I was a little surprised by the Milwaukee Public Schools (MPS)’ response to my recent Wisconsin Interest piece on the district’s long-term fiscal challenges. Specifically, I was confused by the following two paragraphs in a blog item posted yesterday by Milwaukee Journal Sentinel education reporter Erin Richards:
MPS officials on Wednesday objected to the assertion that the district is headed toward financial insolvency. They reiterated that they have raised the minimum retirement age, raised the number of years needed to reach retirement, and increased future retiree contributions, all of which should make a significant impact on legacy costs.
MPS Spokesman Tony Tagliavia reported there is a report coming out in the coming months that will reflect the impact of the changes made.
First off, my article makes clear that I took MPS’ aggressive actions to address their legacy costs into account (Incidentally I have also blogged about these actions and applauded MPS as they have been taken). In the article I write:
Critics and reformers have called on MPS to make the difficult decisions necessary to offset the cost of retiree health benefits. The problem, however, is that MPS Superintendent Gregory Thornton and the MPS board have already made difficult decisions to rein in costs.
In November, the board voted to require employee contributions to fund from 7 percent to 14 percent of their health care premiums, depending on salary. The board also voted to introduce four furlough days as well as to institute a salary freeze in 2013, 2014 and 2015.
Second, I obviously did not have access to a report that has not yet been released. I will certainly blog about it when it comes out because I find this topic incredibly important.
To be clear, these are two distinct pieces that use different data and make different points. Bonds does not specifically mention my article but he does reference Schneider’s “colleagues at the Wisconsin Policy Research Institute,” so I want to make a few points to address any confusion:
On November 15, 2011 Superintendent Gregory Thornton made a presentation to the MPS Board of Directors titled “Proposed Plan Changes to Manage MPS OPEB Liability” that estimated MPS unfunded actuary liability at $2.2 billion dollars. That is the number I reference in the article. That document is available here.
2. The future trends in MPS annual health care and annual retiree health care costs I use are from MPS and do reflect actions taken by MPS to address their liability. The numbers are not from the 2008 actuarial analysis referenced by Bonds in his op-ed.
Those numbers can be found on page 36 and 37 of the agenda book from the November 17, 2011 MPS board meeting. Click here to download that document. The MPS estimated projections go five years into the future and I do, as I write in my article, take those estimates out another five years.
3. Annual projected future MPS costs for the district’s second pension used in my article are from MPS, and reflect the suspension of that second pension at the expiration of the current MPS-MTEA contract.
I obtained those numbers from a February 28, 2012 analysis done for the district by Gabriel Roeder Smith & Company. That document is available here (see the last page for the numbers used in my article.)
4. I did contact MPS.
On May 2, 2012 I sent an an e-mail to MPS’ Communications Director outlining what I was doing, asking for comment, and asking specifically “what the MPS position is on how the long-term budget outlook can be improved?” I sent a similar e-mail to MTEA president Bob Peterson the same day. I received no response or acknowledgement from either.
Bonds’ concludes his op-ed by stating:
We appreciate what we hope and can only assume are WPRI’s efforts to accurately inform the public and believe that goal would best be served by using the most relevant, up-to-date information rather than 3-year-old data that, at this point, paints a misleading picture of what is a very important issue.
I agree with Bonds. I am a Milwaukee resident with two children that wants a strong sustainable education system that is an asset to the city. That is why I brought attention to the issue, and that is why I demonstrated my desire for accuracy by contacting the district in good faith, and using information publicly released by MPS in 2011 and 2012.
Anyone with questions about my article is free to contact me at firstname.lastname@example.org.
The polite warning quoted in the title to this entry is in reference to healthcare obligations threatening the budgets of local governments. The quote comes from Wisconsin Taxpayer’s Alliance President Todd Berry at the end of a Journal Sentinel story touting the strength of Wisconsin’s state pension system.
First, the main subject of the story is worth celebrating. By all accounts, the WRS has been well managed by government. The health of the Wisconsin Retirement System (WRS) gives our state a competitive advantage over states with significant unfunded pension obligations.
But, as Berry alludes, unfunded healthcare obligations still need to be addressed to ensure the future quality of local government. The reason is straightforward, as I detailed earlier this week (and as WPRI has detailed repeatedly) growing health care costs reduce the amount of revenue available for basic services.
