Category Archives: finance

[Update at the bottom]

I wish the Madison Metropolitan School District Board of Education meeting had been as clear as Saran Wrap and as neat as their hair in picture above.  It wasn’t; It was messy.

The preview of the agenda and some of my thoughts going in are here.

Johnny Winston Jr. was absent.

Things started off OK.  After the approval of what seemed like a dozen minutes from previous meetings, Erik Kass cleared up issues about the effect of under-levies on future Revenue Limits.  According to his explanation, unused recurring tax authority does carry over, so there is not a need to be concerned that  if they don’t tax to the max this year the max for next year will go down.  There has been a lot of confusion about this and I admit I’ve been confused in the past.  If you want to know more, this PowerPoint from DPI (slides 54-61) may help.

Next was some Q&A on the Citizen’s Budget that also clarified some things.  The big issue here was about how Special Education spending needs to be treated under state statute or DPI rules.  Special Education money is spent from Fund 27 and the portion of Special Education spending that isn’t not covered by State and Federal aids and grants (that would be about 82.7%) is transferred from Fund 10 (the general fund) to Fund 27.  Apparently one result is that in some places that money gets counted twice.  If I heard right, this is a big part of why some “MMSD Total Revenues/Expenditures” calculations are in the $370 Million range and some are in the $418 Million range.

In the discussion of the Citizen’s Budget, Beth Moss pointed out that “Grants and Contributions” at 13.5% of the revenues are approaching the 17.% that comes from General State Aid.  If General State Aid continues to decline at 15% a year, it won’t be long before a larger portion of MMSD’s budget will be funded by Grants and Contributions than is being funded by the state (if I heard correctly the Grants and Contributions figure does not include State and Federal grants).    This is just wrong.  The state has an obligation to support education.  It is in the Constitution.

Ed Hughes also pointed to the $4 Million lost via open enrollments.  I don’t think this is the biggest or the best reason for the district to be working to improve communications, but it certainly one reason (more on this below).

Then they moved on to trying to clarify the budget situation and various gaps, and things fell apart  An inordinate amount of time was spent on this and at the end there was more confusion than there had been at the start.  Lucy Mathiak has posted a version of the issues and questions, that unfortunately furthers the confusion.

Before going into what is wrong with all this and offering a simpler version (which seeks to avoid the confusing parts by concentrating on the choices the Board faces), I want to say that there are legitimate issues about how this has been framed and communicated and how the information available confuses the issues and the process.  I’ll hit some of these along the way.

Here goes, kind of from the start (basic info in bold, comments not, see GrUMPS for a very different, but very good explanation).

Here is where the first problem comes in.  There is no cost-to-continue/same service budget yet; no “Budget Book.”  There are forecasts, talk of a $12.8 Million increase for a “same service” budget, but no line-by-line budget.  As Board members and others have pointed out, the forecasts and the Budget Options assume that things which have already been changed or cut will go forward (and may also assume that things that have been added will not be added).  At this meeting Donna Williams said that the Board would receive some kind of  “revenue by fund and object, expenditures by cost and object” mini budget on Tuesday.  If they did, it has not been posted.  ***The target date for the full Budget Book is April 1 (it must legally be out by April 3, or 15 days prior to the official Budget Hearing).  Even with all these issues, the most important fact is that MMSD has the authority to almost fully fund at the current service level.  Note that because there is no Budget Book, many of my figures can’t be checked, so I’ll stand by the concepts but not the numbers.   Let me repeat:

The gap between allowed revenue and the cost-to-continue/same service 2010-11 budget for MMSD is estimated at $1.2 million.

Now some new info.

For 2010-11 MMSD will have an estimated $250 million in revenue/tax authority (I’m mostly using round figures and working from memory).  Again, this is enough to almost fully fund the same service budget.

This does not include Fund 80 (mostly MSCR), which has essentially unlimited authority (about $8 million exercised last year and about $4 million spent from fund equity).

We’ll get back to Fund 80.

Last year MMSD exercised about $226 million in authority (leaving aside Fund 80).  That means that there is about $24 million in “new” authority or taxes.  Add in the $4 million that Fund 80 spent from equity last year and you get the $28 million “tax gap” figure.

Tax authority is tax authority.   It doesn’t matter where it comes from or how long it has been exercised (assuming it is recurring authority and all the things being talked about are).

Much of the confusion and the $30 million the table are the result of people trying to make false distinctions among recurring referendum authority, authority that carried over from previous years, authority that comes from an increase in the revenue caps and then mixing these up with calculations about the losses in state aid.  In some contexts — like state school funding reform — these do matter, but when deciding what to fund and what to cut, they are a distraction.

Fully exercising tax authority, nearly fully maintaining current levels of quality,  will mean significant property tax increases.  The total is about $28.2 million, the calculations are that this means about $300 on a $250,000 house.

Nobody wants to raise taxes.  That’s why the state officials shifted these decisions to the local school boards.  They passed the buck.

