ISSN 1092-7999 A Publication on Privatization Initiatives Throughout the State • Mackinac Center for Public Policy • No. 2005-01 / Fall 2005 • Survey: School Outsourcing Grows • Privatization Update: Hamtramck • Competitive Sourcing on an Individual Basis • Privatizing Libraries • State Park Privatization and more! Mackinac Center for Public Policy Michigan Privatization Report • Fall 2005 When you contract the operation of your HOW TO water or wastewater facility to Earth Tech Operation Ser vic es, you save money. Often lots of money. Supply costs are reduced through process optimization. Costly equip ment repairs are LOWER minimized through aggressive preventive main te nance. Labor costs are reduced through im proved employee utilization. We handle tough regulatory issues and take EXPENSES re spon si bil i ty for the com pli ance of your facility. Your satisfaction is guar an teed. Call 1-800-748-0199 for a free eval u a tion and see how easy lowering your expenses can be. 800-748-0199 E 5555 Glenwood Hills Parkway, S.E., Grand Rapids, Mich i gan 49512 Being an informed citizen Editor: Chris Bachelder Senior Managing Editor: Michael LaFaive has never been Graphic Designer: Daniel Montgomery Michigan Privatization Report is published biannually by the this easy. Mackinac Center for Public Policy, a nonprofit, nonpartisan, tax-exempt research and educational organization devoted to analyzing Michigan public policy issues. Michigan Privatization Report is distributed to state senators and representatives and policy staff; department directors and staff; municipal officials and administrators; school superintendents and school board members. Additional copies are sent to Michigan radio and television news directors, print news editors and select industry leaders. Total circulation is over 22,000. Copyright © 005 by the Mackinac Center. All rights reserved. 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Michigan Privatization Report • Fall 2005 Mackinac Center for Public Policy A Publication on Privatization Initiatives Throughout the State • Mackinac Center for Public Policy • No. 2005-01 / Fall 2005 8 12 FEATURES Booking Privatization: Governing by Network: 4 Why Not Privatize The New Shape of Survey: Government Libraries? the Public Sector School Outsourcing Grows Public libraries are fixtures in many A book review of “Governing by Net- School districts face the same cost communities across the state, yet work: The New Shape of the Public pressures as companies in the Sector” by Stephen Goldsmith and private sector in trying to deliver William D. Eggers. a quality product at the best price. Michigan schools are contracting 16 out more ancillary work than ever before, according to the Mackinac many are struggling recently to fund ‘End of the Line’ for Amtrak Center for Public Policy’s 3rd bien- their operations. Officials at both Subsidies? Think Again nial school privatization survey. the state and local level may wish to Despite promised reforms, Amtrak consider some private alternatives to has never turned a profit in more strictly government libraries. 5 Competitive Sourcing on an 9 Individual Basis State Parks Privatization Outsourcing is a fact of life in public The State Park System today has schools. Big contracts with private, expanded into something quite dif- than three decades of operation. ferent than what lawmakers envi- Since 997, Amtrak has absorbed sioned when the system was created more than $6.5 billion in govern- in the early part of the 0th century. ment subsidies. Privatizing the Generating revenue was never the service could mean better service original purpose, and the State Park and additional revenue for the gov- System will ultimately be stronger ernment. for-profit vendors in areas such as if it is comprised of only parks that food service often get the most at- represent the most important natural tention, but districts are starting to and historic treasures of our state. increase their focus and contract out DEPARTMENTS for individual positions. 10 13 Privatization Means AROUND THE 7 Significant Savings STATE Hamtramck Update: Will City Jeff Siegel, superintendent of the An update of Thrive Without Emergency Berrien County Intermediate School privatization District, made the case in April for initiatives, op- Financial Manager? competitive contracting in the St. portunities and Seasoned business executive Louis Joseph Herald Palladium. controversies Schimmel recounts his experience from around the as Emergency Financial Manager for Great Lakes State. the city of Hamtramck. ADVERTISERS: Earth Tech Operation Services 2 MichiganVotes.org 2 Educlean Services 6 Mackinac Center for Public Policy Michigan Privatization Report • Fall 2005 3 Features Survey: School Outsourcing Grows by Michael D. LaFaive Only eight districts