Tracking local government in metro Milwaukee

For years, the Public Policy Forum has urged local governments to use performance measurement as a means of tracking progress toward strategic objectives and educating constituents about the outcomes associated with various government services and expenditures. Today, as government budgets grow tighter and taxpayer tolerance for spending money on all but the most essential services diminishes, it would appear that use of this tool is a necessity.

In keeping with that sentiment, the Forum has released its inaugural Tracking Local Government report. The report – made possible by a grant from the Northwestern Mutual Foundation – should be viewed as a resource both for the ordinary citizen to use in understanding the breadth and effectiveness of local government services, and as a potential model for local governments to consider in determining the types of information they should be collecting and sharing with constituents.

The 47-page report identifies 25 local government or government-funded services in nine functional categories that are considered critical to the metro area’s economy and quality of life. For each set of services, the report tracks fiscal and performance data over a five-year period to provide readers with a sense of revenue and expenditure levels, as well as a sense of what taxpayers are getting for their money. The report also provides brief analysis and observations regarding why the services are important, data trends, and future implications associated with those trends.

Performance measurement has been used increasingly by all levels of government since the early 1990s to better manage programs and services and communicate results to stakeholders and constituents. Unfortunately, not all government entities and departments in our metro area do an adequate job collecting performance data, and even those that adequately collect it often do not share it with policymakers and citizens.

The Tracking Local Government report is an effort to compile such data – to the extent it is readily available – in an easily understandable format in one place. In addition to informing citizens, the Forum’s objective is to “encourage those agencies that are not engaged in an appropriate level of performance measurement to improve their efforts."

The inaugural Tracking Local Government report is considered a work in progress. Time and data limitations required us to focus exclusively on Milwaukee County, City of Milwaukee and other Milwaukee-based governmental entities, as opposed to looking at government services within other Milwaukee County municipalities or other southeast Wisconsin counties. We hope to expand the project in the future to include a broader perspective.


The full report can be accessed here.

Some good news from Milwaukee County's mental health complex

While the problems experienced by Milwaukee County's Behavioral Health Division (BHD) justifiably receive considerable attention in the local news media, there also are some shining success stories that seldom are reported.

One obvious example is the division's Wraparound Milwaukee program for children with complex mental health and emotional needs, which received an "innovations" award from Harvard's Kennedy School of Government in September 2009. Another - discussed recently in a report submitted to the county's Health and Human Needs Committee - is its WIser Choice program for individuals suffering from substance abuse.

WIser Choice was created by BHD and the state after they were awarded a three-year, $22 million federal Access to Recovery (ATR) grant in 2004. The grant funds gave BHD the resources to transform its substance abuse program into one that provides a comprehensive blend of recovery-oriented services. Those services extend beyond traditional drug and alcohol treatment to also include pre-employment education/training, transportation, housing, life skills training and other supports. The county and state successfully collaborated on a second three-year ATR award in 2007 and recently received federal approval for a third three-year installment.

The program's success in competing for scarce federal funds is a direct reflection of its impressive client outcomes. In fact, according to BHD, those outcomes - based on national measures established as part of ATR - generally have been the best of any ATR grantee. Also, in the 2002-2004 pre-WIser Choice period, Milwaukee had the highest rate (13.47%) of any urban area in the nation of persons with a past-year substance use disorder. From 2006-2008, however, Milwaukee’s rate dropped to 9.96%, which ranks it only 22nd among urban areas.

Recently released federal data also show the following impressive results:

• Milwaukee dropped from 1st among urban areas to 7th in binge drinking.


• Milwaukee dropped from 2nd to 20th among urban areas in past-year treatment gap for alcohol use disorders.


• Milwaukee’s rate of substance use disorders dropped 20.1% from 2004 to 2008, while the nation’s rate as a whole decreased only 1.8%.

The success of Wraparound and WIser Choice has relevance to efforts to address the serious problems plaguing BHD's adult mental health operations. A report released in October by the Forum and Human Services Research Institute argues for a redesign of those operations, highlighted by a much greater emphasis on community-based services and a gradual downsizing of the county's role in inpatient and long-term care. A few of the encouraging lessons from Wraparound and WIser Choice that might inspire the adult mental health redesign effort:

1. BHD has shown that with sufficient resources and appropriate support from elected officials, it is fully capable of designing and implementing successful models of behavioral health care and treatment.


2. BHD and the Wisconsin Department of Health Services have shown they can put the politics of their elected leaders aside to collaborate effectively and bring additional federal resources to Milwaukee County.


3. BHD has deftly created and managed relationships with community-based providers in both programs to achieve results that benefit both clients and taxpayers.

Good news from Milwaukee County’s mental health complex may be rare, but in this case it should provide hope for the future.

PPF's top research findings of 2010

The Forum recently received a communication from a national research group detailing its top five findings this year. That got us to thinking about our top five research findings of 2010. The competition was stiff, but here they are, in chronological order (drum roll please):

1. Southeast Wisconsin's skilled workforce may be its greatest economic strength. Our March Innovation Index report benchmarked our region with three Midwestern peers and three innovation leaders using several indicators linked to success in building a knowledge-based economy. While the overall assessment was mixed, we found southeast Wisconsin was number one among the group in its percentage of residents working in middle-skill jobs, i.e. those that require specialized training or education beyond a high school diploma, but less than a four-year degree. The finding suggests that while our region may be lacking in college graduates, we still possess the type of workforce that should be very attractive to certain industries.


2. Milwaukee County's structural deficit is really, really daunting. In our July preview of the county's 2011 budget, we used the county's fiscal forecasting tool to determine how its five-year fiscal outlook would change under two relatively dramatic scenarios: 1) the property tax increased at double the projected growth rate, or 6.6% per year, for each of the next five years; or 2) projected growth in salaries and fringe benefits was reduced by 50% and 25% respectively in each of the next five years. We found that in both cases, the projected structural deficit in 2016 still would be in the range of $65 to $70 million. Quite a challenge, indeed, for the next county executive.


3. MATC clearly spends more than its peers. Our September fiscal assessment of the Milwaukee Area Technical College found an institution struggling to accommodate shrinking revenue streams at the very time that demand for its services had reached historic highs. While plummeting property tax capacity and shrinking state revenues certainly hurt, however, it appears there is capacity to make adjustments to the expenditure side of MATC's ledger. Our research compared MATC with 84 other large two-year technical and community colleges nationally with regard to total operating expenses, salary expenditures and fringe benefit expenditures. We found that MATC ranks number one in expenditures per full-time-equivalent student on each of those measures.


4. Milwaukee County's mental health system is out of balance. Our October report on mental health care for adults in Milwaukee County - released jointly with the Human Services Research Institute - found a system that is out of sync with national trends and best practices in light of its emphasis on inpatient care and its lack of comprehensive community-based services. Particularly telling was a finding that the county's 472 public and private acute inpatient beds are nearly triple the number that would be expected in a mature mental health system that contains the appropriate balance of inpatient, crisis and community-based services.


5. The state's expensive child care subsidy program has grown as household incomes have shrunk. When the state created the Wisconsin Shares child care subsidy program in 1996, all low-income families became eligible, not just former welfare recipients. Participation has grown nearly 350% since then, in part because of a decline in household incomes. Whereas the program's eligibility limit of 185% of federal poverty line represented 57% of the state median income in 1999, today it equals 68%. As we point out in a December report, this trend does not bode well for the state’s new child care quality ratings system initiative, as a continued decline in household incomes may mean continued growth in program enrollment. That, in turn, could translate into less money available to offer incentives to providers for quality improvements.

Narrowing the list to five wasn't easy. We were forced to leave out additional key findings from reports on the Milwaukee Parental Choice Program, the region's public schools, regional property values and taxes, the City of Milwaukee's Main Street Milwaukee program, and three People Speak surveys, among others. Each of the 20 reports the Forum has published so far this year can be accessed here.

The People Speak: Citizens' Views on Energy Policy

Most area residents are at least somewhat concerned about increases in energy costs and, accordingly, most say they have taken steps to conserve energy. That’s according to the latest People Speak poll of 395 residents of Southeast Wisconsin, which also shows that most citizens in the region are willing to pay more for fuel efficient cars, appliances, and homes, and that most support certain tax incentives to conserve energy or lessen reliance on non-renewable energy sources.

The latest People Speak is the fourth edition of this regional tracking poll, which is a partnership between the Public Policy Forum, UWM's Center for Urban Initiatives and Research, and The Business Journal Serving Greater Milwaukee. Over the past six months there has been a sharp increase in the percentage of respondents who feel jobs and economic development are the most important issues facing the region. The environment ranks low as a concern for most citizens, as it has in each of the previous People Speak polls.

