Category Archives: Budget

The MMSD Board of Education will be attempting to reach an initial balanced budget on Monday (the final budget is done in October). The Board members and many in the community have been thinking, writing and talking about the budget for months. With less then 24 hours to go, I’d like to put forth some questions and thoughts that I think would be beneficial to contemplate. No polemics or easy answers, but some ways of thinking about things.

1. On all the cuts or consolidations, which would be seriously considered if there weren’t extreme budget pressures?

I said extreme on purpose because there always are and should be budget pressures and those pressures should always be part of the calculations. I understand that there are potential benefits to the consolidation plans and even some of departmental and program reconfigurations, but I am asking how these would weigh or appear if the district could afford “cost to continue” or faced much smaller cuts. This question doesn’t provide much guidance for decision-making, but I do think it shines a light on how our thinking has become dominated by the pressures of a deeply flawed school finance system.

2. What’s wrong, right and true about political pressure?

I’m starting this with the last, because it is the easiest. A look at election results and district maps makes it pretty clear that neither in this budget cycle nor in previous cycles can the decisions of Board members (including on consolidations) be accurately attributed to pandering to bases of support (geographic or otherwise). To state or imply otherwise is an insult to past and present Board members. Three recent examples should suffice to demonstrate how absurd this idea is. Of all the recent Board members Arlene Silviera is the only one who can reasonably be said to have won her seat on the basis of Isthmus area support (and the reality is more complicated, but it is reasonable to say that). Arlene is on record as favoring consolidating Isthmus area schools. Strike one. Strike two is that Johnny Winston Jr. was the only candidate this spring to express a willingness to close schools, was re-elected overwhelmingly (garnering majorities in all parts of the district) and is now working to avoid consolidation. If you want a strike three, the strongest voice against consolidation, Carol Carstensen has stated she will not run for re-election.

What is wrong and right is complex. I don’t think any of us want Board members who cravenly count votes and shape their actions to please some portion of the electorate. I also think that we want Board members who are responsive to the expressed desires of their constituents. The balance between these is hard to describe.

Board members should have a sense of trying to do what they were elected to do, of serving in a way that is consistent with how they campaigned. That has to mean that the desires of those who voted for them should be given more weight than the desires of those who didn’t. This is basic to governance by elected officials. More weight doesn’t mean that other views are ignored. I’m not a fan of most uses of the word “accountability” in educational policy, but the accountability of elected Board members to the electorate is one place I’m happy to employ it. Mostly we vote for Board members based on a sense of shared ideals or values and trust that person to use these to make the hard decisions. After three years the electorate gets another shot. A final word on this is that I think most of our recent and current Board members have been good about considering the diverse views of people in all areas of the district and think that electing the Board by geographic areas would induce the kind of narrow pandering that we have mostly avoided.

3. What are the appropriate amounts for the Fund Balance (that’s the state term, MMSD seems to use “fund equity”) in general and the “salary savings” calculation in this budget cycle?

These are obviously related, because a miscalculation of “salary savings” will result in a decrease in the Fund Balance account. The Fund Balance is the district’s long-term contingency, emergency, rainy day account. If gas prices triple or there are bad projections with the state or local budget the Fund Balance is used to make up the difference. In one sense it seems obvious that healthy Fund Balance account is good, you want to be prepared for emergencies and it can impact the bond rating. But is the desire for fiscal surety more important than the desire to educate our children the best way we know how? What level of risk can be justified? In Madison, over the last seven or eight years close to half of the Fund Balance has been spent. There was a period of aggressive budgeting — of prioritizing education over finances — that combined with some hits which could not have been anticipated and some that maybe should have (but weren’t) to leave the Fund Balance at little over 7% of the operating budget. I want to emphasize that although the money is gone, those of us who think the district does a good job with the core educational mission believe that it was well spent.

Still, as the account gets smaller it is appropriate to ask how small is too small? The DPI is little help:

The most commonly asked question regarding fund balance is how large should it be? Perhaps the best answer would be: “an amount sufficient that short term borrowing for cash flow could be avoided and would also allow the district to set aside sufficient assets to realize its longer range goals.” However, this may not always be practical or politically possible. The school board must make a policy decision as to the extent they will borrow for cash flow rather maintaining a working cash balance.

Obviously under the current state school finance system the idea of setting aside anything for long-term goals is a cruel joke. I don’t believe we have been forced into much (any?) short term borrowing, so we are good there. I’ve looked at other districts policies and some require a Fund Balance of between 10% and 15% of the operating budget. 15% seems excessive to me. In contrast, the state finance system and the failures of referenda have led Wisconsin Heights to run a growing deficit in their Fund Balance recently. I’d guess (and it is only a guess) that something about 10% of the operating budget is the ideal. I think that as the Board looks to a February 2008 referendum, dedicating some of the authorized money to building the Fund Balance should be considered.

The “salary savings” figure in the budget represents money budgeted for salaries but not spent. I think most of this comes from positions that go unfilled for a day or a week or months. In a large operation like MMSD this can add up. How much it adds up to is the question. In recent years the budgeted amount for “salary savings” has been about $6 million. The administration has not given (or their accounting does not produce) an actual figure for salary savings these years but points to the spending down of the Fund Balance as evidence that the budgeted amounts were too optimistic. Perhaps due to this, the administration used a $1 million figure for the current 2007-8 budget materials. $2 million was used in the “Parameters Used to Build” document earlier this year, so this doesn’t seem to be an exact science. The decreases in the Fund Balance are partially attributable to over optimistic “salary savings” projections (but also other factors such as unanticipated changes in state Special Education funding, tuition income…) and even if it was all attributable, the projections have not been off by $5 million a year (it looks like less than $3 million). I don’t have either the professional or elected responsibilities of evaluating this (I know it is much easier on the sidelines), but it seems to me that in light of what I do know, a “salary savings” projection of $3 million or even $3.5 million would not be unreasonable. Remember, it isn’t like the money will be squandered; the choice is between spending it to educate our children or keeping it to safeguard against emergencies.

I don’t claim that any of this – making decisions in order to do the least harm, serving those who voted for you and those who didn’t, balancing long-term security with pressing needs — is clear cut or easy. These are hard choices. I respect our Board members for their willingness to make them, and wish them all the best as they work through the conflicts and contradictions. I hope what I posted here (at my usual excessive length) may help either Board members or the interested public understand the choices (and how hard they are) a little better.

Thomas J. Mertz