The Milwaukee Public Schools (MPS) is, according to an updated actuarial analysis, continuing to make progress towards reducing its long-term legacy costs.  Last November the MPS board took several actions that were estimated to reduce their unfunded liability costs by $900 million.  The reduction was significant considering earlier forecasts showed MPS liability costs growing from $2.2 billion to $5 billion by 2016.

Turns out things are looking even better.  The updated analysis shows MPS’s actuarial liability as of July 1, 2011 to be $1.39 billion dollars.  If the previously mentioned board actions were not taken, the liability would have been $2.76 billion.  In other words, MPS’ situation improved by almost $1.4 billion.

Why is this reduction so important?  It frees up money for the classroom.  Legacy costs are an annual budget item that leave less funding available for teacher salaries, technology, facility costs, etc.  They are a main reason the number of MPS teachers has decreased by 28% (and the number of teacher’s aids by 38%) since 2003 while student enrollment decreased by only 18%.

The good news does not mean MPS’ financial problems are solved.  Superintendent Gregory Thornton put it well in the district’s press release:

“It has not been easy, but our actions have, without question, worked to stabilize this district amid continuing tough financial challenges. We have taken an unsustainable liability and made it more sustainable. As I have shared with the Board, there is more work to do.”

According to the same press release, Act 10 made most of the district’s cost savings actions, including increasing employee benefit contributions, freezing salaries, and introducing furlough days, possible.  Having already extracted savings by increasing the fiscal burden on current employees, MPS will need to explore other avenues to make further progress.  Such avenues include continuing to embrace the use of non-instrumentality charter schools, blended learning, and other innovative cost-saving approaches to education.

Legacy costs continue to be a serious long-term structural problem for MPS.  However, their new actuarial report shows steps to address this problem are keeping comparatively more dollars in the classroom.  The MPS board and Superintendent Thornton deserve credit for using their post-Act 10 power to address a longstanding problem; their actions benefit Milwaukee students and teachers.

UPDATE:

The September 18th Milwaukee Journal Sentinel story on this topic states:

Though the savings can’t be used for classroom expenses, it shrinks a looming financial burden to meet promises to retirees in the form of health care and other nonpension benefits

While true that MPS cannot turn around and put $1 billion into the classroom, reducing the overall liability does impact the annual cost of servicing its long-term legacy costs, freeing up dollars for the classroom.