Private Equity in Public Schools: Outsourcing in K-12 Education

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With the Trump Administration’s recent executive order to dismantle the Department of Education, public education in the United States faces a host of challenges. Though the fight to preserve public education has entered a new phase, advocates have been fighting against privatization for decades. For some students, a public school is the only reliable source of necessities such as food and medical care. Protecting public schools is not just about protecting education, but protecting children as vulnerable members of our society.

Public school teachers, support staff, and administrators work tirelessly to educate, support, and protect students in some of their most formative years. School boards continue to outsource key staff roles inside and outside of the classroom, weakening teachers’ and government unions and leaving staff with fewer protections and benefits. While outsourcing is often presented as a solution to staffing shortages, staffing agencies and management companies do not create new jobs or address the root causes of staffing crises. In fact, the weakened public school system that allows private contractors to flourish is the problem – without enough funding to pay staff what they deserve, working in public schools has become a less sustainable long-term career option.

Beyond teaching itself, critical positions in healthcare, transportation, food service, data management, and more are being outsourced. Private equity firms and the companies they own promise to deliver better services than the district could provide in-house, but there is no conclusive data showing that school funding is better spent at private-equity owned companies than staying within the district. The following sections explore some of the ways private equity profits from outsourcing at K-12 schools. To learn more about how private equity invests in child care, charter schools, curriculum development, and test administration, see our March 2025 report.

In the Public Interest, a research and policy nonprofit dedicated to the study of public goods and services, released a report about outsourcing school support services in 2023. The report found that privatizing auxiliary services led to a host of issues for school districts: “loss of public control over school services, lower quality services, loss of the school’s ability to respond to emergencies, loss of accountability and transparency, loss of institutional expertise, and ultimately, a change in school culture.”

Direct, permanent school district employees tend to live in the communities that they work in, meaning that students may get to interact with trusted adults both at school and in other places in their community – as of 2017, approximately 75 percent of educational support professionals lived in the school district in which they worked. Contractors, such as virtual teachers, may not even live in the same state if the services are provided remotely.

School districts should do everything in their power to keep critical teaching and support services within the district. Staffing agencies may offer higher salaries or a signing bonus, but provide less in benefits and job stability. In some cases, agencies require employees to sign noncompete agreements, preventing employees from working at a school district for a certain amount of time after they stop working at the company — if a district wants to hire a contracted worker directly, they would have to wait. These practices not only negatively impact workers and their families, but weaken the public school as a safe space for children run by and for the community, not for profit.

Private Equity in K-12 Education

According to a recent study, 34 million public sector employees are invested in private equity through pension contributions. Drawn to the promise of high returns, pension funds around the country allocate billions in commitments to private equity firms each year. To generate returns for investors, firms aim to make the company more profitable by increasing efficiency (eliminating “unnecessary” positions), lowering costs (using cheaper products or labor), or reducing competition (consolidating the market through acquiring smaller companies). Economists and financial analysts recognize the strategy as high risk, high reward for investors, but the labor movement and investors are beginning to realize it may be high risk, low reward for workers.

Private equity-owned companies have demonstrated a pattern of problematic labor practices that hurt workers. Private equity firms typically hold companies for an average of five years before trying to find a buyer. In attempting to extract as much value as possible in a short period, firms notoriously pursue cost-cutting measures that negatively affect workers, including poor management and training, dangerous working conditions, lower wages, reduced working hours, and widespread layoffs. Private equity firms generally prioritize short-term profits over long-term stability, which can be seen in their tendency to implement such cost-cutting measures.

In the education sector, private equity firms invest in hundreds of companies that contract with school districts to provide tools and services that were previously managed in-house. As schools struggle to manage services in the midst of staffing crises and other issues, private equity firms see an opportunity to profit. Unfortunately, outsourcing roles to private companies weakens the school environment, introducing profit motives to spaces that should prioritize student wellbeing over all else. Students thrive on stability rather than efficiency – in pursuit of profit, private equity firms tend to increase turnover. We have long known how turnover impacts student achievement; a 2013 study found that:

“on average, it is harmful. This indicates that schools would benefit from policies aimed at keeping grade level teams in tact over time. One possibility might be to introduce incentive structures to retain teachers that might leave otherwise. Implementing such policies may be especially important in schools with large populations of low performing and black students, where turnover has the strongest negative effect on student achievement.”

The impact of turnover likely extends beyond teaching staff to other school employees such as custodians, counselors, and food service workers. Students deserve a school staff that is dedicated to establishing long-term relationships in the community rather than a constant churn of new faces.

PESP analysis shows that numerous pension funds that invest public school employees’ deferred wages are investing in the very same private equity firms that own companies used to outsource and privatize jobs in public education. Pension funds, especially those that invest on behalf of the very workers whose pensions are threatened by outsourcing, should consider the risks of investing with anti-worker private equity firms not only for their current members, but for their future members as well.

Read the full report here >>