Privatization, like money, is neither good or bad in and of itself.
It’s how it’s used, or in the case of outsourcing – how the contract’s written – that matters most.
Who anticipated the day when a Kentucky university freshman could go his school’s dining facility, swipe a meal card and sit right there and enjoy sushi for lunch?
While such red-carpet treatment wasn’t out of the question for a five-star basketball recruit in the past, it would have been unheard of for, say, a potential engineering major.
But thorns of economic downturns and less state funding coupled with demand for greater returns on higher-education investments are producing flowers of fiscal finery, such as the University of Kentucky’s decision to turn to the private sector for new housing in 2011.
UK via privatization undertook a $450 million building boom that produced 14 new residence halls and more than 2 million square feet of learning and living space.
Education Realty Trust (EdR), which knows how to build, operate and maintain campus housing, fulfilled its commitment to provide 6,500 new, but affordable, state-of-the-art dorm rooms.
In fact, students paid the same rate for a new room in 2013 that was charged for one of the 686 new beds at four residence halls built in 2005.
Now, it turns out that what works in building student bedrooms also succeeds in constructing new dining rooms.
UK contracted with Aramark to upgrade its dining halls so that not only can students find every desired menu selection, but the company’s approach is impacting the commonwealth’s entire agricultural economy through a commitment to purchase Kentucky-made food products and actively recruit farmers statewide to grow vegetables, raise meat and provide dairy products for use in its new facilities.
Throw in a worry-free eating station – where gluten and allergy-causing foods are exempt – a sustainability coordinator and composting system, and you have a truly innovative program run by a private company.
It’s all happening with no additional tax dollars, bonding or borrowing by the university, which signed a $250 million deal with Aramark in 2014 and for the first couple of years actually charged students lower prices for their meal plans than they previously paid.
It’s a worthy example of how effective privatization of what had previously been considered the exclusive purview of a government entity – in this case, a university and its dining facility – can work to the advantage of students and their taxpaying families.
UK free-market economist and Bluegrass Institute scholar John Garen calls it “smart outsourcing.”
“It’s just like private organizations have to do,” he said. “They often must decide whether expending the resources and bringing in the people to do it themselves is the best way, or ask ‘Should we go outside and look for companies that are wholly focused on the particular need?’”
Other schools have begun following a similar outsourcing path.
Aramark’s new dining facility at Eastern Kentucky University in Richmond should be completed by the end of this year.
The company also entered into a 20-year, $20 million contract with Western Kentucky University to renovate current dining facilities and provide new options at the Bowling Green school, including a 24-hour restaurant in a new residence hall currently under construction.
Unlike convoluted P3 projects, such as the corrupt, costly and cronyistic Kentucky Wired boondoggle and its tortuous contract with Macquarie Capital, which has produced a track record of abysmal failure on similar projects in other states, these university deals offer tried-and-tested approaches toward true privatization.
By providing new residence halls with all the amenities and dining rooms with myriad choices, in-state students looking to enroll elsewhere have real reasons to remain in their old Kentucky home.
Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. Read previous columns at www.bipps.org. He can be reached at firstname.lastname@example.org and @bipps on Twitter.