BUDGET BRIEF:

2019 Proposed Budget

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Budget Brief:
2019 Proposed Budget
Milwaukee Public Schools
MAY 2018

Report Authors:
Anne Chapman, Senior Researcher
Rob Henken, President
Douglass Day, Researcher

 Ta b l e o f C o n t e n t s
Introduction .................................................................................................................................................. 3
Budget Overview .......................................................................................................................................... 5
Revenue.................................................................................................................................................... 5
Expenditures............................................................................................................................................. 7
Keys to Understanding the 2019 Proposed Budget ............................................................................... 10
Key 1 – State, local, and federal revenues decline in 2019 ............................................................. 10
Key 2 – The impact of enrollment ....................................................................................................... 12
Key 3 – Employee and retiree health care benefits drive the structural deficit ............................... 14
Key 4 – Continued transfer of property tax levy from construction to school operations................ 15
Key 5 – School revenues and positions reduced ............................................................................... 18
Key 6 – Cuts to central services, but the impacts are difficult to decipher ...................................... 20
Long-Term Prognosis ................................................................................................................................ 23
Conclusion ................................................................................................................................................. 26

We would like to thank the Greater Milwaukee Foundation and Northwestern Mutual Foundation
for their generous support of our education research.

This analysis of MPS’ 2019 proposed budget refers to the budget recently submitted to the
Milwaukee Board of School Directors by the Milwaukee Public Schools Superintendent. The
budget covers the school district’s 2019 fiscal year, which takes effect on July 1, 2018, and runs
through June 30, 2019. Also, it should be noted that while the School Board will adopt a tentative
budget later this month and the fiscal year will begin in July, the budget will be revisited by the
Superintendent and Board in the fall after the district receives final aid amounts from the State
of Wisconsin. A final property tax levy amount for 2019 also will be established at that time.

2

 I nt r o d u ct i o n
Last May, in our analysis of the 2018 Milwaukee
Public Schools (MPS) proposed budget, we warned
that while “significant cuts to the teacher workforce
and major changes in educational programming” had
been averted for that year, “considerable heavy lifting
will be required to avoid such undesirable
consequences in future budgets.”
Little did we know how prescient that warning would
be. With no major initiatives to control costs outside
the classroom – and with revenues declining and
fringe benefit costs rising – the 2019 proposed
budget originally leaned heavily on reductions to
school budgets to bridge a $30 million budget “hole.”
A total of 147 positions would have been cut across
the district, including 80 teachers.
The difficulty associated with the 2019 budget is
heightened by the fact that relatively painless cuts to
school budgets already occurred this year, leaving
little room for reductions in the coming year that will
not impact classrooms. Furthermore, a health care
surplus and budget maneuvers that helped ameliorate
budget pressures prior to 2018 – and that even
created opportunity for investment in new initiatives –
have been exhausted.

INTERIM
SUPERINTENDENT
BUDGET
ADJUSTMENTS
Shortly before this report’s release, the
interim MPS superintendent announced a
series of budget adjustments that would
restore $11.6 million to school budgets,
thus eliminating the need for a 5% per
pupil reduction to discretionary school
spending that had been included in the
original proposed budget.
Given the late nature of the
announcement and our desire to publish
this report prior to the School Board’s final
budget deliberations, we went to press
without having the opportunity to
thoroughly analyze the proposed
adjustments. We do make reference to
them where applicable throughout this
report, but our analysis (as well as all
tables and charts) largely reflects the
original proposed budget, and generally
does not consider any subsequent
adjustments or any amendments
proposed by School Board members.

In light of these factors, MPS administrative and fiscal
officials did suggest significant additional changes to
employee benefits, as well as diminished
transportation services, as options to reduce potential cuts in school budgets. Those suggestions
were mostly rejected by the Board of School Directors in pre-budget meetings, however, and they are
not included in the proposed budget. Instead, the original proposed budget used reductions to
schools and targeted cuts to central office appropriations as the primary deficit reduction strategies.
Several budget adjustments recently proposed by the interim superintendent use revenue recalculations and reductions to certain school supports and central services to dramatically reduce
negative impacts on school budgets. However, while a budget crisis may have been averted for one
more year, two alarming conclusions remain.
The first is that MPS has lost any financial capacity – both in the 2019 budget and for the
foreseeable future – to make and sustain new strategic investments to boost enrollment and
enhance academic achievement. The second is that without a bold and strategic plan to “right size”
its operations and address its structural budget woes – and/or barring any influx of new funding
3

 from Madison or Washington – continued erosion in school spending and MPS’ teacher workforce
appears inevitable.
In the following pages, we provide more detailed analysis of the major elements of the 2019
proposed budget, as well as the root causes of the district’s budget difficulties and what they
portend for the future. After an overview of key revenue and expenditure issues, we hone in on six
“keys” to understanding the budget, and then share our long-term prognosis. Our objective is to
provide an independent assessment of MPS’ finances that will encourage informed deliberations by
policymakers in Milwaukee and Madison.

4

 B u d g e t Ov e r v i e w
MPS' proposed 2019 budget reprises past themes of declining revenues and rising cost pressures,
which require difficult decisions across its range of schools, central office functions, and
infrastructure. Unfortunately, a second consecutive arduous budget confirms this is again the
“normal” state of affairs for the district, while 2016 and 2017 were the outliers.
In those earlier years, MPS leaders were able to secure resources for new positions and programs
via the strategic use of health care surpluses and transfers from the construction fund to school
operations. There was recognition, at the time, that those strategies would be short-lived. Yet, there
was hope the district’s short-term revenue situation would improve sufficiently to sustain the new
initiatives, which in turn would improve academic achievement and boost enrollment in ways that
would enhance long-term revenue prospects.
Similar to 2018, the 2019 proposed budget shows those hopes have not been realized. While MPS
will receive a $15.6 million increase in state per pupil aid per the 2017-19 state budget, its stateimposed revenue limit for combined equalization aids and property tax levy is $20.5 million lower
than in 2018. Enrollment losses at MPS and other adjustments associated with the revenue limits
are mainly responsible for this funding decrease. Overall, revenues are down $10.9 million from
2018 to 2019.
On the expenditure side, the main cost pressures come from fringe benefits and salaries, which at
the start of budget preparation were projected to rise by about $19 million and $8 million,
respectively. While the health care projection ultimately was reduced by about $5 million based on
2018 year-to-date experience – and while the increase in salaries is linked in part to 2.13% cost-ofliving raises – these are ongoing pressures the district continuously must accommodate within its
constrained revenue picture.
Below, we provide a synopsis of the major revenue and expenditure items that characterize MPS'
original 2019 proposed budget. Detailed analysis of key budget items is provided in later sections.

