupil, yet only 63 of 552 districts have done it.

LaFaive, also points out that Michigan residents are about to be made aware of future entitlements to be paid to school staff upon retirement. This information hasn’t been amplified previously, and should stir up the ire of citizens as it puts a tremendous burden on their budget. LaFaive says that this should greatly strengthen the interest and attention for privatization in Michigan schools.

Privatization doesn’t always have to be a drastic redesign of the district’s work force though. For many schools, privatization might be as simple as finding a technology solution from a Web-based vendor who can provide a simple service to lighten the workload of IT staff or other school staff.

The Sharon Public School System in Sharon, MA, has recently begun to outsource some technology resources. "We began with our Special Education Individual Education Plan database that is currently provided by an application service provider (ESPED) through the World Wide Web;" explains Leo Brehm, their director of IT. "So far, this has been a successful implementation and scenario for delivery of database services to our Special Education staff. While seeking a work order management system for maintenance and resource scheduling, we came across," says Brehm. “We have found their application service to work very well and about 18 months ago started to use their IT work order management system and recently their IT asset management tracking application."

In the future, privatization is likely to depend upon the consensus and sentiment of taxpayers, parents, and anyone else with a vested interest in how their tax dollars are spent. In that vein, legislators and elected officials at the local and state level will likely be opposed to stir up the debate of privatization. As many states continue to be very fiscally strained, there's little reason to believe that privatization will be a topic that is not discussed at public meetings in the years ahead.

Critics of Privatization

With the many arguments in favor of privatization, there are arguments that oppose it in these arguments have substance. Privatization is always accompanied by resistance from professional associations and unions. The American Federation of State, County, and Municipal Employees (AFSCME) is very proactive in opposing privatization. They have ready public relations materials and lobbying efforts to oppose privatization as it greatly affects their members and the jobs and livelihood of those members. The National Education Association also overtly opposes privatization and has prepared statements and fact sheets as to why privatization doesn't make sense.

In reports and statements that they put out, they contend, "contracting will cost more than advocates claim is in direct and hidden costs of service delivery are often ignored. Such costs include contract monitoring and administration, conversion costs, charges for extra work, and the contractors’ use of public equipment and facilities."

They also have amassed a number of examples of how privatization did not work for various schools systems around the country. For example, they cite a case in New Jersey where a building services firm that provided maintenance service for school system, failed to provide background checks and fingerprinting of all employees. When their records were audited, it was discovered to that 25 percent of the contractors and employees had a criminal background. This was brought to the forefront when workers were caught stealing laptop computers from one of the schools.

In New Orleans, the school district terminated its contract with a firm that provided janitorial and custodial services because of the poor quality of the work provided by the firm and rising costs that they were charged. There were many complaints against the contractor including human feces having been found in mop sinks in the gym area.

The report goes on to cite numerous examples to make their case and these examples are meaningful in that they show that privatization is not always the panacea that it's made out to be.

LaFaive believes that privatization is a healthy approach to school services as the profit motive of a private firm is more likely to result in a better public good for the schools.

"Government schools do not exist for government employees," says LaFaive. "They exist to educate children."