The choice before the Board is mostly about balancing their duty to provide quality education and their desire to not raise taxes too much.  Note, “duty” and “desire.”  The “mostly” is because their are some savings, efficiencies and smarter ways to project and budget that have no impact on the quality of education and should be done no matter what (these are mostly in Tier I, but may also be found elsewhere and there are some in the MSCR Tier II things).

The state officials also had a duty, but they shirked it and went with the desire to not raise taxes.  Board Members have correctly criticized them for this.

Since most of this isn’t about any real “gap” there could easily be $50 million on the table (tax cut fever), $5 million on the table or only options for the $1.2 million real gap on the table.  The $30 million on the table was and is misleading and a mistake from both a communications and policy perspective.

What should have happened was very early in the process there should have been a decision about a range of taxation the Board wanted to consider and options reflecting that range should have been offered.  The Board asked to see the full $30 million, but they could have been discouraged or they could have been asked at the same time to make some preliminary decision about the range of taxes and cuts that would actually be considered.  None of this happened and we are stuck debating and considering at least $10 million and maybe as much as $15 million worth of cuts (school closures, layoffs, program elimination…) that nobody involved thinks will ever happen.  Bad.

OK, that’s done.  Note, I did not recreate or directly engage what was said about this on Monday.  It was too awful to relive.  I may burn my notes.

Back to the meeting.

There was more back and forth about things like CLC grants and the Fund 80 Grants that were for one year only, all in an attempt to get at what has been included in the “Budget” they are cutting from (but haven’t seen yet).

Finally Beth Moss asks “why not take Tier IV off the table now” (that’s the one I called  the “over my dead body Tier” and includes the school closings, lots of staff cuts and bigger class sizes).

Beth has the right idea.  Maybe not all of Tier IV, but at least parts of it.

This highlights another problem with how this has been handled.  I think that if you are going to cut (which beyond $1.2 M, they don’t have to cut), then maybe some of the classroom staffing cuts and somewhat bigger class sizes should be part of the discussion, however not at the levels presented in Tier IV.  There should be a range of options in these areas offered as part of the various Tiers, instead the items are very distinct with all the classroom teacher cuts basically in two Tier IV items, out there as a yes or no kind of thing.  The reality is the Board can do what they want on any of the options, pick and choose, cut half of what is in Item 27 and 1/3 of Item 187…but the presentation does not reflect this or make it easy.

Beth’s suggestion leads to no action, but it does elicit from other Board Members the understanding that all items will be considered individually.  This is the best way to do it, but with 200+ items, that meeting is going to be one long nightmare.

Back to Beth’s suggestion.  The meeting was very free-form, so things come in and out, but I want to trace what happened with the idea of taking anything off the table on Monday and why it didn’t happen.

Marj Passman asks about the number of FTEs in all the Tiers and in Tier IV (252 and 96).  She speaks with empathy of people being surplussed and “hanging by their fingernails, not knowing if they have a job or not.”  This appears to be a reason to take some of the things off the table.

Ed Hughes talks about understanding wanting to hear from the public, but some things are “too complex” to consider and he refers to the “North Side [closing] Plan” with the implication this should be taken off the table.

Maya Cole says something about the value of Tier IV cuts in communicating how bad the state school funding system is.  She’s right, but the point has been made, this is no reason not to take things off the table now.

Lucy Mathiak is the only one who speaks forcibly against taking things off the table.  She has some good pints about wanting to see the whole picture  — the lack of a Budget Book again –, wanting to hear from the public, wanting to “completely have done the homework” before taking anything off the table.  Good points, but I’m not convinced.  I think, moving forward to save time at other meetings, easing the worries of North Side families, saving some staff from uncertainty all out weigh these reasons.  The truth is that some things — like the school closures — should never have been on the table in the first place and are  not going to happen.  Make that official, the sooner the better.

I don’t think the some of the rest of the Board Members who might have been willing to vote on some things were convinced either.  I think their inaction, their deferral to the strong wishes of a single Member and the reluctance of others was the product of a misguided desire to preserve harmony at any cost and present a united front.  Note, I’m not clear that absent Lucy Mathiak’s clear opposition to taking things off the table, there would have been four members who wanted to do that.  Others did express a desire to hear from the public before voting and there wasn’t enough said to get a solid vote count.

If I were a family in one of the schools that is part of the North Side “Plan,” there really is no choice but to mobilize to make sure that the ridiculous proposal is seen for what it is.  What a waste of everyone’s time and energy.  If four Board Members in attendance Monday had acted, it could have been prevented.

So nothing was accomplished on the 2010-11 Budget.  This was frustrating for many, including some Board Members and that led to the one vote of the session, a vote that was in all likelihood illegal.

Board President Arlene Silveira at one point mentioned that the proposals for the Communications Plan consult were back and ready for consideration.  It is clear that the Board has gotten some heat for doing this at a time of possible budget cuts.  She asked the other Members for their thoughts.  Saying she “wants to accomplish something” Marj Passman made a motion to “deduct Communications Plan set aside” (whatever that means) and after some discussion it passed 6-0 (with Ed Hughes voting yes, “reluctantly.”).