Revenue
The $10.9 million (0.9%) revenue decrease in 2019 is distributed across three of MPS’ five major
funds. As shown in Table 1, only the nutrition and extension funds – two funds that are only indirectly
related to instructional capacity and operations – would see increased revenues in the coming year.
Table 1: MPS revenues by fund, 2018 vs. 2019 (in millions)
Fund
School operations
Categorical
Construction
Nutrition
Extension
Total

2018 Budgeted

2019 Proposed

$938.7
$163.8
$5.5
$51.5
$24.8
$1,184.2

$936.6
$152.0
$2.4
$54.8
$27.5
$1,173.3

Source: MPS budget documents

2018 to 2019
% change
(0.2%)
(7.2%)
(56.5%)
6.4%
10.9%
(0.9%)

5

 School operations – MPS' largest fund – is budgeted to decrease by $2.1 million (0.2%). This cut
largely reflects the $20.5 million decline in combined equalization aid and property taxes, which is
partially offset by the $15.6 million rise in state per pupil aid. Increases in lesser revenue sources –
including $1.4 million in new summer school aid from the state – trim the total decline.
It is important to note that while MPS schools are negatively impacted by flat state revenue limits,
Milwaukee property taxpayers are benefiting. In fact, according to the budget document, the property
tax rate for school purposes in Milwaukee has dropped from $10.66 per $1,000 of assessed
property value in 2015 to $8.52 in 2018. 1
The reduction in construction fund revenues reflects continuation – for a third consecutive year – of
the transfer of property tax levy previously allocated for facility maintenance and repairs to school
operations. This tactic originated with a $9.5 million transfer in 2017, which MPS officials justified as
a one-time measure to free up funds for new program initiatives. The practice continued in 2018,
and an additional $3.1 million transfer is proposed in 2019, leaving only $2.4 million in new tax levy
for the construction fund. Officials defend the move by pointing to a healthy surplus of unspent bond
proceeds from prior years; they plan to draw down $15 million in 2019 to finance needed projects.
Another troubling development in the 2019 budget is the substantial (7.2%) reduction in categorical
aids, which come from state, federal, and private sources mainly to fund activities related to special
populations of students. The largest source of categorical aids – by far – comes from the federal
Title I program, which serves schools with high percentages of low-income families. Title I funding is
budgeted to decrease by $5.5 million (7.7%) in 2019. MPS also is budgeting a $2.4 million reduction
in private grant funding, in part because a multi-year grant from the GE Foundation is winding down. 2
The stagnant nature of MPS' overall revenues is not a new development. As shown in Chart 1, when
considering combined revenues in the school operations and categorical funds – which are those
most directly related to teaching and learning – the 2019 proposed budget contains only $4.8
million more (0.4%) than the 2015 budget. As we will discuss throughout this report, this limited
revenue growth poses huge challenges for MPS given its extensive expenditure pressures.

These property tax rates apply to calendar years, but they are established by MPS’ budget, which is based on
a July 1 through June 30 fiscal year. In other words, the 2018 property tax rate was established by the district’s
fiscal year 2018 budget, which was initially adopted in May 2017 and then adjusted in the fall. Property tax
rates are established in the fall after property tax amounts are determined based on final aid amounts from
the State of Wisconsin.
2 The interim superintendent’s proposed budget adjustments would add $2.9 million in federal categorical
funds based on re-calculations. Even with this increased amount, categorical funding would decline by about
$9 million in the 2019 budget.
1

6

 Chart 1: MPS school operations and categorical fund budgeted revenues, 2015-2019 (in millions) 3

$169.3

$159.8

$166.6

$168.9

$157.3

$919.8

$930.9

$928.3

$938.7

$936.6

2015

2016

2017

2018

2019

School Ops

Categorical

Source: MPS budget documents

E x p e n d it u r e s
MPS enjoyed relative budget calm in 2016 and 2017 because of decisions to reallocate resources
from retirement accounts and the construction fund to school operations. Those moves not only
offset inflationary cost pressures in those years, but also allowed the district to invest in
programmatic initiatives that reflected strategic priorities.
The ability to make those transfers came largely from substantial reductions in fringe benefit
expenditures. In 2010, a new four-year teachers’ contract included restructuring of health care
benefits, which slowed the growth of health care spending. Enactment of Wisconsin Act 10 in 2011
helped create further savings, as a greater share of pension and health care costs were paid by
employees, while the district also was able to make additional changes to benefits without being
subject to collective bargaining.
Changes to MPS' benefit structure also had the indirect effect of curtailing the district’s salary
budget. The phase-out of certain benefits – such as eligibility for retirement at age 55 – precipitated
a spike in retirements. As lower-salaried, less-experienced employees replaced higher-paid retiring
teachers and staff, additional savings became available to reallocate to district priorities.
This situation changed dramatically in 2018, when the district was required to restore $36.6 million
for other post-employment benefit (OPEB) liabilities and other capital and pension-related debt. In
addition, health care expenditures unexpectedly spiked, creating the need for sizeable cuts to school
budgets. The impact was reduced somewhat, however, by the district’s ability to allocate cuts to
areas that had significantly expanded in the previous two budgets, thus leaving some areas of school
spending still better off than two years earlier.

The figures for categorical revenues in this chart differ from those in Table 1 because the chart does not
reduce the categorical fund total to account for indirect costs.

3

7

 For 2019, the fringe benefit challenge remains intense. In fact, when MPS fiscal officials laid out the
2019 budget forecast for the School Board this past January, they projected a need to spend $18.6
million more for employee and retiree health care than had been budgeted in 2018. Furthermore,
salaries were projected to increase $8 million to accommodate a roughly 2% cost of living pay
increase. Those and other projected increases added up to a $38 million projected budget gap,
which later was reduced to about $30 million as budget details were clarified.
Table 2 shows how the original proposed budget reconciled this challenge on the expenditure side.
By cutting 146.5 positions (125 school-based and 21.5 in central services) – while also benefiting
from a reduction in original health care spending projections based on year-to-date 2018 experience
– the budget was able to realize a small ($1.6 million) reduction in combined salary and fringe
benefit spending from 2018 while still accommodating a 2.13% pay increase for employees.
Purchased services and supplies budgets also were reduced by a combined $10.6 million to help
bridge the gap.
Table 2: MPS expenditures by category, 2018 vs. 2019 (in millions)
Expenditures

2018
Budgeted

2019
Proposed

2018 to 2019
% Change

Salaries & Fringe Benefits

$776.7

$775.1

(0.2%)

Purchased Services

$294.5

$289.9

(1.6%)

Debt Service

$35.0

$36.3

3.7%

Supplies

$62.2

$56.2

(9.6)%

Insurance

$9.7

$9.9

2%

Capital Expenses

$5.0

$4.1

(17.6%)

Other (including indirect)

$1.0

$1.8

80.0%

$1,184.2

$1,173.3

(0.9%)