Despite the low priority placed on environmental issues, citizens are concerned about energy costs and climate change. These concerns are echoed in the actions most citizens report taking to conserve energy, including purchasing energy-efficient light bulbs, turning down the air or heat at home, and buying energy-efficient appliances. Fewer respondents report reducing their driving by walking or bicycling more often, and a very small percentage of respondents say they carpool or take public transit.

Overall, citizens' concerns about cost and climate change are also reflected in their support for energy conservation policies such as tax incentives or benefits to individuals and businesses for conservation, requirements that cars be more fuel efficient, and requiring utility companies and business to use more alternative, renewable energy sources. There is less support building a new nuclear energy plant in Wisconsin. Reducing the speed limit and establishing a utility surcharge for exceeding monthly household energy-use limits are not supported.

For the complete People Speak poll results, as well as analysis of the results, visit the poll's homepage.

Moving the goal posts on early childhood care and education

The Forum's latest report on early childhood education finds the original goals of welfare reform produced state child care policies that had detrimental impacts on child care quality and that may be difficult to reverse under YoungStar, the state’s new quality ratings system initiative.

The report finds that as the existing Wisconsin Shares child care subsidy system became operational, certain policy decisions produced results – many of which were unintended – that ended up boosting child care costs for the state while reducing child care quality. Those include:

1. Creating a new, less regulated category of care provider, which was intended to allow parents broader choices in providers, quickly create jobs, and keep child care costs low for parents and the state.


2. Sharing costs with parents by basing co-payments on the cost of care, as opposed to the parents’ income, which would have allowed parents to opt for more costly care only if they wished to pay more out of pocket but which, ultimately, could not be implemented.


3. Creating a more restrictive definition of “low-income,” in order to serve the working poor in general, and not just those obtaining or seeking jobs as part of the W-2 program.


4. Tying subsidy rates to prices in the private market, which was intended to provide low-income parents with access to the entire market while also relying on competition to keep the state’s costs in check.

Each of these four policies helped the state achieve its primary goal of providing a sufficient child care supply that would allow low-income parents to move from welfare to work, but at a high cost to the state and at the expense of quality within the child care market.

As policymakers look to reform the system under the new YoungStar initiative, can they successfully change the emphasis to quality within a system originally built to emphasize low cost and quantity? The policy challenges with which YoungStar’s designers and implementers must grapple include:

• Stepping up collections of co-payments from parents. Under YoungStar, child care providers will be contractually obligated to collect parent co-payments, which they have not been required to do previously. An enforced co-payment requirement might cause providers who serve mostly low-income families to leave the program if they are not able to collect the co-payments, even if they are providing quality care.


• Keeping income eligibility limits for working families at current levels. The pool of families eligible for Wisconsin Shares subsidies is growing because Wisconsin family incomes are not, which swells overall program costs. As more money is tied up in providing access to care, less will be available to improve the quality of care. Options for cutting costs would be to reset eligibility limits to exclude more families, or to appropriate a sum-certain amount and create a wait list for the subsidy. Both of those options, however, would retreat from the goal of serving all the state’s low-income families.


• Tying subsidy rates to quality so as to incentivize quality improvements. Higher subsidy rates for higher quality might price some private pay families out of the market. If that were to happen, such families may have to seek lower quality options than they are using today. In addition, because YoungStar has been designed to be revenue neutral (at least initially), most providers will continue to earn the same subsidy rate after the initial round of quality rankings as they do today. If providers are not certain their investments in quality will result in higher subsidies, they may not see YoungStar as an incentive to improve.

Several policy options are highlighted for consideration as YoungStar’s implementation moves forward, including having the state collect parent co-payments directly, reducing the subsidy for lower-quality providers, and eliminating one category of provider—the minimally regulated provisionally certified provider.

In the end, the success of YoungStar may well rest on the ability and willingness of administrators and legislators to monitor real-world impacts on families and the child care market in Milwaukee County and to be flexible enough to tweak policies throughout implementation, in order to avoid a new set of unintended consequences.

Metrics for boosting educational attainment in Southeast Wisconsin

Recognizing that a prosperous metro Milwaukee depends on an educated workforce, a new Talent Dividend Initiative has emerged in Milwaukee to boost regional educational attainment. The initiative - which is comprised of workforce development, economic development, and educational organizations across southeast Wisconsin - has set its sights on increasing the percentage of adults in the region with four-year college degrees by a full percentage point by 2013.

The initiative grew from a campaign launched by CEOs for Cities (a national network of urban leaders) based on their research suggesting that a one percentage point increase in the number of bachelors degree holders in a metro region can produce a $763 increase in annual per capita income. In southeast Wisconsin’s seven counties, CEOs for Cities estimates that increasing bachelors degree attainment from the current level of 28.7% of the population to 29.7% would produce 13,146 new degree holders and a resulting “talent dividend” of about $1.5 billion annually.

With that goal firmly established, the local initiative is considering two questions:

1. Where should resources be targeted to most effectively attack regional educational attainment?
2. How can the success of these strategies be measured?

The Public Policy Forum was commissioned by the Regional Workforce Alliance's WIRED Initiative to help answer those questions. A report we released today, entitled "Educational Attainment in Southeast Wisconsin," provides an overview of the region's educational pipeline from preschool to college, noting that the majority of new degree holders will come from the 525,000 students already engaged in the pipeline. It contains a series of metrics that provide insights into how the various points of the pipeline are performing and how progress can be assessed. The report also cites several opportunity points for boosting student success and attainment, including:

• Developing college-going behaviors among high school students. Our report finds that while 55% of high school graduates plan to attend a four-year college and 19% of graduates plan to attend a technical college, 17% are undecided about their post-high school plans. Programs to increase the number of college-bound students might set their sights on these undecided students.

• Re-engaging adults who have earned some college credit, but have not completed a degree. More than 20% of the region’s non-degreed adults have attended college at some point and may be interested in continuing their education. Identifying those who are just a few credits short of earning a degree would be the logical starting point.

• Increasing student transfers between two-year and four-year colleges and universities. Completing the degree requirements at a two-year college before transferring to a four-year college can help students reduce the cost of earning a degree. More data are needed, however, to understand and track college transfer trends in the region.

Finally, at all points in the pipeline, strategies to assist minority students offer a substantial opportunity to increase regional degree holders. Currently, just 12% of African-American and 10% of Hispanic residents in the region hold a bachelors degree or higher, compared to 31% of white residents. This is a logical focus for retention strategies, as minority student enrollment in higher education is on the rise, especially in the region’s 2-year institutions.

The Talent Dividend Initiative plans to regularly update the metrics presented in the report to measure the effectiveness of specific strategies toward the overall goal. The full report can be accessed here.

Evaluating the Neighborhood Stabilization Program in Milwaukee

The Public Policy Forum’s recently released 2011 City of Milwaukee budget brief notes that Milwaukee’s budget includes significant allocations to curb the effects of foreclosures in city neighborhoods. Many of the city’s new and enhanced initiatives are funded with grant dollars from the federal Neighborhood Stabilization Program (NSP), which has helped foreclosure strategies throughout the state. The initial NSP allocation in Wisconsin totaled $38.8 million, of which Milwaukee received $9.2 million. In early 2010, the second round of NSP awarded Milwaukee $25 million to return approximately 1,000 foreclosed homes back to productive use.
These allocations are being used, primarily, to prevent homes from sitting vacant and deteriorating neighborhoods. In theory, higher vacancy rates lead to lower home values. Academic literature also identifies this strong inverse relationship between vacancy rates and home prices.

But how can we be sure that NSP allocations are effective? Should the proper test for evaluating NSP’s effectiveness be broad-based, observable increases in home values? On the one hand, yes. If vacancy rates decrease as NSP ultimately returns properties to productive uses, then home values increase. But on the other hand, perhaps not. Theoretically, the bottoming out of the housing market induces some investors, speculators, or unaffected consumers to purchase up properties at a low price. Eventually, demand for properties increases and causes an increase in prices. In other words, at some point property values are bound to increase even without policy action. The issue becomes the speed with which home values increase.

What policy analysts must determine, therefore, is whether the NSP, and similar programs, raise property values more quickly than they otherwise would have rebounded. To do so, analysts will have to account for the other contributing factors that help determine property values, such as unemployment rates, mortgage interest rates, and the availability of credit, among others.

Does our congestion warrant HOT lanes?

The recently initiated debate regarding pay-only express lanes (also known as high-occupancy toll, or HOT lanes) on Wisconsin highways mirrors the discussion in other jurisdictions that have pursued such lanes.

