EXECUTIVE SUMMARY
This study examines the potential benefits of competitive contracting in Oregons public school districts.
It specifically evaluates the student transportation system of the Portland Public School District, and identifies
possible areas of improvement.
Though the Portland School District already has 70% of its operation contracted, it must explore ways
to encourage more bidders. The district may divide the contract so more competition occurs, remove
barriers to innovation or alternative delivery options, or include performance incentives for cost effective
approaches. It must also assure a level playing field is applied in comparing public and private contractor
costs. A recent private performance audit of per-student transit costs understated administrative overhead
and district depreciation costs for vehicles and facilities, though it included such items in the private
contractor costs of Laidlaw Transit Inc.
Special education accounts for 50% of total student busing costs in the Portland School District, including
$1 million in cab fares for only 220 students. The author stresses the need for further research
in this area.
The study also finds that the current state student transportation formula could encourage overspending.
It recommends that the state formula include a higher percent reimbursement for cutting costs, and subsidy
reduction for excessive increases. These financial consequences could provide incentives for better
management, resulting in overall budget reductions.
Cost savings are possible for other Oregon school districts through competitively bid contracts. The
study found the compensation of bus drivers in district programs is typically over 30% higher than in
competitively bid operations. The study provides a list of criteria for inclusion in competitively bid contracts
for student transportation and other school support services, to assure cost effectiveness.
ABOUT THE AUTHOR
Clem Lausberg is an active participant in debates of Oregon school finance policy issues. Over the past
30 years he has worked in a variety of federal, state and local financial planning positions, and currently
serves as an educational consultant to a number of metro-area school districts. He holds a Masters degree
in Political Science and a Ph.D. in Education.
Cascade Policy Institute
813 SW Alder Suite 300 Portland, Oregon 97205
(503) 242-0900 fax 242-3822 www.CascadePolicy.org Info@CascadePolicy.org
This proposal was named a winner in the 1998 Oregon Better Government Competition, organized by Cascade
Policy Institute. Opinions expressed are those of the author and do not necessarily reflect those of Cascade,
its staff, or advisors, nor should the contents be construed as an attempt by Cascade Policy Institute to
influence any election or legislation. 1998 Oregon Better Government Competition
Cascade Policy Institute
2
INTRODUCTION
The Portland School District provides a perfect setting
for analyzing the competitive bidding of student
transportation. Portland now has a mix of district run
transportation, private contractors, Tri-Met vehicles and taxi
cabs daily transporting over 12,800 students to and from
school.
1
It competitively bid for the bulk of student
transportation services prior to the passage of property tax
limitation Measure 5 in 1990, and recently signed a five-year
contract with Laidlaw Transit Inc. through the year 2002.
The Portland School District faces a budget deficit of $30
million or more in the 1999-2000 school year. District officials
are strongly interested in any possible cost savings in support
areas to reduce the deficit, protect the classroom, and convince
state policy makers they are managing resources wisely. There
are potential cost savings for the Portland School District
through an improved and expanded competitive bidding
process.
Additionally, the current state funding formula for student
transportation lacks incentives for cost effectiveness,
contributing to a rapid increase in student transportation
costs. District savings can be realized through adjustments in
the funding formula that encourage efficiency.
Opportunities for cost savings through competitively
bidding student transportation exist not only for Portland,
but for other Oregon school districts as well. A bidding process
which utilizes a carefully written contract is required to
achieve cost effective bidding proposals for student
transportation, or other school support areas.
STUDY OBJECTIVES
This student transportation study has the following objectives: Document the mix of student transportation
funding for Portland Public Schools among
public and private providers. Identify potential cost savings in Portland School
District student transportation, and ways to
improve and expand its competitive bidding. Develop incentives for cost effectiveness in the
current state funding formula for student
transportation. Examine potential savings for other Oregon
school districts through contracting for student
transportation services. Develop model contract criteria for competitive
bidding of school support services in student
transportation, or other areas such as food
service, custodial services, or buildings and
grounds maintenance.