Total
Source: MPS budget documents

The $1.3 million increase in debt service and $900,000 reduction in capital expenses –while
minimal in the context of a $1.2 billion budget – also are worth noting. MPS’ outstanding debt
increased from $349.8 million in 2012 to $382.8 million in 2017, in part because of an opportunity
to borrow for energy efficiency improvements without having the resulting debt service count toward
revenue limits. Meanwhile, as noted above, annual property tax levy support for capital expenses has
diminished because of the transfer of levy from the construction fund to school operations.
The need to reduce projected increases in benefits and salaries places the greatest burden on MPS
schools, as schools and school accounts comprise 80% ($936.6 million) of the district’s $1.2 billion
budget. In fact, the reductions in salaries/benefits and supplies shown in Table 2 emanated largely
from decisions required by individual schools, which originally were hit with a 5% per-pupil reduction
in their discretionary spending allocations. While the impact would have differed from school to
school, the absence of “cushion” from prior year increases and the sizeable reductions that already
occurred last fall (when a mid-year budget hole was discovered) strongly suggested that impacts
would have been felt in classrooms.
Finally, consideration of the proposed expenditure budget for 2019 also should take into account
expenditure reduction strategies that were not included. In early April, prior to development of the

8

 final proposed budget, administration officials presented the School Board with options to reduce
the cuts to per pupil school allocations, including a series of health care benefit changes and
extensive changes to transportation services. Those options were largely rejected, though the Board
did eliminate a disability benefit that will produce $2 million in annual savings.
It is also worth noting that the proposed budget does not move to implement any recommendations
from a study for the district’s Long-Range Facilities Master Plan, which is intended to address its
future facility needs in light of sharp enrollment declines over the past several years. The study –
published in March – finds the buildings housing MPS traditional schools have capacity for 78,000
students but only house about 67,000. The study may offer a roadmap to reduce the number of MPS
facilities and produce substantial annual operating savings. Unfortunately, it also identifies hundreds
of millions of dollars of investment needs in facilities the district will need to retain, which would
drive up capital spending and debt service in future budgets.
In the next section, we provide more detailed analysis of key revenue and expenditure items that
drive MPS’ budgetary decision-making for 2019.

9

 K e ys t o U n d e r sta n d i n g t h e
2 0 1 9 P r o p o s e d Bu d g et
K e y 1 – Stat e , l o c a l , a n d f e d e r a l r e v e n u e s d e c l i n e
in 2019
The combination of state aids and local property taxes comprises 77% of the district’s total revenues
in the 2019 proposed budget and 97% of school operations revenues. These revenue sources are
projected to decline slightly for next year (decreasing by $2.5 million or 0.3% relative to 2018).
Meanwhile, the next largest revenue source – categorical aids – declines by an even larger amount.
Why this is important
Flat or declining state/local revenue poses a serious threat to MPS’ ongoing fiscal stability in at least
two ways. First, the absence of growth in these revenue sources makes it exceedingly difficult for the
district to accommodate inflationary cost pressures in areas like fringe benefits and infrastructure.
Second, it renders the district extremely vulnerable to the volatility of its remaining revenue sources,
the most significant of which are federal and state categorical funds and private grant monies, which
collectively constitute 13% of the district’s overall budget.
Table 3 breaks down the revenue sources that comprise the school operations and categorical funds
and compares 2018 adopted to 2019 proposed totals. As shown, both funds experience a decline in
revenues in the district’s 2019 proposed budget.
Table 3: School operations and categorical fund revenue sources, 2018 vs. 2019 (in millions) 4
2018 Adopted

2019 Proposed

Inc/(Dec)

% Change

School Operations Fund
Property Tax Levy/Equalization Aids

$816.0

$798.2

(17.8)

(2.2%)

State Per Pupil Aids

$35.0

$50.6

15.6

44.6%

Other operating revenues

$87.7

$87.8

0.1

0.1%

$938.7

$936.6

(2.1)

(0.2%)

$135.4

$126.5

(8.9)

(6.6%)

$29.4

$29.1

(0.3)

(1.0%)

$4.1

$1.7

(2.4)

(58.5%)

$168.9

$157.3

(11.6)

(6.9%)

$76.6

$79.4

2.8

3.7%

$1,184.2

$1,173.3

(10.9)

(0.9%)

Subtotal - School Operations Fund
Categorical Fund
Federal
State
Private
Subtotal - Categorical Fund
All Other Revenues
(Nutrition, Extension, Construction Funds)
Total (Less Indirect)

Source: MPS budget documents

The interim superintendent’s proposed budget adjustments would restore $2.9 million in federal categorical
funds based on re-calculations. This table does not include the restored amount.
4

10

 General equalization aid, property tax levy, and revenue limit
The largest source of state aid for MPS and other Wisconsin districts is the equalization aid program,
which is tied closely to districts' property tax levies. Under state-imposed revenue limits, districts are
capped in the amount of money they can receive on a per pupil basis from equalization aids,
property taxes, and several additional minor sources. For instance, if state aid increases in a given
year yet per pupil limits remain the same, then the district must lower its property tax levy to meet
the flat per pupil cap. Funding subject to the revenue limit drives MPS’ fiscal health, comprising 85%
of the district’s 2019 school operations fund.
The 2017-19 state budget freezes MPS’ per pupil revenue limit at $10,122 per pupil in 2019.
Remarkably, the 2019 limit is only 1% more than that adopted for 2011. More important, because
MPS’ enrollment dropped between 2017 and 2018, its 2019 aggregate revenue under the limit
drops relative to 2018. Specifically, the impact of the flat per pupil revenue limit, the enrollment
decline, and technical impacts driven by the state equalization aid formula converge to drop MPS’
combined amount of general state aids and property tax levy by $17.8 million in 2019.
State per pupil aid
In 2011, the Wisconsin Legislature created the state per pupil aids program as an additional means
of providing general state aid for school districts. Because per pupil aids are allocated outside of the
revenue limit, they provide true increases in revenue to cover district operations. For MPS, per pupil
aids represent about 5% of the 2019 proposed operating budget, whereas aids under the revenue
limit make up 85% of the budget.
The good news for MPS is that an increase of $204 per pupil (to a total of $654) provides a $15.6
million revenue increase in 2019. This, coupled with a small source of new funding – state summer
school aid ($1.4 million) – and a slight drop in state aids for students with special needs ($1.7
million) brings the increase in the district’s 2019 state operating aid that is not subject to revenue
limits to $15.3 million.
While extremely helpful to MPS, however, this increase does not fully offset the revenue reductions
associated with the revenue limit. In fact, when we also consider miscellaneous changes in other
small revenue sources, we see that total school operations revenue declines by $2.1 million relative
to 2018. Moreover, despite a projected increase in MPS enrollment in 2019, because the revenue
limit’s enrollment calculation is based on a three-year rolling average, the district is preparing for a
continued decline in state and local revenues in 2019 and 2020.
Categorical revenues
Unfortunately, the district’s next largest revenue fund – its categorical fund – is projected to see an
even larger revenue decline in 2019. Categorical aids are special purpose revenues that serve
specific student populations. They come mostly from federal sources, which consistently comprise
about 80% of categorical aids annually.
Most of MPS’ federal categorical aids are earmarked to schools or programs that serve economically
disadvantaged students. As with state equalization aids, these sources are subject to shifts in public
policy and changes in economic status of other districts across the state (i.e. if other districts grow
11