On the one hand, local opponents, like those in Arlington, Virginia, say "Lexus lanes" only will serve wealthy commuters and their construction creates the same pollution and sprawl impacts as regular highway expansion. On the other, local proponents, similar to those in California, point to the popularity of HOT lanes among both wealthy and low-income citizens, as well as their success in reducing congestion and financing highway improvements without resorting to broad-based taxes or fees.

While sorting out the pros and cons is difficult and subjective, there appears to be one overlooked question in the early discussion about using HOT lanes here: is our traffic congestion severe enough to merit use of such lanes, the success of which requires drivers to agree to pay considerably more to reduce their travel times?

The Federal Highway Administration, which generally has been supportive of HOT lanes, states that a "requisite" for their effective deployment is a "high density corridor typical of a larger metropolitan area with limited travel options and a lack of parallel highway routes." The Brookings Institution similarly states that "HOT lanes work best on roads where there is heavy traffic and long delays during peak hours. Without such congestion, drivers would have little incentive to pay significant tolls."

If HOT lanes are considered for southeast Wisconsin, the congested corridors that might logically be considered include I-94 between Downtown and the Illinois border; I-94 between Downtown and Waukesha County; and I-43 between Downtown and Ozaukee County. But is peak period traffic congestion in those corridors severe and prolonged enough to convince frugal Wisconsinites to pay several additional dollars per day to use new HOT lanes, assuming they could be financially, environmentally and physically accommodated?

It is impossible to know the answer to that question without rigorous analysis by highway planners and engineers. One clue, however, may come from the Texas Transportation Institute's (TTI) latest Urban Mobility Report.

According to that report (as discussed in this July 2009 blog post), congestion in Metro Milwaukee has not grown since the 1990s. Examination of the report also reveals that each of the large urban areas that has implemented HOT lanes - Orange County (CA), San Diego, Houston, Denver and Minneapolis - ranks among the top 25 in terms of highway traveler delays, while Milwaukee ranks 67th.

An updated TTI report on traffic congestion levels is scheduled to be released in the near future. It will be interesting to see whether the new report provides additional clues regarding the efficacy of HOT lanes in Milwaukee.

Is bankruptcy really an option?

The politicization of a recent disclosure that a leading civic organization has discussed potential bankruptcy for Milwaukee County is not surprising. But putting aside the politics, shouldn't we be asking whether, from a government finance perspective, bankruptcy is a realistic or viable option for the county?

A recent article on the Governing website examined the question of whether we're likely to see a surge in government bankruptcies nationally. It found the answer, generally speaking, to be "no." The article features excerpts from an interview with Robert A. Kurtter, a senior public finance official from Moody's credit rating agency. Among the points in the article that are relevant to Milwaukee County's situation:

• Local governments across the country clearly are being squeezed and facing agonizing decisions regarding whether to cut services, raise taxes, or both. Nevertheless, the specter of bankruptcy typically is tossed around as a rhetorical tool, as opposed to a legal one. As Kurtter puts it, "There may be talk about governments being bankrupt and insolvent when what is meant is 'We don't want to raise taxes and don't want to spend so we have to cut.'"


• Municipal bankruptcies typically occur when governments no longer can afford payments on their debt. Kurtter expects defaults at a higher rate than after previous recessions, but they should continue to be "rare and idiosyncratic," and likely will be linked to huge capital projects (like incinerators or steam plants) that "went bad."


• When the city of Vallejo, California, resorted to bankruptcy three years ago to seek relief from unaffordable union contracts, many thought it would set off a wave of similar filings. That hasn't happened, according to Kurtter, because "municipal bankruptcy is expensive, it's time consuming and the outcome is not at all clear...governments understand they need to figure out how to balance budgets and deliver essential public services now."

The Public Policy Forum has not minced words in our assessment of Milwaukee County's financial situation. In a July report, we cited the county's own projection of a $100 million structural deficit by 2014 and called its long-term budget prognosis "alarming." And, in a March 2009 report, we stated that "while the county enjoys cash solvency and a reasonable debt service level, annual reductions have not achieved financial equilibrium, and the county's fiscal condition remains highly unstable."

Still, we have suggested that despite its deep structural imbalance, the county's fiscal woes stem mostly from a lack of political consensus on how to plan for and manage its financial challenges. That reality - combined with the county's continued strong capital debt management, its huge inventory of physical assets, the fact that it is tens of millions of dollars below its state-imposed property tax levy cap, and the uncertainties regarding bankruptcy's legality and its impacts on critical county services - makes it difficult to imagine a bankruptcy declaration any time soon.

PPF Pearls: School reform and the new mayor in town

When the Forum took a look at school district governance reform in a February 2009 report, we found the success of mayoral control of school districts has as much to do with the personality of the mayor as with his/her education policies. That finding is about to be put to the test in two cities where mayors with strong education records soon will be leaving office.

The education reform world was abuzz with the loss in the Democratic primary of D.C. Mayor Adrian Fenty to D.C. Council Chair Vincent Gray, wondering what it would mean for education reform in that city. Mayor Fenty's vision of reform resulted in his appointment of Michelle Rhee as Chancellor of D.C. Public Schools. Ms. Rhee has been a polarizing figure to educators across the country due to her ardent and aggressive approach to school leadership. During her 3.5 years as chancellor, the district has reached agreement on merit pay for teachers, reversed an enrollment decline, and seen an improvement in test scores and graduation rates.

The suspicion that Ms. Rhee, having campaigned for Mayor Fenty, would resign following Fenty’s loss was confirmed last week with the announcement of her successor, interim chancellor Kaya Henderson. Gray has indicated he would refrain from reversing Ms. Rhee’s reforms, saying the district “cannot and will not return to the days of incrementalism." Nevertheless, it remains to be seen whether the reform momentum will continue.

Meanwhile, a similar story is unfolding in Chicago, where Mayor Richard Daley has announced that he will step down as mayor after 22 years in office. That announcement resulted in less drama in education policy circles, perhaps because the school system has survived the loss of the mayor's first hand-picked School CEO, Paul Vallas, as well as his second, Arne Duncan, who left the city two years ago to become U.S. Secretary of Education. Ron Huberman, the current CEO of Chicago Public Schools, has hinted that his continued tenure is uncertain, with his departure possibly preceding that of Mayor Daley.

While Chicago schools have weathered CEO changes, the city has not experienced a mayoral change since the system first became mayoral-led. Chicago has a long history with Mayor Daley, who served as the common thread to the reforms of prior CEOs. With his departure, continuation of his reforms hinges on the priorities of the incoming administration. Education can be expected to be a key issue in the next Chicago mayoral election.

But the political changes are not the only uncertainty facing these districts right now. Mayor Daley and Chancellor Rhee were both very successful in attracting significant corporate resources to their districts. Daley's Renaissance 2010 initiative has been supported by the Commercial Club of Chicago, a group of several Chicago business leaders, and several other local and national foundations, raising $50 million over the last five years to close and replace up to 100 underperforming schools.

Rhee has attracted private donations that totaled $64.5 million from entities like the Walton Foundation to help fund a new pay-for-performance model of teacher compensation. Contributing foundations have reserved the ability to withdraw this funding should Rhee leave the district. Now that Rhee has resigned, it is uncertain whether or not the money will leave D.C. as well.

As transitions play out in Washington and Chicago, the rest of the nation will be watching. Will the new mayors have the political capital needed to follow through with significant reforms? Will the new district leaders be able to push equally bold policy when backed by young administrations?

A budget marked by uncertainty

The Public Policy Forum's annual analysis of the Milwaukee County recommended budget - released this morning - focuses on the significant wage and benefit concessions that allow the county executive to bridge the county's annual structural gap while averting major service cuts and revenue increases.

The analysis emphasizes the necessity of stringent controls on wages and deep cuts in benefits given the county's ominous fiscal challenges, and gives particular credit to the budget's creative attempt to rein in the lucrative free health care benefit provided to retirees hired prior to 1994. While noting the appropriateness of these measures as a strategic direction for the county, however, it suggests there is considerable risk in plugging the savings into the budget in light of the need for collective bargaining and questions surrounding the timing of implementation.

A key theme of this year's budget brief, in fact, is the uncertainty surrounding several areas of major savings in the recommended budget and the potential consequences should they not come to fruition. We update three models used in our July budget preview report to give readers a sense of the types of options available to the county if it is faced with a sizable mid-year gap, while also pointing out some key policy considerations regarding the potential for another 26 furlough days for 1,700 union workers and up to 165 union layoffs.

The 2011 Milwaukee County Budget Brief can be accessed here. The Forum released a similar analysis of the 2011 City of Milwaukee budget earlier this week, which can be accessed here.