In school districts this means fewer resources are available for things like teacher salaries. In cities and counties this means fewer resources for garbage pick-up, parks, transportation, libraries, public art, public health and any number of services that contribute to the quality of life of a place.
Call me a big-government advocate, but local government in particular has a role far greater than simply creating a social safety net; people want to live in place where government is responsive to the basic needs of residents. The ability of government to fulfill that role is being diminished annually by cost pressures (most notably retiree health insurance) that are totally unrelated to service delivery.
There is no one perfect answer and the public certainly has an obligation to fulfill promises made to public employees. However, there needs to be a long-term solution or the quality of local government services will erode. The necessary first step is talking about the problem openly and honestly.
The Wisconsin Policy Research Institute today released a new article by me, titled “MPS’ Looming Fiscal Crack-Up.” The basic point is that the Milwaukee Public Schools (MPS) face a near impossible fiscal challenge over the next ten years. The problem is that retiree health benefits costs are growing at a faster rate than the district’s capacity to raise revenue through state aid and property tax.
In English, this means MPS as an entity will be receiving more public support, but will have less money to spend in the classroom. The scariest aspect of this situation is that there is little MPS can do to fix the problem. A few points:
“The cost of doing business for Milwaukee Public Schools and Wisconsin is relatively high,” Superintendent Gregory Thornton said. “But because of legacy and structural costs, we were not geared toward driving those dollars back into the classroom.”
To Thornton’s credit, he has done more than any previous leader I can find to slow the uptick in committed revenues. He took action to freeze salaries, instituted furlough days, increased employee benefit contributions, and ended a sweetener pension. These moves improve the situation, but do not fix the structural problem.
Second, this article does not assign blame. Frankly, fault is irrelevant. The rising cost of health care is a major culprit, the actions (and inactions) of previous boards and state legislators are culprits, and paradoxically teachers that did nothing more than retire with the benefits they were promised are the culprit. The point I hope to get across in this piece is that the problem is not going to go away no matter how much we assign blame or clamor for tough decisions.
Third, the future revenue and cost estimates are reliant on informed assumptions. I assume MPS’ per-pupil revenue limit growth mirrors the previous decade, and that district enrollment declines continue at a steady pace. I also take district five-year estimates of health and second pension costs (from MPS board documents) out an extra five years. Finally, I assume pension cost trends (which are under control, to MPS’ credit) hold over the next ten years.
All of these assumptions could be off, hence I ran a few alternate scenarios where revenue limits increase at a higher rate, and enrollment declines slow. Even then, the structural problem remains. My point is things may be marginally better or worse, but my assumptions would have to be completely off the mark to reverse the basic problem. I suppose all current MPS fiscal and enrollment trends could change, or a national health care system could be instituted, removing the district’s major cost-driver, but both seem extremely unlikely.
Fourth, I focus on state and local property tax because that is the district’s primary source of revenue, and the one that is driven by enrollment. MPS does receive federal and state categorical aids that may temper some of their fiscal stress, but both of these have declined in recent years and it is unlikely that program specific revenue can save the district.
Lastly, I offer no preferred solution. I detail what MPS appears to be doing, which is educating more kids in non-MPS seats in order to generate surplus revenue for the district. Though currently being done a small-scale, on a large scale it could make the district sustainable long-term. Another solution is a state bailout; taking a $2 billion dollar health liability off of MPS’ books would put the district in a better position long term. One option I do not think is viable is bankruptcy. Even with a change to Wisconsin law allowing municipal bankruptcy MPS is unlikely to become insolvent anytime soon. As long as the district has students, it has a source of revenue.
I am hopeful that the article will serve as a wake-up call for those with a preferred solution. If you have one, it is time to start advocating for it. Though there is no fiscal cliff, annual budget challenges and continued fiscal deterioration are likely to continue until something dramatic is done.
To the point, why is MPS per-pupil spending so high? There are two simple explanations.
