 As many of you are aware, for at least two years now, the district has been examining whether or not to privatize our transportation department. This would mean laying off all our bus drivers, mechanics and their managers, selling our buses, and selling our bus maintenance facility. In lieu of having a district department that would provide this necessary service, we would contract with a private company that would provide the service for an annual fee. Overall, it appears that at least in the short term, some savings would be realized.
Our Sup't, Dr. Hawkins, is in favor of privatization. He wrote an opinion piece in the Courier singing its praises (not available online). Though I fully support a thorough investigation into all aspects of running our district more efficiently, and I support looking into ways to save money that don't impact the educational programs we provide, and I support Dr. Hawkins in the good job he does, I disagree with him on this issue.
I have been examining this issue myself for over two years. I have reviewed reams of material on the subject that range from pro-union / anti-privatization pieces, to conservative think-tank pieces by organizations such as the Mackinac Center. Having thoroughly analyzed the issue over a substantial period of time, I have become convinced that this is not a good option for us right now, and that the long-term risks of privatization far outweigh the guaranteed short-term benefits. Consequently, I am not likely to support privatization for our district at this time.
While analyzing all this information, I tried to distill the issues into a something more manageable, articulating the reasons to privatize, as well as the reasons to not privatize. Here's the list I came up with:
Continue reading . . .
As many of you are aware, for at least two years now, the district has been examining whether or not to privatize our transportation department. This would mean laying off all our bus drivers, mechanics and their managers, selling our buses, and selling our bus maintenance facility. In lieu of having a district department that would provide this necessary service, we would contract with a private company that would provide the service for an annual fee. Overall, it appears that at least in the short term, some savings would be realized.
Our Sup't, Dr. Hawkins, is in favor of privatization. He wrote an opinion piece in the Courier singing its praises (not available online). Though I fully support a thorough investigation into all aspects of running our district more efficiently, and I support looking into ways to save money that don't impact the educational programs we provide, and I support Dr. Hawkins in the good job he does, I disagree with him on this issue.
I have been examining this issue myself for over two years. I have reviewed reams of material on the subject that range from pro-union / anti-privatization pieces, to conservative think-tank pieces by organizations such as the Mackinac Center. Having thoroughly analyzed the issue over a substantial period of time, I have become convinced that this is not a good option for us right now, and that the long-term risks of privatization far outweigh the guaranteed short-term benefits. Consequently, I am not likely to support privatization for our district at this time.
While analyzing all this information, I tried to distill the issues into a something more manageable, articulating the reasons to privatize, as well as the reasons to not privatize. Here's the list I came up with:
Reasons to not privatize:
1. Once this is done, it will be practically impossible to undo. If we sell our buses, sell our maintenance facility and fire our management and labor in the entire department, undoing the decision at a future date will cost us millions. Consequently, each BOE member should be aware that we are binding the hands of future BOEs potentially for decades to come.
2. Nobody has shown that the savings will be permanent. It is clear that we can save approximately $500,000 next year, however, it is unclear whether these savings will continue to indefinitely constitute $500K in structural savings. The presenters at the retreat mentioned that when labor markets tighten up, we could see increased labor costs that would assuredly be passed onto the district. It could very well be that in just a few years that these savings will diminish, possibly substantially, providing little more than a modest benefit to the district after we have completely and permanently liquidated the assets necessary to continue providing the service.
3. Private corporations have a primary duty to maximize the value to their shareholders -- their duty to our district is secondary. If at any time in the future it becomes unprofitable or too costly to run our bus service, the private company can refuse to renew the contract and leave us with no buses, no maintenance facility and no employees. This would put us in an unfavorable bargaining position with other potential contractors who will undoubtedly be experiencing the same market conditions at the time.
4. Private employees can strike. Our current bus drivers can't. If this company fails to conduct proper negotiations with any union that represents the new workers, we bear the brunt of their failures.
5. When we give up our control, we give up predictability. Fifteen years ago, nobody would have believed that numerous major airlines and several large auto parts manufacturers would end up in bankruptcy. If ten or fifteen years down the line our contractor ends up in an insolvency situation, we will be left without buses, without a facility, without a staff, and without recourse to recoup any losses we may incur.
6. In the context of a $50 Million budget, privatization does not save us much money. The savings constitute a mere 10% of our projected budget shortfall next year. Privatizing does not solve our budgetary problems to any substantial degree, either on a one-time basis or on a structural basis. We will be cutting programs whether we privatize or not, and 90% of those cuts will be due to other issues, not due to transportation costs. This paltry contribution to minimizing our projected shortfall does not warrant such a drastic and risky change in the way the district serves the community.