 poorer, they may be eligible for greater shares of a finite pool of such aids). Also, beginning with the
2018 budget, changes to the federal formulae for distributing certain monies steered a larger share
of the state’s federal aids to Milwaukee private schools, thus diluting the amount flowing to MPS.
The most serious hit to the district’s revenue budget for 2019 is a substantial reduction in federal
categorical aids (this was originally cited as an $8.9 million reduction but the interim
superintendent’s proposed adjustments restore $2.9 million – for a revised total cut of $6 million –
based on new information). The reduction in federal categorical aids, along with the first drop since
2015 in private grant monies ($2.4 million) and a $0.3 million dip in state categorical aids, originally
created an $11.6 million revenue hole for 2019.
Overall, these fundamental revenue challenges – which have dominated MPS’ annual budget
deliberations for several years and are projected to continue into the future – typically leave MPS
with little recourse but to balance its budget with a variety of expenditure reductions that ultimately
affect classrooms, teachers, and students. We discuss the implications in the pages that follow.

Key 2 – The impact of enrollment
After a 1.7% dip in enrollment in 2018 (about 1,300 students), the district’s proposed 2019 budget
projects a modest one-year increase (0.7%, or about 500 students). Then, over the next five years,
the budget forecasts annual growth of more than double that amount, primarily in charter and other
contract schools. This is despite an expected future decline in the number of school-age children in
Milwaukee and the possibility of continued expansion of non-MPS charter and voucher schools.
Why this is important
The vast majority of MPS’ revenues are driven by enrollment and subject to unpredictable shifts in
state or federal policy. Because of the linkage between enrollment and the district’s largest revenue
source – combined equalization aids and property taxes – even relatively small enrollment declines,
such as the loss of 1,335 students between 2017 and 2018, produce meaningful budgetary
pressures for the district.
In addition to impacting district revenues, falling or unstable enrollment compromises the district’s
operating efficiency by increasing costs per student. Fixed costs such as employee health care,
facilities maintenance, and even administrative costs generally do not decrease in lock step with
enrollment declines.
Two concerning enrollment trends appear to be converging to threaten future revenue growth for the
district: a shrinking pool of school-age children and continued growth in independent charter and
private voucher schools. In fact, a study that is intended to be a precursor to a Long-Range Facility
Master Plan, which was published earlier this year, projects enrollment in traditional MPS schools to
fall by more than 6,700 students over the next 10 years.
In contrast, Chart 2, reproduced from the 2019 proposed budget, paints an entirely different picture.
The chart depicts a scenario where enrollment in school buildings/programs within the MPS system

12

 grows by 8.3% (6,333 students) between 2019 and 2023. That is about the same amount as the
Long-Range Facility Master Plan study predicts traditional enrollment will drop. 5
Chart 2: MPS enrollment by school type, 2016 to 2023
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000

66,920

66,186

66,683

66,066

66,353

66,595

67,030

67,953

2015-16
Actual

2016-17
Actual

2017-18
Actual

2018-19
Projected

2019-20
Projected

2020-21
Projected

2021-22
Projected

2022-23
Projected

20,000
10,000
0

Traditional Schools

Alternative/Partnership/Contracted

Non‐Instrumentality Charters

Chapter 220 & Open Enrollment

Source: 2019 proposed budget

The district explains these apparently conflicting predictions by showing different projected growth
rates among the three main categories of MPS schools. Traditional schools are projected to generate
a modest increase over the next five years – 1,887 students, or 2.9% growth above the levels
projected for 2019. More important, however, is a projected 40% increase in enrollment in noninstrumentality charter schools (about 3,000 students). Similarly, contracted and partnership
schools (generally schools that provide alternative programming to students at risk of dropping out)
are expected to grow at almost double that clip (72%) to add about 1,300 students by 2023.
How does MPS plan to deliver on this aggressive enrollment projection? MPS officials and budget
documents provide few details. In broad strokes, they hope to leverage a future Long-Range Facility
Master Plan to “right size” district facilities in alignment with expected enrollment. This could include
some combination of restructuring, merging, closing, renovating, repurposing, or building new school
facilities. The district also expects to continue to expand and improve its educational offerings,
especially in the STEM fields. The resulting refresh of the district’s built and educational environment
and programming would allow MPS to embark on an aggressive outreach and branding campaign to
attract a larger share of Milwaukee’s K-12 population.

The numbers shown in the chart reflect enrollment in traditional and instrumentality charter schools (i.e. the
blue portion of the bar), and not total enrollment.
5

13

 A key question is whether the district will have the financial capacity to carry out this plan. The LongRange Facility Master Plan study rates a third of MPS’ school facilities in poor or unsatisfactory
condition and more than half in fair condition. The estimated cost of upgrading all schools to achieve
ratings in the middle of the “good” range exceeds $969 million. That, in addition to the deep
investments that arguably would be needed for programmatic improvements to attract new students,
certainly raises concern about the feasibility of MPS’ enrollment projections.
Yet, while projecting future enrollment numbers is an inexact science, the stakes that are involved
are much more precise. MPS seemingly has no choice but to attempt to successfully compete for a
shrinking number of K-12 students, yet its ability to do so diminishes with each successive year of
budget cutting. The interrelated yet contradictory nature of this set of circumstances is one of the
most serious dilemmas facing MPS policymakers and stakeholders.

Key 3 – Employee and retiree health care benefits
drive the structural deficit
Spending on employee and retiree health care comprises 15% of MPS’ total 2019 proposed budget
and is projected to grow by $44.2 million (25%) between 2019 and 2023. After several successive
years of relief from 2012-2016, health care spending again has become one of the key drivers of
MPS’ structural deficit.
Why this is important
Combined health care costs for both active employees and retirees continue to rank among the
district’s largest and fastest growing categories of spending. As shown in Chart 3, budgeted health
care costs spiked in 2018. In fact, a re-calculation by district officials as part of the 2018 budget
adjustment process last fall contributed to considerable mid-year budget adjustments for schools.
Chart 3: MPS employee and retiree health care costs, 2016 to 2023 (in millions)

$111.0

$138.7

$147.2

$156.3

$121.7

$123.4

$130.8

$51.7

$52.3

$55.0

$57.7

$60.6

$63.6

2018

2019

2020

2021

2022

2023

Budgeted

Proposed

$117.4

$49.1

$33.0

2016

2017
Actual

Retiree Health Care (OPEB)

