School Support Service Privatization: Saving Money, Improving Quality

1. School Support Service Privatization: Saving Money, Improving Quality July 22, 2014 By Michael LaFaive Director, Morey Fiscal Policy Initiative

2. Mackinac Center for Public Policy 26-year-old “think tank” Public policy research Fiscal Policy (Budget, Tax, Privatization) Education, Labor and Healthcare Mackinac Center Legal Foundation

3. State Policy Network

4. Directory of Tanks

5. Michigan Privatization Report

6. A School Privatization Primer • Contains survey research of school support service privatization; • Contracting “How-to”; • Opposition to Privatization • Arguments of Opponents • Actions of Opponents

7. Survey Research 2001-2013

8. Privatization • Peter Drucker and Bob Poole • Outside of U.S. – Selling SOEs • United States • Selling assets (Elk Hills/Worker’s Comp); • Competitive contracting (Prisons, golf, garbage and school support services; • Public-Private Partnerships (Central Park).

9. Conventional Public Schools • School teachers make up single largest group of government employees;* • Teachers’ Aide’s rank second;* • Despite large numbers school support staff still make up large percentage of workforce; • Michigan: 37 percent of school employees non-instructional, down from 47 percent in 2007.

10. Conventional Public Schools • Nationwide, no detailed, central source of support service contracting data; • There are exceptions but typically lack detail of state-focused surveys;

11. Conventional Public Schools Survey Research • Alabama (2014) • 16 percent of 121 responding districts contract out for 1 of 3 services • Only 5 school districts — 4.1 percent —contract for busing; School Bus Fleet recently informed me that 30 percent of nation’s buses owned or operated privately (same as in 2007).

12. Conventional Public School Survey Research • 2012 Report from the USDA’s FNS indicates 13.5 percent of CPS districts contract with a private company for services; • 2007 Mackinac Center national survey of all 50 state education departments pegged number at 13.2 percent.

13. Mackinac Center Annual Survey of School Support Service Contracting in Michigan • Most comprehensive, longest running in nation; • Typically enjoys 100 percent response rates from more than 500 districts; • Started in 2001.

14. Mackinac Center Annual Survey of School Support Service Contracting in Michigan • Project was created because of: • Passage of 1994 law (P.A. 112 of 1994); • Lawmakers and media would be interested in trends; • Schools spending wisely? • 40 percent of non-federal dollars in state budget goes to public schools. • Great “back-to-school” stories; • Stories from our reports might inspire other school officials to consider the contracting option.

15. Survey Results Outsourcing by Michigan School Districts ‘01-’13

16. Survey Results Districts Contracting for Food Services ‘03-’13

17. Survey Results Districts Contracting Custodial Services ‘03-’13

18. Survey Results Districts Contracting Transportation Service ‘03-’13

19. 2014 Survey Results (An Early Look) • 310 Districts successfully surveyed; • 195 (62.9 percent contract for at least one service; • Food (35.5 percent contract out) • Custodial (44.5 percent contract out) • Transportation (24.2 percent contract out)

20. Survey Results Analysis • Why such explosive growth? • P.A. 112 of 1994 took negotiation of competitive contracting for support services off the table. Discussing it was prohibited; • Michigan experienced a “lost decade” of growth from 2000-2009. (Only state with negative GDP growth).

21. Survey Results Analysis • Schools largely funded on per-student basis; as jobless fled state for work they took their children with them and money dried up on the margin. • Newly elected Gov. Rick Snyder introduced incentives for schools to reform spending. This may have driven competitive contracting rates higher;

22. Survey Results Analysis Satisfaction from Outsourcing 2013

23. Gratuitous Rim Shot

24. Opposition Union/employee opposition often fierce; Michigan Education Association (MEA) often referred to as M.O.M in legislature. “The whole ‘best practices’ clause is basically out-and-out bribing schools to do this for the extra $100 a kid…” -- Doug Pratt, Public Affairs Director, Michigan Education Association.

25. Privatization Test • Do bargaining units care more about teachers and kids than dues? • Redford Union $350k in debt; • Intended to lay off 8 teachers; • We offered to guarantee savings; • District chose to lay off teachers instead.

26. NEA Guide

27. Other Guides • The AFL-CIO’s 1993 publication, “The Human Costs of Contracting Out: A Survival Guide for Public Employees.” This guide reads, “It’s [sic] purpose, plain and simple, is to help you prevent, defeat or reverse decisions by your employer to contract out work.” • AFSCME’s monograph “Schools for Sale: The Privatization of Non-Instructional School Services.”

28. MEA Training Tape • “Do your best to split the board on crucial issues through contacts with individual board members or misrepresentation of the issues to the public through press releases. Attempt to carefully attack the credibility of the board negotiating team so that most of the board team’s executive sessions with their board will be spent answering board members’ questions about association charges and not with planning on upcoming negotiation sessions. • “Remember that large districts rely heavily upon the superintendent to absorb the flak. They use the superintendent as a shield. If he is discredited, the rest of the board suddenly feels naked, and they are often eager to take an escape route which the association has waited for the appropriate moment to offer. • “Use time as an ally. You know, if your negotiating team can get to bargaining sessions well rested, whereas the board’s team is harried and fatigued, keep negotiations going until 2 o’clock or 3 o’clock in the morning. Wear down the board physically and psychologically.”

29. Public School Bus, 2006