reported no services reports that contracting with and Daniel J. Smith savings, but this number should be Chartwells, a popular food service interpreted carefully. Over the years company, has meant that “We are bet- School districts face the same some districts have reported to us that ter off and the students are better off.” cost pressures as companies in the they didn’t care about saving money as According to Loock, the district went private sector in trying to deliver a much as they were seeking to get out of from paying a $00,000 subsidy to the quality product at the best price. One a particular business — such as busing food program to posting a profit of up method used by firms in both the — so they could concentrate on their to $5,000 after Chartwells took over. public and private sectors to achieve mission of educating kids. He also added that Chartwells gave According to greater efficiency is the outsourcing of them a better quality food product and Loock, the ancillary business operations. Michi- The most significant barrier to more selections. gan schools are contracting out more privatization, according to 5 percent district went nonessential work than ever before, of those respondents willing to answer Notably, food service for the en- from paying according to the Mackinac Center for this question, was employee and union tire Iron Mountain school district in a $100,000 Public Policy’s 3rd biennial school Dickinson County is provided by the privatization survey. 44-student Dickinson Area Catholic subsidy to the Outsourcing School. The public school district is by Michigan School Districts food program This year the Mackinac Center reportedly happy with their services, successfully interviewed a represen- though not surprisingly they can’t get to posting a tative from every one of Michigan’s meat on Friday during Lent. profit of up to 55 school districts to determine how $25,000 after many of them use outside vendors 31% 35.5% While the purpose of this survey for three primary noninstructional in 2001 in 2005 was to specifically investigate contracts Chartwells services: food, janitorial and busing. 34% that districts held for basic noninstruc- took over. The number of districts that contract in 2003 tional services, we found that many out rose from 34.0 percent in 003 to districts are using competitive con- 35.5 percent currently. Today, 96 of tracting in other areas. For example, the state’s school districts outsource at School districts around the state of Michigan the Birmingham Public Schools main- least one of these three functions. are finding that outsourcing services such tains a comprehensive list of more than as janitorial, busing and food operations helps schools meet their budgets and direct 60 services for which it utilizes outside By far the most popular area of more dollars into the classroom. contractors. The district is saving more school privatization is in food services: than $50,000 annually by outsourcing 56 Michigan school districts (over 8 80 percent of its lawn mowing needs percent) contract out with a private opposition. This opposition should not from April through November. company for some type of food service surprise even the most casual observer. delivery. While janitorial outsourcing Members pay hefty dues to unions Done correctly, privatization occurs much less frequently than in the that fight the type of competitive bid- can and does save money and often food services arena, there is a grow- ding that has saved many districts improves the quality of services for ing interest in it. Janitorial services money while improving services. The school districts willing to adopt this are now outsourced in 8.7 percent of Michigan Education Association has cutting-edge management technique. districts, up from 6.6 percent just two long opposed contracting out, even Best of all, the savings realized can be years ago. though it has in the past contracted invested in efforts that more directly for various support services at its own impact the classroom experience of The survey also asked respondents headquarters — and in some cases with our children. MPR! about whether outside vendors had non-union firms. Michael D. LaFaive is saved the district money, if the dis- director of fiscal policy, trict was satisfied with its contracting On July Kent City schools be- and Daniel J. Smith is a experience, and what barriers (if any) came the most recent district in the research assistant, both existed to thwart privatization. Almost state to privatize its food service pro- with the Mackinac Center for Public Policy, a 80 percent of the districts reported gram. Another addition to the Center research and educational institute headquar- savings through privatization, though survey is the Avondale school district tered in Midland, Mich.