When standardized tests measure the test, not the student

New York state's standardized education exams, like tests in Wisconsin and many other states, have been used to gauge the effectiveness of school reform efforts. The reforms that have been credited with improving test scores in New York City include mayoral control, charter schools, and teacher bonuses. But critics have long taken issue with these findings by raising questions about the tests themselves.

A recent in-depth story in the New York Times reveals that problems with the New York state tests have been a well-known secret for several years among city and state leaders. The tests themselves were recalibrated this year in order to address these problems and, as a result, achievement rates dropped dramatically. The tests will soon be redesigned altogether.

Says the Times:

New York has been a national model for how to carry out education reform, so its sudden decline in passing rates may be seen as a cautionary tale. The turnaround has also been a blow to Mayor Michael R. Bloomberg and his chancellor, Joel I. Klein, who despite warnings that a laserlike focus on raising scores could make them less and less reliable, lashed almost every aspect of its school system to them. Schools were graded on how much their scores rose and threatened with being closed if they did not. The scores dictated which students were promoted or left back, and which teachers and principals would receive bonuses. The test scores were even used for a new purpose this year: to help determine which teachers should receive tenure.

The specific problems with the New York tests are not present in the Wisconsin state tests. Wisconsin's exams are neither as short nor as narrowly focused as the New York exams, and the questions are not released publicly after the annual exam period. It is these facets that have made the New York exams easy to predict, and therefore easy to master. The result has been tests that do not accurately measure student learning, but in fact measure the tests' passability--an incredible 81% of all students in the state were deemed proficient in math and 69% were proficient in reading according to the 2008 test results. (The 2009 tests resulted in 84% of all New York City public schools receiving an A in the mayor’s grading system.)

While many educators, policymakers, and researchers were aware that the scores were too good to be true, the stakes seemed too high to reverse course. However, John King, New York’s deputy education commissioner, told the Times, “If people had known what an effective lever the tests would be of driving behavior, I think they would have designed the tests differently.”

This is a good lesson for Wisconsin as our state embarks on a process to design and adopt a new standardized testing scheme--tests must be designed with all their purposes in mind. To date there has not been a vigorous public debate in Wisconsin about the potential uses of the new tests. To what extent will they be used to measure teacher performance and determine teacher pay? Will they measure students' skills as well as content knowledge? Will they measure student performance in comparison to national norms or as a reflection of state standards? Will individual student growth be measured? Will the tests be used to measure the effectiveness of governance reforms, school choice, virtual schools, and/or charter schools?


Standardized tests do not paint a complete picture of student learning, but they are the easiest method of measuring and comparing student achievement and thus play an out-sized role in education policy. Awareness of standardized tests' limitations should underlie any policy or educational decisions that will be determined by them.

A temporary reprieve in the City of Milwaukee's budget challenges

In our annual analysis of the City of Milwaukee's proposed budget - released this morning - the Public Policy Forum discusses the "remarkable reversal" in the city's required pension fund contribution, which significantly eases the financial pressures that have characterized most city budgets this decade. We point out, however, that this is only a temporary reprieve from the city's difficult structural issues.

The Forum documented the city's long-term fiscal challenges in an August 2009 report entitled "Between a Rock and a Hard Place." Those challenges stem largely from the city's significant reliance on stagnant shared revenue payments from the state, combined with difficult-to-control expenditure drivers (such as health care costs) that are exceeding the rate of inflation.

For 2011, the city's structural problem essentially is erased by an unexpected $49 million reduction in its required pension fund contribution. That's the good news. The bad news is that half of the pension reduction is eaten up by health care increases, and that the contribution is expected to go back up to more than $60 million in 2013.

Commendably, the proposed budget puts away $17.4 million of the pension savings in a reserve in order to help prepare for future pension contribution increases. Otherwise, the budget is remarkably status quo, with federal stimulus dollars helping to boost spending on city infrastructure and select departments, and significant service reductions and tax and fee increases averted.

The 2011 City of Milwaukee Budget Brief can be accessed here. A similar report on Milwaukee County's 2011 budget will be released in the near future.

Are state budgets going to pull out of the recession in 2011?

The state's budget analysts seem confident of the economy's recovery. According to the National Conference of State Legislatures, Wisconsin is one of 40 states predicting FY 2010 to be the low point of the recession by forecasting higher total tax collections in FY 2011. Wisconsin's forecast is for 5.4% growth in total taxes collected, a rate of growth only 16 other states expect to exceed.

With regard to specific tax streams, corporate income tax collections are expected to grow the most in the next fiscal year, at 14%. These taxes make up only a small portion of the total tax revenue pie, however. The largest sources of state tax revenue, personal income tax and sales tax, are each expected to produce 5.5% more in tax receipts in FY 2011. These projections put Wisconsin among the most optimistic states--only 14 states predict greater personal income tax receipt growth and just nine states predict greater sales tax receipt growth.

The state expects FY 2012 to be even better; in fact, the forecast for that year is a return to the peak collection levels last seen in FY 2008.

Of course, if these forecasts turn out to be overly optimistic, the result will be an even larger state budget hole--perhaps foretelling such an occurrence, most state agencies have been directed to plan for FY 2011 and FY 2012 expenditures to remain at FY 2010 levels.

A new strategic direction for mental health care in Milwaukee County

A recent series of articles in the Milwaukee Journal Sentinel on safety issues at Milwaukee County's Mental Health Complex is the latest to raise questions about the level and quality of mental health care in our community. Unfortunately, while these exposes have ranked high in shock value, they have yet to produce the comprehensive redesign of the public and private mental health systems that many feel is needed.

A report released today may provide the impetus for such change. The report - authored by Massachusetts-based Human Services Research Institute - culminates a two-year project initiated by the Milwaukee Health Care Partnership (a collaboration headed by the five major health systems in Milwaukee County), the Medical Society of Milwaukee County, and the Milwaukee County Behavioral Health Division. The project’s objective was to bring in national expertise to examine gaps in the existing adult mental health care delivery system and devise ways to transform that system into one that more closely mirrors national best practices. The Public Policy Forum has served as local facilitator for the project.

Readers of the report should be forewarned - in many respects, this is a technical document that contains dozens of pages of data findings and analysis and lots of references to mental health policies and practices that may not be familiar to the average citizen.

But that also may be its strength. Indeed, by suggesting a new strategic direction based on data and facts, it is hoped that this report can de-politicize and de-sensationalize a set of complex issues and challenges that must be confronted for the sake of the overall health of our community and the fiscal health of Milwaukee County government.

Some of the report's recommendations may be controversial, and some may require new fiscal resources (though the report emphasizes re-directing existing dollars, as opposed to finding new ones). Implementing those recommendations will not be easy, and will require teamwork and cooperation from several levels of government, law enforcement, consumers, advocates, community-based organizations, and private sector payers and providers. Yet, the diversity of the stakeholders group that has brought the project this far certainly provides hope.

The media release accompanying the report - which provides additional details about the project's history and the stakeholders that have guided it - can be accessed here. The executive summary and full report can be accessed here and here.

What’s the right peer group for Metro Milwaukee?

Identifying the right group of metro areas with which to compare Milwaukee is a frequent dilemma for Public Policy Forum staff. Our answer is ever evolving. Typical decisions affecting our choices include level of geography (city, metropolitan statistical area, seven-county region), population size, data availability, and project timeline and resources. Depending on the project, we may be looking for best practices that might be replicable in our region or how other cities tackled similar issues to those faced by Milwaukee.

In our Innovation Index, launched in spring 2010, a narrow list of benchmark cities was adopted, combining typical Midwest metros (Indianapolis, Minneapolis, and Cincinnati) and a few existing or rising innovation leaders (Austin, Portland, and Kansas City). The benchmark cities were chosen to provide both a regional context and a set of peers that could set the bar high for Milwaukee’s innovation strategies.

Recent studies from the Brookings Institution Metropolitan Policy Program and the Federal Reserve Bank of New York may reshape how peer groups are determined. Both studies establish new comparison typologies based on the shared economic and/or demographic characteristics of metro areas, as opposed to geographic location alone.

In State of Metropolitan America, Brookings establishes new metro groupings that include Border Growth and Mid-Sized Magnets, Diverse Giant/Next Frontier, New Heartland, Skilled Anchor, and Industrial Core. Milwaukee falls into the Skilled Anchor category, which is defined as “slow-growing, less diverse metro areas that boast higher-than-average levels of educational attainment.” Brookings’ broad analysis of social, demographic, and economic data shows that metro regions can be grouped based on the types of challenges they’re facing, which the authors argue may allow similarly positioned regions to develop “common solutions.”

