Free Market for School Services : Common Sense Prevails

Now this has always seemed to be rocket science, 'the free market will not work, if we don't have total control of all outcomes the system will fail'. Government overreach, whether local or federal, is like drug, once you have become addicted to having the power to control, it's nearly impossible to relegate that responsibility to others.

That Alabama is allowing the free market to solve problems bodes well for government recovery of common sense. Who knew?

Privatizing School Services in Alabama
Source: Daniel J. Smith and Robin P.K. Aguiar-Hicks, "School Service Privatization In Alabama," Manuel H. Johnson Center for Political Economy, Troy University, September 2014.

September 15, 2014

One fifth of Alabama's education budget goes towards non-educational services such as food, maintenance and transportation, adding up to $2,000 per pupil each year. Those services, write Daniel Smith and Robin Aguiar-Hicks of Troy University, represent a huge opportunity for cost savings.

Many states have begun privatizing non-teaching functions in their education budgets, saving money for their districts. Alabama, however, largely has not done so; in 2013, less than 16 percent of Alabama's 134 school districts contracted with private companies to perform these non-educational services.

Privatization, the authors explain, would allow private companies to bid for contracts with local school districts, offering to provide a service to the district (such as school maintenance) for a certain price. The competitive bidding process would allow schools to choose low-cost providers, without sacrificing quality. By contracting out auxiliary services, schools could not only see monetary savings but improved performance (as private companies can utilize economies of scale and are spurred by competition to perform efficiently), allowing school officials more time to focus on educating students.

Privatization has been successful in states across the country. For example, a study on school bus transportation in Indiana found that private companies were 12 percent cheaper than schools that ran their own bus services. Michigan has been a leader in privatization:

• Sixty-five percent of Michigan school districts contract out for some form of auxiliary school service, and over 92 percent of districts were satisfied with the results. Less than 4 percent were dissatisfied with their private service provider.
• Even with the costs of transitioning to private services, a 2012 Mackinac Center survey indicated that school districts new to privatization in Michigan expected to save $12.8 million, with 85 percent of districts reporting savings from privatization.
• Michigan's Gaylord Community Schools saved $100,000 in the first year alone when they contracted out food services. Over the following three years, they expected $1 million in savings.
• The Hastings School District in Michigan is also saving $100,000 annually by contracting out custodial work.

Alabama school districts, say the authors, can save money and provide better quality services by working with private companies.