State decides against privatizing some prison services
LANSING – Michigan will not privatize nearly $350 million in prisoner health care and food costs, keeping intact nearly 1,700 state workers’ jobs, a state official told The Associated Press on Friday.
State Department of Corrections spokesman Russ Marlan said none of three contracts out for bid would have achieved the necessary 5 percent savings as required by state rules. State officials also decided not to contract with companies to handle inmates’ mental health care or meals.
Bidding out more of the prison health system could have been the largest privatization of state government services in Michigan history.
The decision not to do so will come as welcome news to psychologists, nurses and others who work in 32 Michigan prisons. It may anger Republican lawmakers and others demanding savings in the corrections budget that eats up much of the general fund.
Marlan said Michigan tried for the first time to get a true comparison of wages and benefits for private workers versus state employees.
With state workers now paying 4 percent toward future pension benefits and retiree health care being eliminated for new hires, Marlan said, private companies cannot show as much savings even though they may pay workers less. Michigan also began pre-paying employees’ future health care liabilities.
State civil service rules require any move to privatize a government function must save at least 5 percent. Low bidders for the three contracts would have saved between 3 percent and 4.5 percent, Marlan said.
“To get a real apples-to-apples comparison, you need to incorporate these legacy costs,” Marlan said. “Whether these 1,670 employees work for the state or not, we’re still going to have that cost.”
It was not immediately clear if legislators could push to change the savings threshold. If it was not in place, the state could have saved between $11 million and $12 million – no small amount but not huge in the context of a $2 billion prisons budget.
The moves would have affected about one in 10 of 14,700 corrections workers.
The decision also is welcome news for all state employees because Gov. Rick Snyder’s administration plans to consider legacy costs in the evaluation of any future request for bids for work being done by government employees.