The Federal Reserve Bank’s Knowledge in Cities assigns cities to 11 different knowledge clusters based on occupational skills requirements and existing industry employment patterns. The clusters include Making Regions, which have high knowledge of manufacturing, but low knowledge in commerce occupations; Understanding Regions, which have very high knowledge of arts, sciences, and the humanities, but low knowledge of manufacturing; and Building Regions, which have high knowledge of construction and transportation. Several areas in Wisconsin (Eau Claire, Green Bay, Racine, and Wausau) fall into Making Regions. Milwaukee is grouped with the Enterprising Regions that have high numbers of jobs in commerce and IT fields. Other enterprising regions are Atlanta, Charlotte, Cincinnati, Denver, Kansas City, Minneapolis, Portland, and St. Louis.

Ultimately, determining the most appropriate metro peer groups may depend on how the Milwaukee region defines itself and its vision for the future. Will the City of Milwaukee’s ranking as the 4th highest in poverty level define the city and link us with similarly impoverished regions? Or will the rise in a skilled computer workforce be leveraged for regional economic gain and link us with the Austins, Pittsburghs, and Seattles who are strengthening their information infrastructure? The answer may lie in how our region responds to its challenges and whether it is able to successfully build on its strengths.

Local nonprofits still feeling impacts of recession

The 14th annual "Report Card on Charitable Giving" - released by the Forum today in partnership with the Greater Milwaukee Foundation - shows moderate improvement over last year in the fiscal health and general outlook of Metro Milwaukee nonprofit organizations. Nonetheless, nonprofit leaders continue to express a healthy dose of pessimism toward the state of philanthropy and continue to feel the impacts of the economic downturn in varied ways.

The report card is based on a comprehensive survey of nonprofit organizations in southeast Wisconsin. More than 150 nonprofits responded to this year's survey, with a little more than half (52%) from the human services sector, 17% from arts and culture, 16% from education, 10% from health organizations, and 3% from the environmental sector.

Among the key findings that emerged:

• For the second year in a row, nearly two-thirds of respondents feel that economic conditions are causing local giving to be less generous than usual. The 2010 result of 66% is slightly improved, however, from the 68% who felt that way in 2009.


• More than a third (38%) of this year's respondents report decreased total revenue, while half report increased total expenses.


• Half of the respondents feel they are financially healthy but vulnerable in the future, an improvement over the 57% who felt this way in 2009. Meanwhile, 30% feel they are financially healthy with no foreseeable problems in the near future, also improved from the 24% who responded that way in 2009.


• Arts and culture organizations expressed the greatest concern about their financial health among the various nonprofit sectors, with 35% reporting chronic financial problems, and another 50% reporting they are financially healthy but vulnerable in the future.


• Survey respondents cited the need for several personnel-related actions to address budget constraints, including salary freezes (40%), reductions in benefits (20%) and lay-offs (18%). Nearly half (48%) say they have considered collaborating with other organizations and 22% say they have considered merging with other organizations.


• A quarter of the respondents say their expectation of long-term sustainability is very high, while another 41% report it is high. Only 3% have low expectations for long-term sustainability.


• Nearly half (46%) of the respondents say they expect gifts from corporations to decline, while 43% expect gifts from individual donors to decline and 41% expect foundation grants to decline.

An executive summary of this year's report card and a copy of the full report can be accessed here. The report card is published and sponsored by the Greater Milwaukee Foundation, and co-sponsored by the Donors Forum of Wisconsin, Faye McBeath Foundation and United Way of Greater Milwaukee.

MATC facing growing demands, shrinking resources

Today, the Forum released the third in its series of financial reports on local taxpayer-funded entities in Metro Milwaukee: a comprehensive fiscal assessment of the Milwaukee Area Technical College (MATC). This report uses the same fiscal monitoring methodology as 2009 reports on Milwaukee County and the City of Milwaukee, which were recognized with an award for "most effective education" earlier this year from the Governmental Research Association.

Like the city and county reports, the report on MATC paints a somewhat alarming picture. It finds a local institution that has taken on increased importance in light of the economic downturn and community-wide efforts to increase the number of college degree-holders, but one that has been hit hard by the recent decline in property values.

Key findings from the MATC fiscal assessment include:

• Property tax revenues comprise roughly 60% of MATC's budget, causing it to rely on the property tax more than most local governments and school districts. MATC's budget has mirrored the ups and downs of the real estate market, with revenues climbing much faster than the rate of inflation from 2005 to 2009, but falling in the next two years.


• MATC has seen a steady decline in revenue from the state. The college was able to weather this decline when overall revenue growth was strong, but faces difficulty doing so in today's revenue climate.


• Student charges have been the college's fastest-growing revenue source of late, with tuition and fees rising nearly 40% since 2005, raising questions about impacts on student access.


• Fringe benefit and salary increases were responsible for about three-quarters of the college's expenditure growth during the five years under review, with health care expenditures rising twice as fast as those at the City of Milwaukee and Milwaukee County.


• A newly developed imbalance between ongoing expenditure needs and revenue capacity will continue to grow without substantive budgetary corrections, reaching a projected $11 million to $62 million within the next five years.

This turbulent financial picture leaves MATC little choice but to examine current levels of employee staffing, pay and benefits, which are quite robust based on comparisons with state and national peers. For example, the report finds that MATC ranks first among a group of 85 national peers in operating expenses, salary expenditures and fringe benefits expenditures per full-time equivalent student.

The report cautions, however, that any significant expenditure reductions must weigh impacts on the college's academic quality and its capacity to meet recent double-digit increases in enrollment. It also suggests that college leaders step up efforts to establish clear performance goals and collect performance data as part of the effort to address difficult budget issues.

Finally, the report offers an opportunity to compare the fiscal practices and condition of MATC - which operates as a local authority and is governed by an unelected board - with local governments operating under traditional elected models. It notes both similarities and differences in the manner in which these entities have responded to common fiscal challenges, and offers insights into what this tells us about the debate over government structure in our region.

A full copy of the report can be accessed here, and our media release here.

Merit-based pay for students and parents?

The notion of linking teacher salaries to student outcomes has been one of the country's most talked-about education reform topics of late, causing us to wonder in an earlier blog whether Milwaukee's new superintendent had this controversial idea on his radar screen.

But now, out of Houston, comes a concept that undoubtedly would generate even more controversy if attempted locally: paying students and parents for improved academic performance.

A recent article in the Houston Chronicle describes a $1.5 million pilot program approved by the Houston Independent School District (HISD) that will allow families at certain HISD schools to earn more than $1,000 for enhanced student achievement in fifth grade math. The program will be funded by a Dallas foundation.

According to the article, fifth graders at the selected schools will be able to earn up to $440 for passing tests showing they have mastered certain mathematical concepts. Parents of successful students can earn another $400 as a reward for making sure their children did the necessary work to pass the tests, as well as $180 for attending nine parent-teacher conferences. There's also something in the deal for teachers, who can earn up to $40 per student for holding the parent-teacher conferences.

Interestingly, a third party to this seemingly radical idea is Harvard University's Education Innovation Laboratory, which has formed a research partnership with HISD. The same Harvard researchers conducted a comprehensive experiment of the "pay for grades" concept in Chicago, Dallas, New York and Washington that was featured last spring in Time magazine. The research team will compare student test scores at HISD schools that are participating in the program with schools that are not. It also will examine the incentives' impacts on other barometers of student success, such as attendance rates and behavior.

The Chronicle story engendered howls of outrage from readers commenting on the paper's website, many of whom questioned why anyone should be rewarding parents for fulfilling their parental responsibilities and students for doing what's in their own best interest. School district officials quoted in the article argue, however, that over-worked and over-stressed low-income parents may need an incentive to become more involved, and at this point it's just a research project aimed at determining whether financial incentives truly would make a difference.

Given the political outcry that likely would occur even if the pilot turns out to be successful, it's difficult to imagine it taking hold across the country. Still, in light of the constant refrain for bold and innovative reform in our urban schools, can you blame Houston for trying?

Wisconsin ranks in top ten in child care costs: child care more expensive than college

Wisconsin ranks among the 10 most expensive states for child care in a new report from the National Association of Child Care Resource and Referral Agencies.


The NACCRRA found that full-time care for an infant in the average Wisconsin child care center, at $10,520 per year, exceeds 13% of the annual median family income for a two-parent family, placing Wisconsin among 36 states for which the cost of infant care exceeds 10% of the median family income. For a family earning at the poverty line, full-time infant care would exceed 57% of annual income.

In addition, Wisconsin is 4th most expensive when the cost of center-based care for a 4-year-old is considered ($9,039 per year, or over 11% of the median family income) and 3rd most expensive for afterschool care for school-aged children ($8,223 per year, or over 10% of the median family income).

