News Story

School Union Denounces "Dangerous Trend" Toward Private Food, Busing and Janitors

The Southfield Public Schools last fall began using private contractors to provide food, transportation and janitorial services. It is estimated that this will save the district between $14.7 million and $21.5 million over a three-year period — or an annual savings of $557 to $814 per pupil. This comes in an environment when falling state revenue projections are forcing the governor to request a reduction of $59 from the state's per-pupil foundation allowance in her fiscal 2010 budget recommendation. 

For several years, the Mackinac Center's Fiscal Policy Initiative has tracked privatization of non-instructional services at public schools. The Center's 2008 survey found that 40 percent of Michigan school districts contract out for at least one of the three big services: busing, custodial and food. Southfield's projected savings for doing all three is not a surprise, as the Mackinac Center's surveys have indicated that privatizing just one support service can lead to annual average savings of more than $20 per-pupil for food, more than $135 for janitorial and more than $220 for transportation.

Privatization's timely injection of fiscal relief is still available and yet unused by a majority of the state's 551 school districts, in large part due to pressure from the Michigan Education Association, the state's largest public school employee union. In December, the MIRS Capitol Capsule newsletter (www.mirsnews.com - subscription required) published a story about Southfield, characterizing its new arrangement as "one of the most comprehensive privatization schemes in the state." An MEA spokesperson called it part of a "dangerous trend" and noted that the union sends "directors and consultants" and "all the resources we can possibly provide to fight the battle" against districts wishing to privatize.

One MEA tactic is to launch recalls against school board members that vote to hire private contractors. Such an attempt failed in Southfield due to lack of sufficient recall petition signatures.  A similar effort against four Reed City board members succeeded during the Nov. 4, 2008, general election, despite the fact that the anticipated annual savings of $300,000 was used to hire three new teachers. Prior to privately contracting for food and custodial services, the Reed City district's projected expenses were exceeding revenues by $890,000.

The recall ballot language used by the MEA against the board members avoided listing the privatization vote as the reason. Instead, it cited their approval of the superintendent's contract; a baseless allegation that they had not cut administrative pay; and a subjective accusation that they did not consider input at board meetings. What may have been intended as an effort to deflect attention from the real issue worked on Election Day, but just barely: The average vote in favor of recalling each of the four was just 51 percent.

The hostility regarding privatization savings has also spread to the state Capitol. The MIRS story quotes state Rep. Rick Jones, R-Grand Ledge, as saying he believes that schools are more dangerous when they contract with the private sector. Last legislative session, Jones and state Rep. Jeff Mayes, D-Bay City, co-sponsored a package of bills that would have placed more restraints on the ability of districts to privatize.

On the other hand, Michael LaFaive, director of the Mackinac Center's Fiscal Policy Initiative, told MIRS that contractors winning competitive bids will often provide more sensitivity to safety and other concerns because they know that their contracts will expire if they do not keep school boards and administrators happy: "Now they've got a person at a private company saying, 'What can I do for you today?'"

The Jones and Mayes bills had co-sponsors from both political parties, but the bills were not considered in the 2007-2008 session of the Michigan Legislature. As of this writing, neither lawmaker has re-introduced these bills for the 2009-2010 session. However, state Rep. Fred Miller, D-Mount Clemens, has introduced House Bill 4219, which MichiganVotes.org says would "repeal a law that prohibits teachers unions from bargaining to get a school district to agree to not privatize non-instructional support services including bus, custodial, or food services, even if doing so would save the district money." State Rep. Doug Bennett, D-Muskegon, has introduced House Bill 4584, which MichiganVotes.org says would "prohibit the privatization of any school function if the savings are less than 10 percent compared to the cost of school employees performing the same function."

The contact information for all lawmakers may be found here.

Ken Braun is the senior managing editor of Michigan Capitol Confidential. He may be contacted at author@mackinac.org. For further information and an opportunity to comment on this issue, please see www.mackinac.org/10424.

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.