Projected
Employee Health Care

Source: MPS budget documents

14

 For 2019, the news is not as grim, as health care spending is projected to rise only 1.4% above the
2018 budgeted amount. That good fortune is linked to a recent actuarial analysis of 2018 year-todate spending, which has come in lower than budgeted and allows the district to calculate
inflationary increases from a smaller baseline. Nevertheless, even an increase of 1.4% requires an
additional $2.4 million for health care in 2019, which is a challenge given the district’s constrained
revenues. In addition, the 2019 budget reflects a 0.5 percentage point increase in fringe benefits as
a percentage of salaries to 53.8% (up from 43.2% only three years ago).
A cause for more concern is the projected growth of employee and retiree health care spending
levels over the next five years. Using actuarially estimated annual inflation rates of 5% for medical
costs and 12% for prescription coverage, Chart 3 shows health care costs would increase from
$175.6 million in 2019 to $219.9 million in 2023.
The administration recently proposed strategies to reduce the growth of fringe benefit and,
particularly, health care costs. Those included creation of an employee health clinic (with estimated
annual net savings of $700,000); and changes to the nature of the district’s health care benefit,
including increased copays, increased employee premium contributions indexed by salary level, and
a carve-out for employee spouses with access to their own employer health care. District officials
also proposed conversion of a seldom-used long-term disability benefit to one that employees could
voluntarily purchase.
All told, the benefits-related proposals offered an estimated $17.1 million in annual savings once
fully implemented, including $8.5 million in 2019. The School Board rejected all but the long-term
disability modification, however, which will generate annual savings of about $2 million.
Asking employees to shoulder more of the cost of their health care benefits is easier said than done.
The district considers its ability to offer competitive employee and retiree health care benefits to be a
key to attracting and retaining high-quality teachers and school leaders in an increasingly
competitive marketplace for talent. In addition, it should be acknowledged that employees already
have been asked to pay more for their health care as a result of recent collective bargaining
agreements and changes implemented by virtue of Wisconsin Act 10.
Yet, at the same time, this spending category is exerting intense and increasing pressure on the
district’s efforts to balance annual budgets. Given the narrow set of options available to the district
to confront its mounting fiscal crisis, it is difficult to see how it will be able to make ends meet in
future years without pursuing strategies to reduce the cost of health care benefits, notwithstanding
the negative consequences that may have on teacher retention and recruitment.

K e y 4 – C o n t i n u e d t r a n s f e r o f p r o p e r t y ta x l e v y
from construction to school operations
For the third consecutive year, MPS is budgeting only minimal property tax levy in the construction
fund to ensure more property tax resources are devoted to the school operations fund.
Consequently, construction fund projects will be financed mainly with prior year bond proceeds in
2019. Although a full restoration of property tax levy is proposed for 2020, the timing for the return
of these funds remains uncertain.

15

 Why this is important
The construction fund is one of three MPS accounts that receive property tax revenues (in addition to
school operations and extension). The construction fund mainly finances major maintenance costs,
as well as larger capital remodeling projects at school buildings. MPS is challenged by its ownership
of dozens of older buildings with considerable facility needs, and securing the resources to address
its maintenance backlog has been a long-standing fiscal and programmatic concern.
As shown in Chart 4, prior to 2017, MPS regularly appropriated $12 to $14 million in new revenue to
the construction fund each year, the bulk of which was derived from property taxes. In 2017, the
fund’s property tax appropriations dropped from $10.6 million to $1.1 million, and in 2018 they
stood at $3.9 million. These diminished amounts were linked to decisions to use the property tax
dollars instead for school operations.
In the 2019 proposed budget, MPS continues to sharply curtail its property tax allocation to the
construction fund as a means of boosting the school operations fund, leaving $1.3 million in
property tax revenues and $1.2 million in other revenues. The $2.5 million would represent the
lowest total, by far, in the five-year period. An additional $9.3 million in property tax levy would be
needed to restore the construction fund’s levy amount to the 2016 level.
Chart 4: Construction fund appropriations, 2015 to 2019 (in millions)

$4.0

$9.6

$1.0

$10.6

$1.6

$5.2

$3.9

$1.2
$1.3

2018

2019

$1.1
2015

2016

2017
Property Tax Levy

Other

Source: MPS budget documents

As property tax levy appropriations diminished in the past three years, the district has sought to keep
pace with major maintenance projects by replacing those dollars with borrowing proceeds. In 2017
and 2018, MPS drew upon unused proceeds from past issuance of Qualified School Construction
Bonds for this purpose. This federal program, created by the American Recovery and Reinvestment
Act of 2009 (ARRA), awarded interest-free loans for school rehabilitation and reconstruction costs.
In December 2017, MPS also issued $34.9 million in new Qualified School Construction Bonds to
finance major maintenance projects. The district has three years to spend these funds. The
proposed budget anticipates that MPS will draw on $15 million of the bond proceeds in 2019, with
16

 remaining funds expended in succeeding years. Fiscal officials do not anticipate full use of the
surplus funds in 2020 since the current plan is to restore the $9.3 million in that year.
In both the 2017 and 2018 budgets, MPS officials similarly indicated they would restore property tax
appropriations in the construction fund to the 2016 level in the following budget year, but school
operations priorities precluded them from doing so. That raises doubt about the return of these
funds in 2020 (notwithstanding the plan in the proposed budget). MPS officials acknowledge that full
restoration is not a certainty, but they say if property tax levy is not fully restored as planned in 2020,
then available bond proceeds will be drawn down at a faster rate to pay for maintenance costs that
otherwise could not be funded.
It is important to note the relationship between construction fund financing and debt, as efforts to
maintain construction fund activity through increased borrowing also have pushed up the district’s
annual debt service payments. In particular, as MPS has pursued unique borrowing opportunities, its
debt total has increased. Those opportunities include not only the interest-free ARRA borrowing
noted above, but also an opportunity provided by the state to issue debt for energy efficiency
projects while having the debt service fall outside of the district’s levy limit calculation.
Overall, the district’s outstanding debt increased by 12% in the past five years, from $342.2 million
in 2013 to $382.8 million in 2018. Meanwhile, principal and interest payments on that debt are
budgeted at $36.3 million in the 2019 proposed budget, which is up from $35.0 million in 2018.
To ease the budgetary pressure associated with higher debt, MPS officials have structured annual
debt service payments for various bond issuances to rise when the debt incurred for the district’s
Neighborhood Schools Initiative is paid off in 2023. This repayment schedule will smooth total debt
service payments over many years and reduce the severity of annual increases in the near term.
Furthermore, MPS officials point out that the district’s overall level of borrowing falls well below state
statutory restrictions and is modest in comparison with similar urban school districts. Per the budget
document, recent data from the Council of Great City Schools show the ratio of outstanding principal
debt to annual district revenue stands at 32.4% for MPS, while the median urban district’s debt ratio
is much higher at 75%.
Replacing property tax levy outlays with increased borrowing to address deferred maintenance is not
a preferred budgetary practice. Still, given MPS’ current fiscal condition and its relatively strong debt
position, the district’s course of action does not seem unreasonable if pursued as a temporary,
short-term measure. This option seems better than the alternative of reducing annual maintenance
expenditures, a tactic many districts and local governments have adopted during periods of fiscal
stress.
Nevertheless, the timing of the recent increased reliance on borrowing is not ideal. Subsequent to
budget adoption, MPS leaders will gear up to consider a facilities master plan, which likely will
necessitate substantial investment in the district’s facilities even as it downsizes its overall footprint.
Consequently, increased debt totals and the recent upward trajectory of debt service payments may
loom large in determining the affordability of that plan.

