Like a buried land mine in a field reopened for public use, an anti-union law the Illinois Legislature passed in 1995 resurfaced in February and became the weapon to maim two AFT affiliates representing faculty and staff at the City Colleges of Chicago. With just a few days advance notice to the Cook County College Teachers Union/AFT and its sister clerical union, Local 1708, City Colleges Chancellor Wayne Watson announced his intention to contract out the entire financial services and data processing operations of the colleges.

Moving swiftly, the colleges' board of trustees met 10 days later to approve the proposal and issue layoff notices to 63 employees. In a highly unusual move, say management experts, the trustees are turning over management of a $284 million operating budget to the accounting and consulting firm of American Express Tax and Business Services Inc., to which it will pay $1.7 million, according to board documents. The board will be passing along responsibility for the payroll, grants accounting, accounts receivable and payable, consolidation of financial data reporting, fixed asset accounting, purchasing activities, student billing/financial aid and grants, and budget processes.

Contracting out, or "outsourcing," some non-educational services is a familiar practice in higher education, according to American School & University magazine's sixth privatization/contract services survey of 750 chief business officers at colleges and universities. The survey found that in 1999, only 5.3 percent of institutions did not contract out some services. The areas most often outsourced are food service, vending, bookstore and custodial work, the survey shows.

Contracting out some "back-office" functions--as these administrative procedures are known in the business services industry--is a newer phenomenon, however, says Larry Goldstein, senior vice president of the National Association of College and University Business Officers. Outsourcing some functions, such as student loan processing or billing for student receivables, has been a routine practice for years. What is unusual in the City Colleges situation, he notes, is the comprehensive scope of the contract and its rapid implementation.

The City Colleges have "put a lot of eggs in one basket," Goldstein observes. "They appear to be giving a huge amount of control of their financial administration to an outside entity. It is hard to understand how some of those [administrative procedures] will function." He notes, for example, that in higher education, the payroll process is very complicated and unique on every campus. Because of the prohibitive cost, Goldstein says, he's never seen an institution where contracting out the payroll function has been successful.

Scott Wilson, vice president in equity research and a senior analyst in charge of education services at Merrill Lynch, says such an approach is rare in the industry and perhaps unprecedented. "There's no reason it couldn't be done," he observes, "but where do you draw the line? At some point, you could be just outsourcing the whole administration."

That might be what Chancellor Watson and the board have in mind, some worry. Both Watson and board of trustees chair James Tyree are relatively new to the City Colleges. Tyree's background is in finance; in interviews, he readily confirms that his strength on the board is bringing business sense to education. With the financial operations divested and the employees fired, the administration next is looking at "restructuring" the Office of Information Technology, the library, and the business and computer services departments. This could affect 80 more CCCTU members.

The unions that represent the staff and faculty who do much of the work of those departments see the outsourcing differently. "It's a wholesale declaration of war," says Norman Swenson, CCCTU president.

On the day the layoffs were approved, he led a demonstration of more than 300 faculty, staff and students who protested the privatization at trustee headquarters. With others, Swenson testified on alternative options for saving money and improving quality of services. Their suggestions fell on deaf ears.

Prior to 1995, the contracting out of union members' work and the procedure for laying off employees would have been the subject of consultation or bargaining according to the contract. In that year, however, an election turned over the governor's mansion and both houses of the Legislature to Republican control. In swift measure, the Legislature passed House Bill 206, an amendment to the Illinois Educational Labor Relations Act, that severely limited the scope of bargaining for both CCCTU and the Chicago Teachers Union. Contracting out became a prohibited subject of bargaining. The college administration had not exercised its power to act, however, until now.

Legally, the unions have some options, says Larry Poltrock, counsel to the AFT and the Illinois Federation of Teachers. They are looking at whether the layoffs violate either the protective provisions of the Illinois tenure law or some recent appellate court decisions dealing with HB 206.

If the board and chancellor move forward with their plans to privatize academic departments, it would set another ominous precedent. Even with the growth of for-profit education and e-learning, these are offered as competition or supplements to existing academic offerings. As conceived at City Colleges, it would be a bizarre straying from the mission of the system, which is to serve a large underserved population of Chicago residents.

But perhaps that is beside the point. Why would the board threaten the jobs of hundreds of its loyal employees, Swenson asked trustees on the day the layoffs began. "Are the City Colleges the colleges that work? Or are they the colleges that contract out work to for-profit employers, lay off public employees and destroy their unions?"