First, as articulated by Dale Knapp of the Wisconsin Taxpayer’s Alliance in today’s story, MPS per-pupil spending is high because it has always been high. Since Wisconsin instituted revenue limits in the early 90s the amount of state aid and local tax revenue a district can raise (and correspondingly spend) per-pupil has been indexed to what a district raised in the prior year. In every state budget legislators specify the statewide allowable per-pupil revenue limit increase amount. Because MPS had a high base to begin with, the amount of revenue the district raises and spends per-pupil is always on the high side. Further, because annual increases are indexed off of what a district raised in the prior year, there is a built-in incentive for districts to raise and spend as much as allowed under revenue limits.
Second, categorical funding to MPS has increased dramatically since 2001. Categorical funds are program specific funds that exist outside of the state aid formula and hence are not capped by revenue limits. In 2001 MPS received $1,468 in categorical funding per-pupil, in 2012 it received $2,318 per-pupil (A 58% increase).
State and local categorical funding to MPS has gone up since 2001, but the bulk of the increase in per-pupil categorical funding is federal. Federal categorical funds per-pupil increased 73% since 2001. Included in this pot of federal money is title funding for low-income pupils, and funding for special needs pupils. The focal year of the study that spurred the Journal Sentinel article, 2010, also is important because of the impact of federal stimulus funding.
Since MPS’ high level of per-pupil spending is primarily driven by two factors, there are few things that can be done to lower per-pupil spending in the district. One option is to cut revenue limits, which Governor Walker did by 5.5% last year. Another is to reduce categorical spending. This too is happening because of state and federal budget pressures. Hence, MPS per-pupil spending has actually gone down since 2010.
The overall level of MPS per-pupil spending is headline grabbing, but what the district can actually do with the money it receives is far more important. It is there where MPS is severely constrained and left with few good options. It is also there where kids, and the future prospects of Milwaukee, are the biggest losers.
U.S. census data shows that 27 states have a higher percentage of residents with college degrees than Wisconsin. Middle of the pack in education attainment might have been ok thirty years ago, but today our middling position is a barrier to attracting businesses that demand a highly educated workforce.
A college diploma does not guarantee employment, as thousands of new graduates are learning. However, it is a basic credential that gets you in the door. Walker’s plan provides a flexible path for more students to get that credential.
According to the governor’s office “more than one-fifth of all Wisconsin adults have some higher education credits, but no degree.” This statistic does not surprise me. As an instructor at UW-Milwaukee, I have come across numerous smart, capable students that were unable to complete their coursework because of work and family commitments. Often these students were first generation college attendees.
It is particularly cruel to make a student choose between improving themselves through education and helping to provide for the basic needs of their families. I am hopeful this new program will prevent ambitious busy students from having to make that choice.
Specifically, the new initiative allows students to demonstrate specific competencies at their own pace in a structured program that leads to a University of Wisconsin degree. Though I am admittedly partial to face-to-face learning and the overall university experience, qualified students whose circumstances prevent such an experience should have a path to a credible degree based on their knowledge and skills.
The UW Flexible Degree concept seems like a no-brainer. It is a way to improve Wisconsin’s economy, and more importantly, a path to greater opportunity for thousands of Wisconsin residents.
I am rather late to the point, and it kills me to write this, but there is no need for a daily newspaper.
Deep down I know it is true.
Some will point to the continued popularity of sports coverage, perhaps the last bastion of newsroom strength. But the sports page has a basic flaw that will bury it: The late game. After a long day of writing blog posts I often struggle to stay up for west coast Brewer games. So, I go to bed.
After a night dreaming of a world where Prince Fielder takes a hometown discount and Jonathan Lucroy travels light, I awake eager to open the paper and find out the score. Only when I do, I find the paper telling me something I already know, that the game was late.
And therein lies the problem with newspapers; they tell us things we already know. Or, if you fancy the weather page, they tell us things we already know to be obsolete.
Some will point to investigative reporting. But do the infrequency of these reports demand a daily? Why can’t the Journal Sentinel start a weekly magazine dedicated to investigative reports while leaving its day-to-day news reporting online?
And it is drama. Perhaps it started as news, but the battle between Flynn and the Journal Sentinel has become larger than the original story. This bodes well for newspaper sales; people love drama. The great urbanist Lewis Mumford gives a framework as to why.
Mumford’s basic idea was that humans have an innate need for drama. In the past, people satisfied that need through the hunt and battle. However, food security and government required that human beings go elsewhere for their drama fix.
