HIGHLAND PARK, Mich.—The public school district in this hard-luck city has come up with a radical answer for its troubled education system: It is outsourcing all of it.

Highland Park School District, one of the state's lowest-performing academically, says it will turn over its three schools and nearly 1,000 students to a private, for-profit charter school company—the second district in Michigan to take such a drastic step to avert financial collapse.

The...