News Story

Property Tax Protections Assaulted Again by House

Eleven GOP members vote to undermine Proposal A

On March 24, for the second time in four months, the Michigan House voted to allow public school districts to hold elections for so-called "sinking fund" millages so as to increase the amount of money taken for operating expenses (see: "Sneak Attack," January/February 2009 Michigan Capitol Confidential). Currently, as a result of passage of Proposal A in 1994, school district operating expenses are funded on a per-pupil basis from the state's School Aid Fund, which is itself funded through a combination of earmarks from the state sales tax, the personal income tax, an education property tax, business taxes and more. According to the Michigan House Fiscal Agency, FY 2008 funding ranged from a minimum of $7,204 per pupil to a maximum of $12,387. Now at $13 billion per year, the SAF is the largest single expenditure of state government.

According to Michiganvotes.org, House Bill 4313 would "allow school districts to levy up to three mills for ten years to buy or fix school buses, and to buy computers" and that "the tax increase election would be either on May or November election days." Under Proposal A, school districts may hold bond elections to construct or make improvements to buildings. Sinking fund mills are currently an extension of this power, allowing districts to put away money to pay principle on those bond debts and to make capital improvements — but not for operating expenses such as school buses and computers. One original justification for Proposal A, approved by 69 percent of Michigan voters, was to put an end to local millage elections for operational funding by creating the SAF's large pool of foundation allowance money at the state level.

Proposal A's constitutional protections against a return to these local millages are such that some legal experts believe that it would require a three-fourths supermajority vote in both chambers of the Legislature to reinstate the millage votes. If true, this would require 83 votes in the House of Representatives, but HB 4313 received only 74 favorable votes on March 24.

According to the HFA, fewer than half of Michigan's school districts now have sinking funds and more than 80 percent of those districts levy less than 2 mills, rather than the 5 mill legal maximum. The Michigan Chamber of Commerce, a staunch opponent of HB 4313, notes that if the use of sinking funds is expanded to operational spending, then there will be a powerful incentive for many more districts to hold sinking fund elections seeking much higher property taxes.

Calculating the potential impact of the sinking fund expansion that the House approved in December 2008, the Michigan Chamber warned that it could lead to property tax hikes of $3.2 billion to $7.6 billion. While the version of HB 4313 passed by the House is restricted to spending on buses and computers, and was thus slightly more limited than the 2008 version, the business group's opposition to expanded taxing power remained high.

"Since 1994," noted a Michigan Chamber statement before the HB 4313 vote, "school funding for operations is up 99% and school debt funding (like sinking funds) is up 269%! It seems logical that administrators should be able to run their districts without trying a sneak attack on taxpayer's wallets." Elsewhere, the Michigan Chamber noted that total inflation was up only 33 percent from the passage of Proposal A in 1994 until 2007.

Demonstrating the seriousness of the hostility to HB 4313, the MIRS Capitol Capsule newsletter noted that the "story in the House is that the Michigan Chamber of Commerce has basically told Republicans that anyone on the GOP side of the aisle who votes yes on HB 4313 can expect to have the Chamber oppose them in future primaries." Ultimately, 11 Republicans decided to do just that. Other business groups opposing HB 4313 included the Detroit Regional Chamber of Commerce, the Grand Rapids Chamber of Commerce, the National Federation of Independent Businesses, the Michigan Manufacturers Association and the Michigan Association of Realtors.

Rep. Tonya Schuitmaker, R-Lawton, one of the Republicans to vote for the proposal, compared the spending of additional tax dollars by schools to spending by businesses.

"I see it very analogous with companies that need capital improvements for technology," she told MIRS.

Rep. John Walsh, R-Livonia, noted that he initially favored HB 4313, but then turned against it due to "overwhelming" opposition when he pitched the idea to his local businesses.

Another opponent, Rep. Phil Pavlov, R-St. Clair, made note of Michigan's rapidly falling home prices and wondered how raising taxes on those homeowners would bring about better public education.

The Michiganvotes.org vote tally for HB 4313 is below. The bill is now before the Senate Finance Committee, chaired by Sen. Nancy Cassis, R- Novi. See Who Are Your Lawmakers? for contact information on your legislators.

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Ken Braun is the senior managing editor of Michigan Capitol Confidential. He may be contacted at author@mackinac.org. For additional information and an opportunity to comment on this legislation, please see www.mackinac.org/10424.

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.