17

 Key 5 – School revenues and positions reduced
The district’s stated objective in closing next year’s $30 million budget gap was to undertake cuts
that minimized impacts on schools, instruction, and supports for students. However, because the
vast majority of staffing and spending occurs in schools and school accounts, the budget originally
proposed a 5% cut to schools’ per pupil discretionary allocations and elimination of 125 schoolbased positions.
Why this is important
Schools receive their annual budget allocations through a variety of separate categories, as shown in
Chart 5. The largest of those is “board per pupil” revenue. This is the main component of a school’s
discretionary budget and makes up about 36% of a school’s total direct allocation.
Chart 5: Proposed 2019 school allocations by category
Board Per Pupil

35.7%

Special Education

23.8%

Grants

10.2%

School Office

7.0%

Regular Ed. Transportation

5.0%

Nutrition

4.6%

Buildign Services

4.0%

Art, Music, P.E., Library
Special Ed Transportation

3.4%
2.6%

School Safety

1.3%

School Counselors

1.2%

World Languages

1.1%

Supplemental Support

0.2%

Source: MPS Administration

The starting point for a school’s board per pupil allocation is a base allocation for every student
enrolled in a given year. The base per pupil amount differs slightly by grade level. For 2019, the
proposed budget originally reduced the base by 5% as its primary budget-cutting strategy. 6 Table 4,
which breaks down per pupil reductions by type of school, shows the cuts would have ranged from
$169 to $183 per pupil. The district estimated $11.6 million in savings from these reductions.

These cuts do not apply to non-instrumentality charter and partnership schools, which are funded through
different methodologies.

6

18

 Table 4: Board per pupil spending cuts by type of school
School Type

2018

2019

Change
(5% Cut)

High School

$3,470

$3,294

($176)

Middle School

$3,332

$3,163

($169)

K-8

$3,652

$3,469

($183)

Elementary

$3,647

$3,465

($182)

Source: MPS Administration

The board per pupil spending category includes operational costs such as salaries and benefits for
teachers and educational assistants, supplies, and purchased services. Certain schools receive
additional allocations within their discretionary funds for specific programming or needs. Also,
schools receive additional targeted funding above the board per pupil amount to support a variety of
specialized supports and programming.
It is important to note that only the board per pupil category was subject to the 5% cut. According to
district officials, centrally funded programs and supports for schools generally would have been
maintained close to 2018 levels. Consequently, the overall impact on a school’s budget would have
been closer to 1.7%.
In light of the magnitude of these cuts to school allocations, it was inevitable that positions would
need to be reduced. Overall, the proposed budget originally cut 147 full-time equivalent positions
(FTEs), which would have followed a reduction of 323 positions during the 2018 budget cycle. In
terms of impacts on classrooms, 80 teaching and 49 educational assistant positions were proposed
for elimination after a loss of 166 teachers and 113 educational assistants in 2018.
As this report was going to press, the interim superintendent proposed a series of adjustments that
restore the $11.6 million in per pupil spending to schools. Among the changes that allow these funds
to be restored are identification of additional federal revenues, reductions in salary accounts to
reflect a larger number of assumed vacancies, elimination of extra supports for schools, additional
central services reductions, and additional savings attributed to the previously mentioned change in
long-term disability benefits.
If accepted by the School Board, the adjustments likely will give considerable leeway to individual
schools to determine how to restore the 5% per pupil reduction to their discretionary budgets. It is
impossible to determine at this time how originally proposed position reductions would be impacted,
as the restored funding could be used for various purposes in addition to positions. We also cannot
determine how the newly proposed reductions in school support accounts will be implemented.
In the end, the proposed budget still will require schools to make choices and accept tradeoffs based
on their individual needs. For example, some schools may elect to accommodate 2019 budget
changes by employing fewer classroom teachers, thus potentially increasing class sizes. Doing so,
however, would allow them to accommodate competing needs, such as hiring art or music teachers,
employing more paraprofessional support, or offering a wider range of elective courses.

19

 Key 6 – Cuts to central services, but the impacts
are difficult to decipher
MPS officials originally cited reductions to central services in the 2019 proposed budget as evidence
that the administration has sought to spread the impacts of deficit reduction among both schools
and administrative functions. The proposed budget originally eliminated 21.5 FTEs from central
services and reduced spending in that area by $2.8 million when compared to 2018.
Why this is important
MPS’ central services consist of 10 main offices that provide support to schools, school activities,
and school personnel. Central services offices also house the administrative infrastructure –
including functions like finance and human resources – that allows for the operation of a system of
161 schools serving 76,000 students. According to MPS officials, the district spends 19.4% of its
budget on what the Department of Public Instruction defines as “administrative” costs. This,
according to the district, places MPS below the statewide average of 21.3% and on par with other
large districts like Racine, Madison, Kenosha, and Green Bay.
Because central services offices support all of the district’s functions, the dollars appropriated to
central services do not exist in a single fund. Instead, central services draws its resources from other
funds. The largest funding source for these offices is the school operations fund, which in the original
proposed budget contributed about a third (35.6%) of the central services budget. About 8% of
school operations fund expenditures were devoted to central services. The rest of the central
services revenue budget was split between the categorical (26.3%), nutrition (26.4%), and extension
(12%) funds.
The original proposed budget for central services in 2019 was $207.3 million, which comprised
17.7% of total district spending. As shown in Chart 6, this was about a $2.8 million (1.3%) decrease
from 2018 but a $19.1 million (10%) increase from actual central services spending in 2015.
Chart 6: MPS central services expenditures, 2015 to 2019 (in millions)

$188.2

$185.1

2015 (Actual)

2016 (Actual)

$210.0

$207.3

2018 (Fall Adjusted)

2019 (Proposed)

$191.8

2017 (Actual)

Source: MPS Administration

20

 Table 5 shows how proposed central services expenditures originally were spread across various
offices. All but three offices realized a reduction in their overall budgets relative to 2018, while two
offices appeared to receive sizeable increases.
Table 5: 2019 proposed central services expenditures by office
2017-18 F.A.

2018-19 P.B.