As someone who no longer needs full-time child care with last week's start of the school year, I was well aware of the cost. But I was quite surprised by the report's finding that child care has become one of the largest monthly outlays for Wisconsin families, costing more than the average monthly rent payment, grocery bill, utility bill, and even health care. In fact, average child care costs for two children exceed the average mortgage cost for Wisconsin families.


The good news, if you choose to see it that way, is that these Wisconsin families should have no problem affording college tuition when the time comes--they are already paying more for child care than they would for most of our state's public four-year universities.

PPF annual analysis of school district performance: How's your district doing?

The Forum's annual analysis of public school districts in southeast Wisconsin is released today, and finds the regional academic achievement scores continue to come more in line with the statewide scores. Unfortunately, lower scores in the rest of the state contribute to the smaller difference as much as improved scores in the seven-county region.

The report also finds that while the region does well on ACT and AP exams, as compared to the rest of the state, it is lagging more and more in graduation rates, mostly due to the low graduation rates in MPS.

The region's large racial achievement gap has been highlighted in several previous editions of the report. This year's analysis shows little progress has been made toward closing the gap in scores between white and African-American students--it is nearly as large now as it was five years ago and is persistent across all districts. All districts also show a significant gender achievement gap in reading, with girls outperforming boys at every grade level.

Other findings:

• This year's 8th graders' reading proficiency rate slipped down as compared to the rate for last year's 7th graders, a trend that has been true statewide in previous years but has occured in the region for the first time this year.


• Total enrollment in the region remained virtually static, but the number of minority students attending public schools in the region grew by 39%.


• The number of students participating in the free or reduced-price lunch program grew significantly this year for both the region and the state as a whole. Almost all districts in southeast Wisconsin had more students qualify for the program serving low-income children.

The full report, as well as a poster-sized summary detailing data from individual districts, can be found here.

Underwriters of this year's edition include: Alverno College, Multiple Listing Service, Northwestern Mutual Foundation, Southeastern Wisconsin Schools Alliance, Stifel Nicolaus, and Waukesha County Technical College.

We're far from alone when it comes to fiscal chaos

Every summer, members of the Governmental Research Association (GRA) - an association comprised of organizations devoted to government research from across the United States - get together to exchange research ideas, discuss topical issues and recognize outstanding research products.

It should come as no surprise that at this year's conference, held in New York City last week, a primary topic of discussion was the fiscal difficulties facing state and local governments.

Among the many sessions that focused on those difficulties was a luncheon address by New York Lieutenant Governor Richard Ravitch that described the political dimensions of that state's budget challenges; a panel discussion on state finances with budget officials from New York, New Jersey and Connecticut, as well as an official from the Standard & Poor's bond rating agency and the vice president of the California Taxpayers Association; a panel discussion on city finances with a group of officials and experts from New York City, Philadelphia and Boston; and a session on the "roots of dysfunction" with a panel of researchers from New York, Chicago, Louisiana and New Jersey.

Those sessions and discussion with fellow GRA members revealed several common themes, which might sound familiar to those who have followed recent budget deliberations in Madison and locally:

• Stimulus dollars were enormously important in staving off deep budget cuts and/or tax hikes in 2009, but state and city governments now are alarmingly ill-equipped to deal with the loss of those dollars, especially given that the expected economic recovery has not meaningfully materialized.


• Unfunded pension and retiree health care liabilities are huge problems virtually across the board, yet very little can be done to reduce their fiscal burden in the short-term because of legal protections.


• Elected officials are maddeningly unwilling and/or incapable of responsibly dealing with their complex and difficult budget challenges. A researcher from Rutgers University, for example, lamented the unwillingness of legislators in his state to acknowledge and use fiscal data, while a New York budget official cited one anonymous legislator who publicly decried the irresponsibility of raising taxes to fill the state's huge budget hole while pushing behind the scenes for pork barrel spending in his district.


• There is a feeling among government insiders in many states (and most notably, California and New York) that the political class has given up - they know the problems they face demand difficult and unpopular solutions, so they have resorted to posturing and kicking the problems down the road for someone else.

Despite the pessimism that permeated these sessions, the "misery loves company" dynamic certainly came into play. Indeed, while we tend to think of our state and some of our local government budgets as hopelessly imbalanced, it was perversely satisfying to realize there are others in worse shape.

California and Connecticut, for example, are being dragged down by immense unfunded retirement liabilities, while Wisconsin's state retirement system is in reasonably good shape. And Philadelphia and New York City are just as dependent on state aids as Milwaukee, yet their capacity to weather continued state cuts is far inferior given the huge reductions in personnel and depletion of reserves they have already implemented.

An interesting perspective also emerged, albeit from an unlikely place. State leaders in New Jersey - widely known as a hotbed of irresponsible budgeting - instituted a strict property tax levy cap as part of an initial package of state budget cuts, which also included sharp reductions in state aids to local governments. Instead of leaving local elected officials to fend for themselves, however, state officials have engaged them to identify the reforms in state law they would need in order to live within the cap without slashing valued services. A scenario in which state and local officials here would attempt to work together in similar fashion certainly would be refreshing.

Overall, it's clear that state and city budgets across the country are in a state of disarray. At the GRA conference, the hope was that strong leadership based on solid data and sound research would emerge to address those challenges.

Could a budget crisis reform teaching?

Tight budgets are causing many local governments to revisit labor agreements in search of cost savings. Around Milwaukee we've seen labor concessions to avoid layoffs at MATC and the city; unpaid furlough days at the city and county; and teacher layoffs at MPS. While a portion of the laid-off teachers were called back last week, the MPS layoffs have been portrayed as the most drastic labor management tactics of any local government in response to the budget crisis.

Facing its own budget troubles, the Chicago Public School District (CPS) is also looking at the potential for layoffs. But the CPS board of education approved a new policy last month that would prioritize the release of tenured teachers with the poorest performance ratings over newer teachers with higher ratings. The policy would save the district money every time a more costly senior teacher is laid off instead of a lower paid, more recent hire. The policy would go into effect if the district reaches class sizes of 35, another attempt at coping with a gaping budget hole, or if student enrollment drops enough to require layoffs.

The Chicago teachers union is arguing that the district cannot implement the policy, as it violates the negotiated teacher contract. The contract, in place since 2007, requires layoffs to be based on seniority. The district claims state law allows it the discretion to use teacher performance evaluations in making layoff determinations. The district and the union are debating whether the discretion granted by the state law is abandoned when a district signs a contract that does not include a provision for performance-based layoffs. (The union also contends that the teacher evaluation process is too arbitrary to be used for this purpose, a universal issue with regard to teacher performance measurement.)

If CPS prevails, it will be among the first to abandon the traditional "last hired, first fired" model for mass layoffs. However, it is not likely to be the last. Education reform advocates wanted the $10 billion federal education jobs bill, which passed the House July 1 and is now pending in the Senate, to include a provision requiring states to outlaw seniority-based layoffs in order to be eligible for the aid. (The bill does not contain the provision.) Arizona is currently the only state with such a law on the books, although Gov. Schwarzenegger has stated his support for a similar proposal in California.

While Wisconsin has yet to take on the issue, it is not unreasonable to expect pinched districts to look for new ways to relieve their budgetary stress. Education reform is not usually driven by the need to save money and often, in fact, requires an influx of money. Could this be the reform that structural deficits hath wrought?

Previewing next year's Milwaukee County budget

This morning, the Public Policy Forum released its latest report analyzing the fiscal predicament of Milwaukee County government. The report previews the county's 2011 budget scenario and also includes analysis of its five-year fiscal outlook.

In the past, we have raised sharp concerns about the county's fiscal condition and we have been critical of its inability to address its challenges strategically (see previous reports here and here). In this report, we give credit where it is due for some recent encouraging developments, including the county's success in reducing health care and incarceration costs and its creativity in developing public-private partnerships to support the parks and other functions. We also praise its new commitment to long-range fiscal forecasting and strategic planning.

Unfortunately, our assessment is that those positive steps have allowed the county to move the ball from its own 10-yard line to perhaps its own 20 or 25. It still has a ways to go before even reaching midfield (let alone the goal line). Meanwhile, it has gale-force winds in its face in the form of the region's and nation's larger economic challenges and the state's overwhelming budget difficulties.