Enter cities. Cities have high art, sidewalk conversation, and sports. But they also have political dramas that play out on the pages of the daily newspaper. Sure, we have blogs full of political drama, but nobody saves a blog post with a dramatic headline. There is something about a printed page that makes a story feel more legitimate and exciting
The Flynn spat will run its course and the decline of the daily will continue. However, I am thankful for each little piece of drama chronicled by the Journal Sentinel that allows me to extend my morning date with the printed page one more day.
Today I am going to dig a little deeper into the demographic profile of Milwaukee’s independent charter school sector. In 2011-2012 18 independent charter schools operated in Milwaukee. Seven were authorized by the City of Milwaukee, and 11 were authorized by UWM.
Below is a comparison of the demographics of independent charter school students with the demographics of Milwaukee Public Schools (MPS) students. All data is from the Department of Public Instruction.
City of Milwaukee: 2,431
City and UWM: 6,730
Percentage of Minority Students
City of Milwaukee: 95.9%
City and UWM: 94.0%
Percentage of Low-Income Students
City of Milwaukee: 81.0%
City and UWM: 80.6%
Percentage of Special Needs Pupils
City of Milwaukee: 11.2%
City and UWM: 9.3%
I have three takeaways from this information:
1) Independent charter schools, like schools in MPS and the Milwaukee Parental Choice Program, are serving an overwhelmingly low-income minority population.
2) There are no significant demographic differences between the students attending City and UWM charters.
3) Independent charter schools enroll a smaller percentage of students eligible for special education services compared to MPS.
Money is not everything in education. In fact, there is little direct correlation between education funding and academic outcomes. This does not mean money does not matter in education. It does, especially when it comes to teacher compensation.
Though the predicted mass lay-offs did not come to fruition last year, teachers across the state did experience reductions in take-home pay. These reductions were largely caused by increased pension and health care contributions used by districts to offset the 5.5% per-pupil reduction in state and local money going to K-12 education.
But put yourself in teachers’ shoes. Many are taking home less pay today for doing the same work they were doing yesterday. I would be upset too.
The good news is the per-pupil revenue limit will go up $50 next year. This means school districts will be able to raise an additional $50 per-pupil through a combination of state aid and local property tax. Hopefully districts will use some of this modest funding increase to raise take home pay for teachers.
The after effects of the past 16 months are likely to linger for a while; money alone will not stop public sector employees from feeling they are under attack. However, reversing some of the fiscal pain felt by teachers last year is a step in the right direction.
Marquette pollster Charles Franklin ought to get a raise. His May 30th poll of likely Wisconsin voters showed Scott Walker with a seven-percentage point advantage over Tom Barrett. Sure enough, Walker won the recall by seven percentage points.
I hope Walker’s win will be a cautionary tale against using recalls to settle policy disagreements. It is mind-boggling to consider the amount of time, money, and energy spent simply to retain the status quo.
I hope Wisconsin citizens of all political stripes will respect the important role played by public employees. Our public institutions and the employees that run them are key to Wisconsin’s quality-of-life and economic future. To that end, I hope new state revenues can be used to restore reductions in take-home pay for public employees.
I hope public employees are open to new approaches to service delivery in a post-collective bargaining world. A Government sector built on collaboration and mutual respect between public employees and management will be more productive than one built on mutual distrust.
I hope Tom Barrett will focus on being an advocate for the City of Milwaukee. His concession speech was classy, and the state’s largest city needs an advocate as sincere as I believe Barrett is.
I hope the urban non-urban divide so evident in the recall campaign is not a permanent fixture of Wisconsin politics.
Finally, I hope we can regain a little bit of civility, and really dignity in our public discourse. Dismissing policy ideas because of the messenger only guarantees good ideas will be wasted.
Yes, we are tantalizingly close to the end of a historic time in Wisconsin politics. I have written before that I do not like the idea of recalls, but I would be lying if I said I was not enjoying the excitement of today. With my older son accompanying me, I was voter 101 at Clement Avenue School this morning. The place was buzzing.
As is the street outside the coffee shop where I am typing this. A few anti-Walker folks are holding signs and yelling at cars. Some cars are honking in support, and some drivers are even stopping to argue. Somehow watching these democratic scenes while CNN covers the royal family makes me particularly happy.