As actual budgeting begins, district leaders review past budgets and plans for the future. When the projected expenditures are greater than the anticipated revenues, it may be necessary to consider outsourcing rather than maintaining in-house staff, considering that salaries and benefits make up 85% of the average budget.
The Decision to Outsource
The ultimate reason to outsource is to save money. However, if not planned correctly, a large amount of time (yours) and money (district fees) could be spent on a fruitless endeavor. Outsourcing should be planned six months to a year in advance—not four weeks before the submission of a tentative budget.
Outsourcing has the potential to save districts money on the following payroll items:
- Pension costs
- Sick and vacation time payout upon retirement or leave
- Paid days off (snow days, district closures)
- Performance payments (perfect attendance, uniform reimbursement)
- Health benefits
- Workers’ compensation and related insurance costs
- Contract costs
If the district’s administration and school board decide to explore outsourcing, they should consider several areas before making a final decision.
Legal issues. The auditor, attorney, and other related advisers should be consulted regarding the feasibility of outsourcing. It is also important to be aware of any laws regarding this option that could affect the budget. For example, New Jersey passed a law in 2020 restricting school districts’ ability to outsource.
Procurement process. Outsourcing is a professional services contract. A request for an outsourcing service proposal should specify who, what, when, where, and why. State organizations sometimes offer sample requests for proposals to use as a guide, but it is the budget committee’s responsibility to ensure that the information is accurate.
Items to consider as part of the specifications include the following:
- Legal compliance regarding fingerprinting and criminal background checks, drug testing, and so forth.
- Salaries and compensation for overtime, holidays, inclement weather, and coverage of the building.
- Deductions for failure to provide services.
- Specific work hours, workdays, and holidays.
- Uniforms and dress code; personal hygiene.
- Contract termination; providing notice and nonrenewal.
- Penalties for nonperformance of contracted agreements (i.e., providing substitutes for every open position).
These terms and conditions do not represent a complete list. They do highlight why outsourcing should not be coordinated on a short timeline.
Options for Outsourced Personnel
Possible outsourced personnel include substitutes, support staff, special services staff, transportation staff and bus drivers, business office staff, food service staff, and facilities staff.
Support and special services staff. Public education commissions might provide support staff and special services staff at a potentially lower cost than what the district pays in-house. The commission would be responsible for the advertising and hiring process, along with evaluating and training staff members, which frees district personnel to focus on their regular responsibilities.
Some companies provide a bank of substitute employees for a district. The advantage of using this option is that, in theory, every substitute need is filled without a district employee’s having to call for substitutes or asking staff members to give up their prep time to cover a class. The disadvantage is that with current staff shortages everywhere, private companies may be unable to guarantee substitutes.
Transportation staff. Finding bus drivers is especially challenging right now. In-house staff members are difficult to retain because of retirements and the lure of other districts that offer higher pay. Districts often have an inadequate number of drivers in reserve to cover bus runs.
Outside contractors may face the same problems finding transportation personnel, but they take that responsibility off the district’s plate. They can offer their services at a premium rate because of the high demand. If districts cannot find an adequate number of bus drivers, they may have no alternative but to contract routes and pay the higher cost.
Budget planning might allow the district to reorganize the transportation department and create a five-year plan that would include such measures as delaying the replacement of buses whose service time is expiring. This option may present an opportunity for long-term planning rather than short-term panicking.
Business office personnel. Business office services, such as payroll, are another opportunity for a district to consider contracting rather than hiring in-house. Similar to substitute teachers and bus drivers, knowledgeable payroll personnel are increasingly difficult to find.
Using the services of a payroll company may free up business officials so they can focus on other areas. The payroll companies will set up all employee information (with district input), run the payroll, and pay the federal and state taxes and withholdings; the district would most likely file state and federal quarterly reports.
When contracting with a payroll company, caveats include being aware that some larger payroll companies are not proficient in school district payroll functions (e.g., 10-month, 11-month, 12-month employees) and may charge a higher fee to convert files to match school district files. There’s also the possibility that the contractor’s payroll software might not be compatible with the district software.
Food services. School districts have contracted food services for many years. Because the food service industry has so many vendors, school district officials typically have no problem obtaining this service.
Facilities personnel. Facilities is another area of operations that has been contracted for years.
Outsourcing facilities operations may make sense if a large number of personnel are expected to retire at one time, and contracting would save the district dollars. The potential savings must be weighed against the potential unbudgeted expenditures related to overtime, weather, and insurance claims (which always occur on a holiday or holiday weekend).
Research Before Action
The decision to outsource is not an easy one to make; however, it can be a worthwhile strategy for a business official to explore. Completing a study of what is best financially for the district now, while incorporating the data into a five-year plan, may give a school district a better understanding of its direction and discourage impulse decisions.