Education
1:00 am
Mon June 30, 2014

New MPS Leader Will Face Dire Financial Outlook

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A new report by the Public Policy Forum in Milwaukee details the district’s dire financial picture. Forum President Rob Henken says MPS faces flat revenues, but rising costs.

Henken says that more than 50 percent of MPS' revenues come from the state of Wisconsin and 20 percent comes from the federal government. "So right off the bat, when you look at, are there alternatives that MPS may have to modify its revenue structure on its own, there really aren’t," Henken says.

"In terms of its ability to have any impact on the situation, the biggest driver is enrollment," he says. "If somehow MPS could wave a magic wand and increase its school enrollment, then that would have a positive impact because of the way the state revenue formula is designed. Unfortunately, not only can it not do that, but the trends are all pointing the other way, both demographic trends and the fact that the competition grows more and more fierce for MPS."

In recent years, through Act 10, Milwaukee Public Schools has saved millions by cutting benefits for its employees. But Henken says those savings likely won’t last.

“To the extent that health care is again going to start rising at an inflationary rate, do their revenue streams have the capacity to keep up with that? They don’t,” Henken says. “And so then the question becomes, are you in a position to do more redesigning of your health care offerings and or reducing those very benefits without having an impact on the quality of your workforce, and can they compete with choice and charter schools for students – which is ostensibly the system that we have created is intending to happen – can that happen effectively with these types of financial challenges?”

Henken says declining enrollment has had a major impact on MPS’ finances, but historically high employee benefits levels also helped created the current problems.

“We actually took a look at the health care benefits that were offered in comparison to other large urban districts and I don’t think there’s any question that the benefit levels were higher," Henken says. "But that does have to be countered with the realization that on the salary side, MPS’ salaries when compared to its peers, were not on the high side."

"So an argument could be made that one reason that benefit levels are so high at MPS is that salary levels are not as high, and perhaps that was a conscious choice made by employee unions during the collective bargaining process. Be that as it may, that made the financial situation completely unsustainable," he says.

Uncertainty over ongoing state and federal funding levels for K-12 education makes projecting future outcomes difficult, but Henken says it’s likely any additional government aid for MPS would cover only inflationary increases health care costs.

“And that would leave no room whatsoever to do anything new and different in terms of programmatic initiatives, in terms of activities to try to attract and retain a higher quality workforce, etc.," Henken says. "And in fact it’s feared there would have to be cuts of up to 450 teachers according to projections, looking out and saying based on what’s happened in the past, here’s what we think our revenue streams will do.”

“So, I don’t know about a tipping point, but clearly, they are getting back to the point where they are going to have to look at reductions in their teaching workforce, if nothing else changes, and depending on what happens with enrollment, that could be very problematic," he says.

Milwaukee Public Schools Superintendent Gregory Thornton leaves his job Monday. He’s been named CEO of public schools in Baltimore. MPS is preparing to launch a national search for Thornton’s replacement, and by all accounts, the new leader will face a throng of challenges, including a budget on the brink.