TRANSPORTATION FUNDING IN THE
PORTLAND PUBLIC SCHOOLS
The Portland School District budgeted $13.4 million for
student transportation out of a General Fund budget of
$335.5 million in 1997-98.
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The annual operation includes: Home to school transportation for over 10,500
general education students. Transportation for 2,300 special education
students, including 220 in taxi cabs. Over 3,000 active daily bus stops and 3.9 million
miles driven in 1996-97. A total of 360 buses, including 25 wheelchair
buses and 16 lift buses. An average annual cost of $1,070 for each
student transported in 1997-98.
Student Transportation Operations
Nearly 70% of Portlands student transportation is
privately contracted. The lions share of this amount is for
home to school busing provided by Laidlaw Transit Inc. The
1997-98 contract included $4.2 million for the basic
transportation of 5,700 general education students, and $3.8
million for 800 special education students.
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In addition,
Laidlaw contracts for nearly $500,000 of athletic and activity
transportation.
In addition to Laidlaw, the district purchases nearly 2,000
Tri-Met passes at an annual cost of $300,000. Tri-Met partially
subsidizes Portland student transportation; passes are
provided at a discounted cost of $29 for a monthly pass
(compared to a regular $39 or $49 depending on the number
of zones traveled). Monthly passes are $12.50 for disabled
students, while a 10-ticket package is $7.50.
4
In 1997-98, the district also paid over $1 million to
transport an average 220 students by taxi cab.
5
Cab service is
almost exclusively provided to special education students
under the federally mandated Individualized Education
Program (IEP). Only two Portland cab companies, Radio Cab
and Broadway Cab, now bid for this service. Portland School Transportation Contracting
Clement H. Lausberg
3
Public School District Transportation
The balance of the Portland Public Schools transportation
budget is operated in-house at an annual cost of
approximately $4 million. The district daily transports 3,700
general education and 400 special education students with
its own drivers, operates its own maintenance shop with
mechanics, and employs dispatchers, planning specialists to
route buses, a trainer and clerical staff.
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The district also provides central oversight of the entire
public and private student transportation system. The director
oversees the implementation of the several contracts with
private providers, and extensive records are kept comparing
costs and service between the various operations. Core
functions, such as routing students in the most cost effective
manner, enforcing reward and penalty provisions in contracts,
and state reporting, are viewed as the exclusive responsibility
of the district.
Table 1. Portland School District Transportation Budget 1997-98
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Major Operations
$ Share
% Share
Laidlaw Transit Inc.
$8.0 million
60%
Portland district-run
$4.0 million
30%
Tri-Met Passes
$0.3 million
2%
Taxicabs
$1.0 million
8%
Transportation Budget
$13.4 million
100%
Athletics and Activities
$0.5 million
Portland School District Cost Savings Efforts
Portland School District transportation costs were flat
from 1991-92 to 1996-97. Portland expended $10.73 million
in 1991-92 compared to $10.85 million in 1996-97.
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This transportation cost containment was undoubtedly
aided by the combination of a district and privately contracted
operation. Despite significant pressure on the contractor
during those years due to an area-wide increase in driver
wages, the district held fast to the original agreement through
the life of the contract in 1996-97.
The Portland district transportation budget went up
23.6% in the 1997-98 school year, from $10.85 to $13.4
million.
9
The pent up demand of the contractor to turn a
profit, an increase in driver compensation, and the need for
new buses were felt as the district went through the bidding
process for a new five-year contract, from 1997 to 2002.
The 1997-98 increase was mitigated by a change in the
bell structure for school opening which generated savings of
$1.2 million.
10
By limiting the start of school to three times -
8 am, 8:45 am, or 9:15 am - the total number of buses needed
for daily home to school transportation was reduced from
230 to 179.
The Portland School District also cut back on its own
administrative overhead. The position of