Additional findings and observations from the report:

• Bridging the county's 2011 budget gap of $20-$45 million may require consideration of several stark options, including wholesale elimination of programs and services and/or closure of certain parks facilities or animal exhibits at the zoo.
• The county's five-year outlook forecasts continued growth in annual budget gaps, reaching $126 million in 2016. We modeled hypothetical scenarios in which the county would raise property taxes by 6.6% in each of the next five years or significantly curb the projected growth in wages and benefits, and those scenarios may not even cut the projected hole in half by the end of the five-year period (though they could produce considerable progress over a lengthier time frame).
• Even if the county employs a series of drastic options modeled in our report to address its structural gap, it will fail to get at other major non-budgeted problems, such as maintenance and capital needs in its parks, loss of stimulus dollars for its transit system, and a series of operational and physical concerns at its mental health complex.

The intention of this report is not to add to the gloom and doom that often surrounds Milwaukee County government, but to encourage county policymakers and civic leaders to continue their focus and recent progress on long-term financial solutions. We also suggest, once again, that a balanced approach employing service reductions, revenue enhancements, wage and benefit concessions and sale or lease of assets may be the best strategy for bringing Milwaukee County's financial situation back into balance.

The full report can be accessed here.

Impacts of decreasing property values on government budgets come into focus

The Public Policy Forum's annual report on property values and taxes in southeast Wisconsin was released this morning with a not-so-surprising conclusion: property tax rates are on the rise as local governments and school districts struggle to maintain existing service levels in the face of declining values.

The Forum has been compiling taxing, spending and property valuation data from each of the region's seven counties and 146 municipalities since 1992. This year was the first in which property values in the region declined, with the aggregate value diminishing 1.3% between 2008 and 2009. Yet, despite this decline in value, the property taxes levied by local governments and school districts in the region increased by 3.9%, a reflection of the fact that the aggregate property tax rate in the region grew by $1.02 per $1,000 of value, or 5.3%.

The good news - if one can call it that - is that the average homeowner paid less in property taxes for the 2010 tax year than he or she paid in 2009. That's because one's property tax bill is determined not only by the tax rate, but by the assessed value of one's home. Because the value of the average residential property decreased by more than 9%, the average homeowner in the region actually saw his or her overall tax bill drop from $4,607 to $4,401.

So what's the takeway from all of these numbers? We suggest it's that state and local elected officials will continue to face a monumental challenge keeping rates down while maintaining existing service levels, and that property owners soon will notice the difference. Indeed, this data further illustrates the need for revenue diversification at the local level, a topic we're hoping receives greater attention as races for governor and the state legislature heat up.

To access the full report, click here.

Program at a crossroads

Since its establishment in 2005, the Main Street Milwaukee (MSM) Program has been a highly touted economic development program designed to promote economic growth and revitalization in six selected city neighborhoods. MSM - a partnership between the City of Milwaukee Department of City Development (DCD) and the local chapter of the Local Initiatives Support Corporation (LISC) - is a key component in the city’s overall economic and community development strategy.

In light of the program’s important role in city development, the Forum’s 2009-2010 Norman N. Gill fellow, Sandra Zupan, took a look at the MSM and its outcomes. Her report, Main Street Milwaukee: Program at a Crossroads, explores the program's public and private investment, financial sustainability, expenditures, outcomes, and governance.

The report’s key findings include:

• The total investment in the MSM program between 2005 and 2009 was $3.3 million. Although the goal was for public and private investments in the MSM Program to be equal, the public portion accounted for 64% of the overall investment, while the private portion accounted for 36%.


• While the MSM neighborhoods were originally planned to be financially self-sufficient within six years, none of the districts will meet this goal and in fact, public investment continues to be crucial for sustaining the program.


• As a result of the program, more cohesiveness and stronger working relationships have been created among stakeholders within the neighborhoods.


• When compared to the program's estimated outcomes over its first five years, the total private investment in exterior building improvements exceeded estimates by a considerable amount. However, the number of businesses created in the neighborhoods is 86% of the original estimate, while 57% of the estimated jobs have been created.

The MSM Partners Board, made up of public and private officials, recently initiated an effort to consider substantial restructuring of the MSM program. As they move forward, the report urges them to consider the following issues:

1. The MSM program goals need clarity, and may need to be revamped in order to be more suitable for Milwaukee’s low-income neighborhoods;


2. The mismatch between the intended goals of the program and the purpose of the program’s main funding source likely has contributed significantly to the program’s failure to meet initial estimates, and needs reconciliation;


3. The program structure is overly complex and coordination among the neighborhoods and partners is poor;


4. Transparency and accountability for achievement of outcomes is lacking;


5. Resources need more leverage, and the program's branding, marketing, and visibility are insufficient; and


6. More volunteers are necessary for the program to be viable.

Finally, the report points out that city officials, LISC, and the MSM Partners Board may wish to research further whether there is a tangible connection between economic development improvements in Main Street neighborhoods and the program itself. In addition, the overall question of how the city's economic and community development strategy relates to its anti-poverty strategy is ripe for future research and analysis.

For the full report, please visit the Forum's website.

Special thanks to the Gill family for their generous support of this project through the Norman N. Gill Fellowship.

PPF Pearls: Revisiting the need for an independent fiscal voice at Milwaukee County

In recent years, the Public Policy Forum has not been bashful about articulating the perilous fiscal condition of Milwaukee County government. Our intention has not been to "pile on," but to objectively discuss the size, scope and origin of the county's fiscal challenges and the need for a strategic approach to address them.

Our March 2009 report on the county's fiscal condition, for example, found the county "has attempted status quo management for far too long in an atmosphere of exceptional costs and restricted revenues." And, our review of the 2009 recommended budget cited the "failure of both branches of government to utilize a realistic and mutually agreed upon assessment of their long-term fiscal challenges," which was "indicative of a county culture that has existed for many years - one that focuses on each budget one year at a time, deferring tough problems and basic infrastructure needs while long-term liabilities grow."

Perhaps no development better exemplifies the consequences of status quo management than the county's need to spend millions of dollars on repairs and maintenance at its mental health complex in the wake of dozens of state citations.

The county has known for years that the complex is outdated and faces a huge maintenance and repair bill. The administration's proposal to move inpatient mental health services to a renovated St. Michael's hospital under a long-term lease arrangement was rejected by the county board, in part because supervisors were advised by their staff that it would be less expensive to build a new hospital on the County Grounds. Almost 18 months later, the county has made little progress on that initiative or any alternatives, and now finds itself needing to spend millions of dollars on repairs at a facility that clearly does not meet its needs.

The current circumstances are yet another example of the county's inability to realistically and effectively assess real problems and agree on real solutions due to distrust between the executive and legislative branches. Indeed, the fact that the two branches debated the future of their mental health complex for more than two years without agreement on fundamental fiscal and administrative realities - such as their capacity to issue debt or take on the legal, financial and project management complexities required to build a new hospital in a timely manner - suggests a compelling need for institutional change.

The Forum's 2009 budget review recommended establishment of an independent entity - along the lines either of the independently elected city comptroller or the state's Legislative Fiscal Bureau - to counter the skepticism of each branch toward information provided by the other. We specifically noted that "in light of the recent dueling cost estimates between administration and county board staff regarding a new or renovated mental health complex," such an entity could be charged with evaluating and inserting the county's fiscal realities into critical policy debates.

The county did respond by increasing the independence of the existing controller, but he still lacks the tools and the charge to fulfill the function we envisioned. As millions of dollars are spent repairing an obsolete mental health complex the county is seeking to abandon, perhaps it is time for county decision-makers to revisit our suggestion.

The People Speak: Citizens' views on transportation issues

The June 2010 People Speak poll, conducted in conjunction with the UWM Center for Urban Initiatives and Research and The Business Journal Serving Greater Milwaukee, covers several transportation issues, including congestion, transit options, revenue diversification, and regional governance.

The People Speak is a tracking poll, conducted at regular intervals throughout the year. Its purpose is to gather information from the region's citizens about their interests in, concerns about, and preferences for public policy. By gathering and reporting these citizens' perspectives, the partners hope to expand the public voice in policy matters affecting greater Milwaukee.

Highlights from the June 2010 poll of 386 residents of Milwaukee, Ozaukee, Washington, and Waukesha Counties include:

• Average grades for the region's transportation infrastructure. Local roads garner a C- and freeways a C+. Local bus service and main thoroughfares each earn a C-, as well.


• Overall, respondents see traffic congestion as a moderate to severe problem, but do not feel it has been increasing over the past decade. Still, there is majority support for increasing the capacity of the I-94 East-West freeway.


• Declining support since September 2009 for commuter rail and for high speed rail to Madison.


• Support for a downtown Milwaukee streetcar system is strongest among Milwaukee County residents, although about a third of respondents overall say they would regularly use a streetcar to get around downtown Milwaukee.


