Privatizing Services: A Pay Raise at a Cost

For many years, "outsourcing" and "privatization" were the euphemistic territory of job-slashing state agency heads. Lately, however, the lexicon of "cost containment" has entered the shuttered world of academia with impressive force, as penny-pinching administrators have hunted for ways to diminish their overhead.

At UT-Austin, a number of major functions have been privatized or outsourced in the last five years, including shuttle services, portions of parking and traffic, the dining services at the Texas Union, and custodial services in 19 university buildings.

With UT's budget for the 2000-2001 biennium looking, according to university estimates, about $40 million too thin, administrators are struggling to come up with innovative cost-cutting devices. UT President Larry Faulkner has told staff to expect massive hiring freezes next year, when he says only one of every four employees who leave the school will be replaced. The cuts, Faulkner says, are necessary to pay for a 6% pay raise for those workers who remain.

But some staffers are wondering whether UT administrators have a different replacement plan in mind. Two of the UT System's newly anointed regents, Woody Hunt and Charles Miller, are staunchly pro-privatization conservatives. Hunt, the El Paso builder who was sued by the U.S. Justice Department for building military barracks that wouldn't stand up in the wind, told TheDaily Texan student newspaper that he was "especially interested in the privatization of public universities" as a way to cut costs.

Meanwhile, Miller, a Houston investment manager, serves on the board of the National Center for Policy Analysis, a far-right, anti-union group whose Web site features headlines like "Why not Privatize Unemployment Insurance?," "Privatizing Public Radio," and "Privatizing the Electromagnetic Spectrum." An NCPA spokesman in the group's Dallas office said the group also supports privatizing the space program, higher education, and some aspects of the military.

What concerns staff is not privatization per se, say staff members and advocates for public employees; often, they acknowledge, workers who lose jobs due to privatization can find employment in the company that takes over.

What worries them is that the jobs they find often pay less, offer fewer benefits, and provide less security than state employment. At UT, where Wendy's and Taco Bell replaced university-provided food service in the Union and elsewhere, most employees moved on rather than accepting drastically reduced wages and benefits. "Food service at UT wasn't a great job, but it was a job with benefits," says Mike Gross, president of the Texas State Employees Union, which represents many university workers. "Working at McDonald's is just working at McDonald's."

According to information obtained from UT's budget office, the university saved over $400,000 in expenses in 1998 by privatizing its dining services. UT also saved more than $210,000 by privatizing many of its custodial services, a fact some advocates for staff point to with alarm. "For the near term, custodial workers are very vulnerable," says Gross. "I think you're also going to see privatization of grounds workers soon."

UT president Faulkner denies that the school has plans to expand the number of services it contracts to private companies.

UT advisor Alice Andrews, who worked at the university during the hiring freezes of the early 1990s, says there are limits to how much UT can privatize without running into liability concerns. "You don't want to just give a whole bunch of people a key to the university, which is one reason [large-scale privatization] never got off the ground," Andrews says.

In North Carolina, where the entire university system just completed a massive privatization study, administrators and study leaders were less than awed by the potential savings to be found in privatization. At North Carolina State University, the site of the most comprehensive review, study administrators discovered, according to privatization team chair Jeff Mann, that "for the most part, we were managing our activities efficiently. It was relatively rare that the privatization alternative was better" than university-run services, Mann says, despite the fact that many private contractors could save money by providing lower pay and benefits to former university workers. "All in all, it was a wash, and that was the reason we stayed self-operated in most cases," Mann says. In the end, the university chose to extend its privatization program onto just one adjunct campus; the rest of the school's 3,500 staff workers have remained employees of the state. --E.C.B.