Business & Finance Outsourcing

Schools Are Learning the ABCs of Outsourcing

It’s no secret that the global financial crisis hit small cities very hard, especially in California. Bad investments, optimistic revenue projections and overly generous pension funds created local financial disaster and bankruptcy in more than 40 municipalities. Now that the cuts from the Federal government are on the way, further economic pressure is mounting on local governments. We will hear about more bankruptcies, but we will also see a lot of stories about towns avoiding bankruptcy by making difficult budget decisions.

In previous articles, I've discussed budget cuts and outsourcing of police, security and prison services. Today, we’re going to look at another of the primary services for municipalities, primary education.

Since the beginning of the year, school boards have been thinking up creative ways to reduce costs. For example, towns that directly manage or lease school buses have started to outsource these services. The cost of fuel has a major impact on any transportation service. New buses are more fuel efficient, but school boards often under-invest in new bus purchases, resulting in runaway costs given today's gas prices. Add to this the cost of pensions for union bus drivers, and school provided bus services are more expensive than just about any other option. In Michigan, which has 551 school districts, 250 districts have already outsourced all of their bus services.

These districts have also outsourced other “non-instructional” services, such as building maintenance and food services. If we look at Pennsylvania, we can see that this type of “non-core” outsourcing is having a major impact on closing budget gaps.

The school board of Greencastle-Antrim, in Pennsylvania, had to close a budget gap of $1.4 million. Outsourcing bus services, janitorial services and technology support will contribute $600,000 towards closing that gap. That’s a very good start, but still other cost reductions (or higher taxes) are needed. With ongoing uncertainty in Washington, it’s hard to say what the future will bring, but it will probably bring at least a few more years of tight local budgets. That means more cuts, and more outsourcing.

As we can see from the results in Greencastle-Antrim, there is a lot to be saved in non-instructional programs. However, for a typical American school board, these programs are a relatively small expenditure. After the first round of cost savings, there may not be a lot left for follow-on savings. The Organization for Economic Co-operation and Development (OECD) released a report on education around the world. Not surprisingly, the United States spends more per student per year than any other country, about $16,000. Just slightly more than $2,000 is for non-instructional services. Sooner, rather than later, school boards will need to look into the classroom itself to find the next tier of savings.

That next tier of savings might be found by moving to digital books. The traditional model is for schools to buy books, manage the ownership of the books until they need to be replaced or a new edition is released. Students, even very young students, increasingly use computer tablets, smart phones, and personal apps. Putting digital books on tablets, not only adds new features to books, it also can dramatically reduce the cost of textbooks. In pilot tests in Utah, the cost of textbooks was reduced by 70%.

A more controversial area of outsourcing is the grading of school papers. It’s quick and easy to grade multiple choice, but essays are time consuming. It’s questionable if grading is the best use of a teacher's time, but teachers and teachers unions are highly suspicious of the value of automated grading. Still, the studies conducted so far indicate that computer based grading system are at least as accurate as teachers.

Will grading be the next big thing in school outsourcing? It just might! It will certainly be a recurring topic of discussion for parents and for the government. If grading was automated, it could help solve a budget crisis and it might provide teachers with time to focus on more valuable classroom activities, and improve educational achievement in your school.

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