• Over half of respondents say they would support a $0.01 per-gallon increase in the gas tax to fund transportation improvements. This funding option is more popular than toll roads or increases in the vehicle registration fee. With respect to funding the Milwaukee County Transit System in particular, most agree that a half-cent sales tax is the "best option."

For the Research Brief and full results, please go to the poll's website.

When the going gets tough...

"When the going gets tough" is the theme of this year's Salute to Local Government, an event held annually by the Public Policy Forum since 1992 to recognize outstanding and innovative government performance in southeast Wisconsin.

This year's theme recognizes that as bad as the historic economic downturn has been for all sectors of our economy, the local government sector has been among the hardest hit. Indeed, plunging property values and sales tax revenues, coupled with growing demand for a variety of local government services, have created severe challenges for even the most property-rich and prudently managed local governments. Those that have weathered the storm - and perhaps emerged even stronger from their innovative efforts - certainly are worthy of recognition this year.

The 2010 award winners - described in this media release - represent a diverse group of governments, programs and individuals throughout the region. Government honorees, for example, include our biggest city, two villages and a special authority, while honored programs encompass functions ranging from watershed management to a library to a zoo. The individual award winners, meanwhile, come from the region's second-smallest county, a small city and a consolidated fire department.

So what's the overall takeaway from this year's slate of winners? Perhaps it's that examples of good government permeate all levels of government in our region, as well as a wide variety of programs that ordinary citizens may not realize are linked to the public sector or even think about as being managed in creative and effective ways.

That's not to say that examples of wasteful and ineffective government don't exist, but it is to say that such examples - while constantly and justifiably in the news - cannot be allowed to overshadow the good work being performed by thousands of local government and school district professionals in our region every day.

This year's Salute will take place on June 17 at the Italian Conference Center - to find out more and sign up, click here.

Reforming the teaching profession, part 2: Pay-for-performance

Like tenure reform, discussed in yesterday's post, tying teacher salaries to student outcomes is a controversial education reform strategy that is gaining traction across the country, but has yet to be debated in Milwaukee. Many of the recent efforts come from the federal Race to the Top grant guidelines, which expressed a preference for states that included student outcomes as a factor in teacher evaluations.

But even before Race to the Top, several districts already had implemented merit pay plans, most notably the Denver Public Schools. The DPS scheme, call ProComp, was approved by Denver voters in 2005. Teachers new to the district are automatically part of the program and other teachers may opt-in. In exchange for a higher base salary, teachers agree to accept pay raises based on participation in professional development activities, working in a hard-to-staff school, showing proficiency in teacher evaluations, and/or exceeding student achievement goals. The goals of ProComp are to improve student outcomes and to attract and retain quality teachers.

A recent evaluation of ProComp found that the program appears to have contributed to the district's gains in reading and math scores and to have attracted new teachers with better student outcomes in their first year of teaching.

Other programs have shown less promise. An evaluation of a state program in Texas that provided grants to high poverty schools to implement merit-based bonuses found that over the three years of the program, schools that gave bigger bonuses had less teacher turnover; however, no relationship between the merit bonuses and student outcomes was found.

Despite the mixed results of these and other pay-for-performance strategies, federal, state, and district officials continue to seek ways to connect teacher pay to student achievement. In two districts, controversial new superintendents have received approval to implement merit pay plans starting next school year. Michelle Rhee and the Washington D.C. plan were discussed in a previous post. A superintendent that has often been compared to Rhee, Mike Miles, will implement a plan in the Harrison School District of Colorado Springs in which all teachers and principals in the 11,000-student district will forgo salary step increases in favor of raises based on performance.

The Harrison plan stands out among merit pay schemes in its reliance on classroom observations to measure teacher effectiveness. Soon after joining the district in 2006, Miles started intensive professional development for principals in the art of classroom observations. In addition, he established an extensive professional development infrastructure so that principals can refer teachers to training opportunities based on what was observed. Principals are to conduct frequent "spot" observations of 10 to 15 minutes, as well as longer formal observations of entire lessons and/or classes, and give constructive feedback to teachers.

The observation scores will be matched to student performance scores on, at minimum, the state standardized test, progress-monitoring and interim assessments, and district assessments. Together, the observations and student performance scores will place the teacher in one of nine salary tiers. Teachers can move down the tiers, as well as up, and their salaries will be adjusted accordingly. For current teachers, the adjustments will be made from their current salary.

This new merit pay model, which requires not only investment in salaries and raises, but also substantial resources for professional development, is certain to be closely watched across the country as it moves forward. Will Milwaukee's new superintendent be watching as well?

Reforming the teaching profession, part 1: Tenure reform

Milwaukee is often called ground zero for education reform, and for good reason. We have been on the forefront of reforms such as budget decentralization, school-to-work, neighborhood schools, parental choice, charter schools and, the most recent attempt, governance reform.

There are two hot-button issues, however, that have not been on the agenda here: merit pay and tenure reform. But, with both of these tactics garnering more attention across the country, it seems unlikely Milwaukee will be a hold-out for long.

Merit pay, or pay-for-performance, has been implemented or is in the process of being implemented in several schools districts across the state. Tomorrow I'll post about a few of those efforts. Today's post focuses on tenure reform.

In one way, tenure reform has gained a foothold in Milwaukee. The recently passed legislation that gives the state Department of Public Instruction with greater powers over the Milwaukee Public Schools also eliminated tenure for principals in MPS. (MPS is the only district in the state with represented principals.) But it does not tackle teacher tenure, or permanent status, head-on.

Teacher tenure laws arose in the 1920s and '30s from the women's rights movement of the time. In an era in which female teachers were routinely fired for getting married or wearing pants, teachers needed protection from paternalistic employment laws, unfair rules, and arbitrary decisions by administrators. Today, through due process requirements, tenure still protects teachers from arbitrary dismissal, and also provides some protection from political, ideological, or other pressures from administrators, school boards, or parents. An argument also can be made that tenure helps balance out the limitations of the job, such as a low salary, and makes the profession more attractive.

Providing permanent status to teachers has both fiscal and educational drawbacks. From a fiscal perspective, dismissing a teacher is a long and costly process for school districts and districts. And from an educational standpoint, districts often struggle to hold mediocre teachers with tenure accountable for student performance. In addition, some argue that K-12 teachers are not in need of the same "academic freedoms" as professors and that there is not the same threat today of unfair working conditions or arbitrary dismissals.

Over the past year many states have begun debating tenure reform proposals. In fact, at least four states have had tenure reform bills introduced this spring that would bring teacher quality into the tenure/dismissal decision:

• Colorado: Last week Governor Ritter signed a "teacher effectiveness bill" into law that, among other things, grants tenure only after a teacher has three consecutive years of "demonstrated effectiveness" in the classroom. Tenured teachers lose their non-probationary status if they have two consecutive years of unsatisfactory evaluations. In addition, when layoffs are necessary, effectiveness will be considered before seniority.


• Louisiana: Gov. Jindal's proposal to tie dismissal decisions to annual performance evaluations has passed the Louisiana House and is awaiting a vote in the Senate. The bill specifies that the evaluations will include consideration of student performance. In addition, teachers deemed ineffective would receive "intensive assistance" for a year. Those judged ineffective a second time could be dismissed.


• California: Gov. Schwartzenegger's 2005 proposal to increase the probationary period for teachers from two to five years was defeated by the voters. He is now supporting a reform that would prevent layoff decisions from being made based solely on seniority. In addition, the Los Angeles Unified School district is planning to dismiss three times more teachers this year than last year, after the Los Angeles Times reported that an investigation of the district revealed no systematic process for evaluating teacher performance prior to granting permanent status.


• Florida: Gov. Crist vetoed a bill last month that would have eliminated teacher tenure and linked salaries to student performance. The bill kept tenure in place for current teachers, but tied their pay to performance evaluations. New teachers would have worked under one-year contracts and would have been dismissed for low student performance on end-of-year exams in any two of five years.

Other states also have debated or changed their laws regarding the number of years a teacher works before being eligible for tenure, including Ohio, Maryland, and Delaware.

Interestingly, Wisconsin is the only state in which districts are not statutorily required to provide tenure for teachers, although all districts currently do so. At first blush, it might seem that this unique status would allow MPS to more easily embark on an evaluation of the tenure process, potentially making changes of the type being debated nationally. In reality, however, the district is unlikely to seek any changes in teacher contracts that would make employment at MPS less attractive than in surrounding districts.

Will a district and a city accustomed to being at the cutting edge of education reform sit out this latest wave of reform efforts? The clock is ticking on when tenure reform will become part of the discussion about the urgent need to improve student outcomes in Milwaukee.

Part II, tomorrow: One superintendent's role in tying teacher pay to student achievement.