This probably should not have been allowed by legal counsel.  The agenda for the meeting included possible action on the options related to the 2010-11 Budget; the money for the consult is from the 2009-10 Budget, which is nowhere listed on the agenda.

You can make a case that not spending money from 2009-10 leaves more money for 2010-11 and therefore it was indirectly on the agenda.  It is a weak case.  the agenda is pretty specific:

2010-11 MMSD Budget Reduction and Efficiency Options for Addressing the Property Tax Impact of and Revenue Gap within the Projected Budget (action may be taken)

The “2010-11 Budget Gap and Tax Impact Options” page has nothing directly or indirectly on the budget for a communications plan consult.  The law is very specific that non agenda items cannot be discussed, much less acted on.

In fact, had I known that this was on the table, I would have communicated to the Board that I think the money would be well spent.  If nothing else, the whole way they did the premature focus group, handled the backlash, the Reorganization Plan roll out and much of what they have done with the Budget indicates that they need help communicating.

Some other items from my notes.

Both Marj Passman and Maya Cole noted that the proposed elimination of Reading Recovery would leave the district with no reading remediation program (another example of how bad some of the Budget option preparation and presentation is, note “some,” some of it is good work).

Ed Hughes spoke forcefully on the issue of calling refinancing savings that I had raised earlier.  There was no response from the administration, but from the looks on the faces of the other Board Members, I doubt this will go through and that means that $4 million in Tier I “savings” are gone.  Good for Ed.  I wish they would have had a discussion of this at this point, because that is another complex and potentially lengthy thing they will have to deal with sooner or later.

On the MSCR stuff, there are no alternative cuts and it doesn’t look like there will be.  Only the adult fee increases and there seems to be an orchestrated push-back on those happening.  There was also no discussion about whether the 70% price increases may diminish participation and projected revenues.  I have to say, that of all the administrators or staff  have seen testify before various bodies, I have never seen one be less responsive than Lucy Chaffin (head of MSCR) was recently.  Here’s a clue, when the people who vote your budget are looking to cut, you want to make them feel like they are being listened to.  I went into that meeting thinking that MSCR needed advocates; I came out thinking that MSCR needs leadership.

As I’ve said before, the MSCR cuts on the table are mostly bad, but by almost all  accounts there are some other things in the MSCR Budget that should be on the table.  I don’t know why this hasn’t happened.

On the Instructional Resource Teacher (IRT) proposed cuts, it was clarified that if the cuts go through, the remaining school-based positions will all be those that are Title I funded; there will be no locally funded school-based IRTs.   It is important to keep in mind  that IRTs are at the center of the Reorganization Plan.

Some discussion of Transportation issues, ongoing negotiations with Metro and the possibility of a future study to see if there might be savings by returning some or all of the expenidtures now spent on Metro to a” Yellow Bus” contract.

Maya Cole suggests a small savings to be had by quitting the Wisconsin Association of School Boards, because they “don’t represent us” and asks for an accounting of fees paid to them for various labor relations services.

Ed Hughes asks that Board Members get any suggestions for cuts that are not part of the Options in as soon as possible for analysis and consideration.  He uses the phrase “sweeping and dramatic” so there might be something coming from his direction.  Lucy Mathiak also indicates that she will have some proposals of her own and I’d guess Maya Cole might too.

Arlene Silveira asks for information about the long term maintenance needs and plans.

That’s about it from my notes.  It was a messy meeting and nothing was accomplished.

A couple of other things.

The Board Q&A are being updated and are worth a look.

The first “Public Hearing” is Monday, March 22, 6 p.m. at the UW Space Place in Villager Mall – 2300 S. Park St.

Thomas J.  Mertz

[10:30 PM — I did some clean up for clarity and typos and added a couple small things]

* Note that because part of the way taxes were reduced last year involved not using non-recurring referendum authority and shifting debt to future years, the $1.2 Million figure may be wrong and the real gap might in fact be significantly higher.  Beginning paying that debt again is part of the projections for 2010-11 (at $7.1 million) so the money must be found and that means other things must be cut (unless I missed something and I may just be confused about all this and the debt payments are part of the discussion as “State aid cut last year”).  This whole thing has not been very transparent and the lack of a Budget Book or even the old “Parameters Used to Build the Budget” makes it impossible to see what is being assumed on this and other things.

**For those who care, hre is a simple version of where the need to increase taxes comes from:

$7.6M NEW AUTHORITY (Revenue Cap increase)

$4.0M  REFERENDUM AUTHORITY

$9.2M LAST YEAR’S STATE AID CUT, NOT LEVIED (includes Fund 80, mostly instead of increasing the levy last year they put off debt payments, re budgeted and spend equity)

$7.8M THIS YEAR’S STATE AID CUT

$28.6M TOTAL “NEW” REVENUE AUTHORITY

***Update:  Arlene Silveira sent me copies of the “Mini Budget Book” documents.  Here they are:

Cost To Continue – Memo 3_16_10_1

Expenditures by Fund #3 031610 ctc final

Revenue by Source #3 031610 ctc final

2010-11 Cost to Continue Budget and Tax Levy -1

Proposed Property Tax Levy for 2010-15 (Up

Thanks much!