Change ($)

Change (%)

Board/Office of Board Governance

$2,943,619

$2,574,015

($369,604)

(12.6%)

Accountability & Efficiency

$1,060,708

$901,602

($159,106)

(15.0%)

Superintendent of Schools

$1,350,117

$1,306,307

($43,810)

(3.2%)

Chief of Staff

$2,963,210

$2,817,030

($146,180)

(4.9%)

School Administration

$9,596,148

$8,956,742

($639,406)

(6.7%)

$50,460,344

$45,993,881

($4,466,463)

(8.9%)

OFFICE

Academics
Finance
Operations
Human Capital Services
Innovation
All Offices

Source: MPS Administration

$6,197,068

$5,648,409

($548,659)

(8.9%)

$103,098,207

$107,935,098

$4,836,891

4.7%

$5,765,766

$5,364,501

($401,265)

(7.0%)

$26,585,252

$25,759,500

($825,752)

(3.1%)

$210,020,439

$207,257,085

($2,763,354)

(1.3%)

The overall impression conveyed by Chart 6 and Table 5 – and one that had drawn strong reaction
from some MPS stakeholders – is that the “pain” in this area of the budget was not severe. Indeed,
while central services would have seen a spending reduction in 2019 and the loss of 21.5 positions,
it still would have experienced a substantial increase when compared to only two years ago.
However, the actual situation is far more complicated for a variety of reasons, including the following:
•

Because of a major reorganization of central services in 2018, it is possible that certain
supports and areas of spending that once were contained in school budgets or other areas
simply have been transferred to central services, thus making it appear that central services
spending had grown.

•

Because central services offices obtain their revenues from multiple funds – including the
nutrition and extension funds, which are supported by revenue streams that are not subject
to state-imposed revenue limits – trends in total central services spending obscure MPS’
need to adjust some portions of that spending in accordance with the limits. MPS officials
attest that while it appears central services spending increased 10% since 2015, that
increase is largely attributed to services associated with nutrition and recreation. They say
central services spending for activities under the purview of the school operations fund was
flat over the period and would suffer a much deeper cut in 2019 than shown in the chart.

•

It is possible that reductions in positions or funding that are related to central services may
be reflected in other areas of the budget. For example, certain bookkeeper positions are
centrally managed but are reflected in school accounts.

21

 The administration has spurred some confusion itself by stating to the School Board that “office
chiefs reduced central service and central account budgets, based on a 15% cut to the 2017–18
office allocations.” They have said this reference specifically speaks to an originally proposed 15%
reduction in school operations funding dedicated to central services, which in 2018 totaled $78.9
million. A cut of that magnitude would have resulted in savings of $11.8 million.
While we do not dispute that figure, we are unable to independently determine its accuracy with
available data. That, in turn, speaks to a larger point: because of the complexity involved with
pinpointing the extent of the cuts to central services, this issue is likely to remain mired in
controversy.
This is unfortunate and should provide an important lesson to MPS administrators, who would be
well served by presenting central services spending and positions in a more consistent and
understandable fashion. Furthermore, the district would benefit by more effectively laying out for all
stakeholders the role that various central services functions and offices play in promoting academic
achievement, supporting the organization’s immense administrative responsibilities, and serving the
needs of MPS’ student body, teachers, and leaders.
What is most germane to 2019 budget deliberations is the potential impact of some central services
budget cuts to schools and classrooms. As this report was going to press, the interim superintendent
proposed an additional $2.2 million of central services reductions that would be spread across eight
offices. A key question going forward is whether, in its attempt to insulate schools from deficit
reduction efforts, the district may be cutting too sharply in central support areas dedicated to
academic improvement, as well as central support areas that are essential for measuring student
outcomes and financial and strategic planning.

22

 Lo n g - T e r m P r o g n o s i s
It is difficult to sugar-coat MPS’ long-term financial predicament. After two years of relative calm
attributed mainly to unanticipated health care savings and an influx of lower-salaried new teachers
to replace retirees, the district’s structural budget challenges have re-emerged in 2018 and 2019 to
produce considerable pressure on school budgets. A fundamental issue – as emphasized repeatedly
throughout this analysis – is reductions in state and federal funding, accompanied by strict limits on
local revenue. However, MPS’ inaction with regard to developing and implementing long-term fiscal
strategies that reflect the nature of its challenges also looms as a major concern.
Table 6 summarizes MPS’ five-year fiscal projections for its school operations fund budget and
shows the financial situation is worsening. It is important to note that MPS’ budget forecasting
involves considerable uncertainty in light of the major fiscal forces beyond its control, such as state
aid and general health care inflation. Still, these projections provide a useful tool for fiscal
management and strategic planning. As shown in the table, a $133.7 million gap between projected
revenues and expenditures is projected in 2023 if the district’s fiscal assumptions hold. 7
Table 6: MPS school operations fund five-year budget projection (in millions)
2019
Proposed
$936.6

2023
Estimated
$912.3

%
Change
(2.6%)

Salaries/other wages

$409.0

$442.4

8.2%

Benefits

$214.4

$269.8

25.8%

Purchased services

$242.3

$259.8

7.2%

$21.7

$23.1

6.5%

$1.7

$1.8

5.9%

$47.5

$49.0

3.2%

$936.6

$1,046.0

11.7%

Category
Revenues (without applied surplus)
Expenditures

Supplies
Capital purchases
Other (including debt service)
Total expenditures
Deficit

($133.7)

Source: MPS 2019 Proposed Budget

As would be expected, MPS’ projected $109.4 million increase in school operations fund
expenditures over the next five years is tied largely to salaries and benefits. The forecast assumes
annual increases in salary expenditures of 2% per year, which reflects cost-of-living pay increases
distributed among a stable number of teachers. Fringe benefits are projected to grow even more
sharply, in large measure because of assumed 7% annual increases in health care spending.
While these expenditure pressures are familiar, more troublesome is the estimated decline in school
operations fund revenues, which are projected to fall from $936.6 million in 2019 to $924.2 million
in 2020 and $912.3 million in 2021 before leveling off. Previous five-year forecasts have assumed
flat revenue totals given uncertainty about future state budgets. The most recent forecast
This estimate represents the projected gap at the end of the five-year period; a gap of that magnitude would
be highly unlikely to occur in 2023 because the district would have been required to make sharp spending cuts
(or achieve higher revenues) in each of the intervening years to produce a balanced budget.