7. The state is responsible for the financial issues that are causing our budgetary problems -- not us. The primary financial benefit that is gleaned from privatization (retirement costs, etc.) results from a state-created problem and should be dealt with by the state. It is unfair to our community to eliminate core district jobs and services for short term gain merely because our statehouse refuses to deal with this problem. This represents a band-aid approach that, if the state comes through in the end, we won't be able to undo.
8. We cannot spend the $600K + that we will get for our buses right away. We have been advised that we should keep that money in escrow in case we want to "undo" the privatization scheme. If we are sufficiently worried about failure that we can't reap the benefits of doing it now, we have no business moving forward with what appears to be little more than a risky experiment.
9. We don't get the benefits of all the savings. The savings we reap represents only a portion of the money saved. Some of those savings represent a profit margin for the company. Consequently, a significant portion of the money saved will go into the pockets of a private company and its executives, not toward enhancing programs here or reducing our projected budget shortfall.
10. We have not been provided with detailed data (only verbal statements and ballpark projections) concerning regionalization / consolidation / cooperation of this service. Governor Granholm is clearly moving in the direction of regionalization, and I would like to see hard data on what could be saved by combining operations between Willow Run, Ypsi and Lincoln. We can always evaluate what happens in this area and re-consider privatization next year.
11. We have not taken care to explore a number of other ways of saving money in the transportation department, such as increasing the distance from schools for which we will offer service and/or examining options with organizations such as AATA. If we are not doing a good job in this area, we need to work on doing a better job before giving it up to a private company.
12. Most of these savings will be at the direct expense of the drivers. For example, they will lose some or all of their state retirement benefits, and they will be offered an inferior health care plan. They will lose their union protections or have to re-negotiate them all over again. I recall when we discussed closing schools that we all bought into the concept that everyone must bear the brunt of cuts. In this instance, we are placing this burden disproportionately on the backs of our transportation workers.
13. Relations with our other unions will suffer. Union support for our current educational leadership will erode, morale will diminish, and all our other employees will begin wondering if they are next in line for privatization. We will not be able to count on support and cooperation with all the other challenges we face this year and in the future if we seek to divide our community in this way. The actual cost of failing to maintian a positive relationship is intangible and hard to put a value on.
14. We are taking this company at its word without a basis for doing so. The only knowledge the BOE has of this company and it's employees is that we met two representatives one time in a public forum. We don't have an established relationship with them, we don't know what it's like to work with them, and we are taking their word for a great number of things that are of great importance to our district.
15. The company we are considering has little to no track record in Michigan. The only place in Michigan this company has provided services was a small portion of Detroit, and their contract was not renewed.
16. We cannot afford another transportation breakdown. Just over 3 years ago, our district suffered a debacle when administration switched over to a new computer-based route system with little or no time to test and ensure it would work. Our transportation system broke down and was front-page news. If we privatize and this transition does not go smoothly, the loss of a mere 66 students will entirely wipe out the savings we stand to glean from the change.
Reasons to Privatize
1. Assured temporary structural savings of $500,000, at least for a year or two, perhaps longer, permitting us to eliminate about 10% of our predicted budget shortfall for next year and preserve some educational programs.
2. An additional $600K + when we feel comfortable accessing the bus money and using it, assuming the transition goes well and the contract works out.
3. Diminished responsibility for transportation due to delegation of duties to a private corporation.
So, in the end my analysis concludes that there are a lot of reasons to not privatize, and only a few to move forward. The reasons not to involve, to a large extent, unknowns and risks that are difficult to quantify, but that can be disastrous to our district if they are realized. The reasons to privatize are largely mitigated by their temporary nature.
If there are things that I've missed, I'd appreciate having them pointed out in comments. We will be taking a "straw vote" to see if we should continue to expend time and resources on investigating privatization at Monday night's meeting. At this point, I think we should stop spending time on this and focus on what cuts will least impact our ability to provide a quality education.
UPDATE: At the meeting, the BOE decided that privatization will be shelved for now. The interest isn't there, and the unknowns appear to outweigh the potential benefits. To hear the discussion, check out Sam's blog, where he will have the audio up in the coming days.
|
Okay, get a pencil and some paper. My email is c.getto@yahoo.com. If in the next few days (or possibly hours) the blog disappears, then it's because the registrar of my domain name seems to be about to lose its ICANN accreditation. I'm doing what I can to try and maintain control of my domain name, but Registerfly's phone isn't picking up, my support tickets aren't being responded to, and technically, as of today, my domain name has expired, despite the fact that I renewed it, and $8.99 was debited from my bank account.
