Host own mail server or not

We currently have Exchange 2003 running on Server 2003 so both need to be replaced by mid-April. The question is do we replace the server and exchange version or let someone outside host it for us? There are 2 f/t and 2 p/t IT people here. I handle nearly all the exchange functions though my part-timers know how to add and remove users.

I can set up a VM Server 2012 and get the license, then get the 250 odd CALs for my users. That is a direct cost. The other expense is my time and effort. I did test and set up Server 2012 with Exchange 2010 some months ago, migrated a dozen or so users and it all ran well and I did not have much problem with that. Unfortunately I could not get the Powers That Be to sign off on the cost at that time. Now they must make a decision. We have people come and go about once every 2 weeks (lot of part-timers) so not much work in exchange for me.

The other option, since we are a state agency, is to pay our state IT department to host the mail server for us. Of course there is a per user cost, and the issue of mailbox size. We do not limit users directly, we just nag them when boxes start to get large. If the state hosts our mail, we will have a couple dozen users who will need to do some serious trimming.

We estimate that the per month cost will pass up the server and CALs licensing costs in less than 18 months. After that, outside hosting is more expensive. My boss likes the idea of not worrying about backups. My issue is that I am leery of letting someone else manage our mail. I know they can do backups, same as me, and they will add/remove/tweak mailboxes as needed though I do not know what kind of response time to expect. They claim it is within hours but I do not know that for sure.

Any recommendations or suggestions  on which way to go?