7

23

 anticipates reductions over the next two years, however, because of the three-year rolling impacts of
previous enrollment declines per the current school aids formula.
So where do MPS leaders turn if these revenue projections are correct? If preserving existing teacher
positions is a priority – which it likely needs to be given concerns about class sizes – then two
obvious places to look are areas that already have been broached by the administration: fringe
benefits and transportation. After salaries, these are two of the largest areas of spending in 2019 at
$273 million and $64 million, respectively (a third, contracted services, is linked largely to the
district’s charter school contracts, which are a potential key to stabilizing or increasing enrollment).
In an earlier section, we noted that efforts to save $8.5 million in health care spending by increasing
the share of costs assigned to employees could threaten teacher retention and recruitment.
Similarly, the transportation savings plan offered by the administration earlier this year – which
included revised attendance areas within which busing would be provided, staggered school start
times to reduce buses and drivers, and increased use of Milwaukee County buses for high school
students – would have saved the district up to $3 million in 2019 but would have caused
inconvenience or disruption to some students and parents.
In a similar vein, additional cuts to central service staffing and functions could yield savings. Those
savings, however, must be weighed against the potential detriments of shrinking the district’s ability
to provide the types of planning, analytical, and support services to schools, administrators, and
students that may increase in value as fiscal challenges worsen.
It is beyond the scope of this report to provide in-depth analysis of these options. What all MPS
stakeholders must recognize, however, is that barring annual increases in state and/or federal
funding or the relaxation of levy limits, painful budget cutting must occur, particularly if the district
sticks to its plans to provide cost-of-living pay raises to teachers each year.
To the extent such recognition is lacking, it may be linked to MPS’ approach to budgeting over the
past few years. When unexpectedly confronted with huge unbudgeted health care savings in 2016
and 2017, district leaders decided to invest them in a series of strategic initiatives designed to
address longstanding classroom challenges and boost the district’s reputation and enrollment. This
was an understandable gamble that has (and still may) pay dividends. Yet, it also created a
perception that MPS somehow had turned the corner financially, thus delaying development and
discussion of long-range fiscal strategies that still were needed to address key structural issues.
Some additional short-term tactics used in recent budgets – such as the transfer of levy from the
construction fund to schools and increased reliance on borrowing – also were calculated gambles
that were justifiable in the context of the district’s strategic aspirations. Yet, those actions also
perpetuated a perception of budget stability and have dug a deeper hole for 2020 and beyond.
Even the series of 2019 budget adjustments recently proposed by the interim superintendent –
while justifiable based on the desire to protect school budgets – do not address the district’s
structural problems and may remove the sense of urgency the district’s long-term financial
challenges demand.

24

 Underlying these strategies has been the hope that enrollment declines would be reversed and state
and/or federal funding sources would grow. As neither of those hopes is being realized, the time has
come for MPS to confront the reality of its financial paradigm and prepare a long-range fiscal plan
that realistically addresses it.
A logical starting point – which MPS officials deserve credit for already teeing up – is facilities. As
noted earlier, the Long-Range Facilities Master Plan study offers a possible road map to shrink the
number of school facilities and align the district’s physical assets with its enrollment. As with health
care and transportation, there certainly are tradeoffs, including the potential that liquidated MPS
buildings could be purchased by independent charter or choice schools with which it competes for
enrollment. Also, the need to make substantial investment in existing facilities to accommodate the
plan poses a severe challenge. Nevertheless, it is critical for district leaders to objectively consider
what can be done to liquidate facilities given that, per the master plan study, MPS is spending
millions of dollars annually “for students that don’t exist.”
While shedding facilities and cutting benefits, transportation, and central services must be
considered, any realistic plan to align MPS’ future expenditure needs with its projected revenues
also will have to include school-based reductions that could negatively impact classroom teaching
and learning. Many would say this is neither just nor acceptable given the high percentage of
economically disadvantaged students the district is striving to effectively educate, which has risen
from 56% of the MPS student body in 1990 to 80% in 2017.
Yet, failure to properly plan and lay out for the community the highly undesirable actions that must
be considered precludes the type of informed discussion in Madison and among local stakeholders
that is a prerequisite for action to repair MPS’ unsustainable financial structure. Furthermore,
consideration of individual expenditure reduction strategies without the context of a plan containing
the full menu of undesirable options minimizes the chances that any will be accepted.
In a recent budget meeting, the former MPS superintendent was quoted as saying, “If we say no to
everything, this is why we’re here.” It is hard to argue with that sentiment, but equally difficult to
imagine MPS’ various passionate stakeholders and state leaders getting to “yes” without a
comprehensive and objective effort to identify the full range of options and their potential
consequences.
Finally, it is critical to bear in mind that MPS has a legal mandate to provide an appropriate
“standard of care” for all of its schools and students. The unsustainable fiscal paradigm under which
MPS operates would present challenge enough if the district simply needed to maintain the status
quo. But, instead, it is incumbent upon MPS to improve upon a raft of troubling outcomes related to
low academic achievement and persistently wide achievement gaps by accelerating academic
growth for the majority of its students.
Irrespective of arguments as to whether MPS has achieved all possible operational efficiencies or
has the capacity to implement the programmatic or curricular strategies to improve poor student
outcomes, it is a sad reality that the current financial structure leaves no room for investment of any
magnitude in strategic initiatives to address these concerns.

25

 Conclus ion
The factors that have converged to make the 2019 proposed Milwaukee Public Schools budget one
of the most difficult in years are unfortunate and alarming, but they should come as no surprise.
MPS’ revenue streams have been flat for years, while its ability to reduce expenditures always has
been limited by the unique demands of its low-income student population, its retirement obligations,
and the requirement that it compete for students and teachers with charter and voucher schools.
As we have warned in previous budget briefs, the district cannot continue to lean on one-time
devices to address short-term budget gaps. While several newly proposed strategies may minimize
the pain for school budgets in 2019, the district needs to develop options to generate long-term
savings by restructuring operations and facilities in ways that would least damage classrooms.
Arguably, some of that preparation has occurred, as reflected by the administration’s proposals
earlier this year for substantial reductions to health care benefits and student transportation. Yet,
lacking buy-in from School Board members and other stakeholders, those proposals died.
Outside of these proposed strategies, as well as possible actions associated with a new facilities
master plan, options to ease or eliminate the pain of school-based budget cuts in future years will be
limited. Policymakers could consider additional cuts to central services or elimination of salary
increases, but as discussed above, those options also have drawbacks.
A more troublesome approach would be to employ questionable budget moves, such as greater use
of fund balances or underpayment of contributions to retirement reserves. Indeed, while there will be
a strong temptation to “do what it takes” to survive each year without slashing school budgets, great
care should be taken to avoid actions that will exacerbate long-term challenges.
Our call for responsible budgeting and realistic long-term fiscal planning should not be mistaken for
lack of concern about the potential impacts on tens of thousands of disadvantaged students and
their families, the livelihoods of teachers, and the reverberating consequences for the regional and
state economy. On the contrary, in light of their severity, there is an urgent need for state leaders
and external MPS stakeholders to honestly assess those impacts and the full range of possible
solutions.
That is a point we similarly made in a comprehensive assessment of MPS’ fiscal condition six years
ago, when we argued that efforts to effectively educate nearly 80,000 schoolchildren “cannot and
should not take place in a fiscal environment that is plagued with such vast uncertainty and
challenged by a set of overriding variables that are so beyond the school district’s control.”
Those words are even more appropriate today. Unfortunately, until they are heeded, MPS leaders
have little choice but to honestly confront their immediate budget realities; and to use long-term
financial planning as a tool both to identify the difficult choices their worsening fiscal situation will
require, and to alert all stakeholders of the potential consequences should they fail to address the
roots of that situation.

26