Friday, April 30, 2010

Some perspective on surpluses

The City of Milwaukee's recent announcement of a $23 million budget surplus for 2009 - following closely on the heels of Milwaukee County's announcement of an $8.9 million surplus - has engendered the expected spin-doctoring from the gubernatorial campaigns of the mayor and county executive, as well as their legions of supporters and detractors.

Last year, the Public Policy Forum conducted assessments of the fiscal condition of both city and county government using a set of fiscal indicators developed by the International City/County Management Association. Based on those assessments, we offer the following points of perspective:

  1. The fact that both governments were able to generate healthy budget surpluses in the midst of an historic economic downturn is a tribute to their conservative approaches to monitoring and ultimately balancing their budgets. While logical questions are being raised regarding the necessity of some of the mid-year actions taken by each government to control spending, it's important to remember that fiscal forecasting is not an exact science, and that in a $1.3 billion budget, the margin of error between a small deficit and a small surplus is minuscule. Given that reality, it seems reasonable for our public sector fiscal officers and chief executives to err on the side of caution.

  2. It's a tad misleading to characterize the year-end figures cited by the city and county as "surpluses" given that both build their annual budgets with an expectation that revenues will slightly exceed expenditures. In the case of the county, the 2010 budget contains the $4.1 million surplus from 2008, so anything less than a $4.1 million surplus in 2009 would have created a deficit in that revenue category for the next budget. In the case of the city, a significant sum is taken from the Tax Stabilization Fund (TSF) in each annual budget to hold down property taxes (in 2010, that amount is $13 million). Consequently, failure in any given year to achieve a sufficient surplus to replenish the TSF will erode its value. There is no hard and fast rule that the two governments must achieve surpluses to equal that of the previous year or the TSF withdrawal, but sound budget practice (and the watchful eye of bond ratings agencies) certainly encourages them to do so. In that respect, achieving a "surplus" is a concrete policy objective.

  3. While fiscal leaders in both governments should be commended for their budget management skills in 2009, their long-term structural challenges remain very much alive. In some important respects, such as implementation of wage and benefit reductions and new administrative efficiencies, recent actions by both governments have made dents in their structural problems. Both governments also will be helped significantly in the near term by recent impressive investment returns in their respective pension funds. Nevertheless, both continue to face immense challenges with respect to old and deteriorating infrastructure; retiree health care costs that are expected to increase much faster than inflation; the need to replace stimulus dollars that helped prop up budgets in 2010; and the prospect of further cuts in the already stagnant state revenue streams upon which each largely depends.

You know it's election season when promising fiscal news is greeted with skepticism by some, and derision by others. From the Forum's objective perspective, it is appropriate to applaud this good news and give credit where it is due, but not lose sight of the deep long-term financial challenges that continue to face all levels of government and that, unfortunately, show little sign of abating.

Thursday, April 29, 2010

Meeting the workforce development needs of healthcare employers in southeast Wisconsin

A Public Policy Forum survey of healthcare employers finds that despite near-record unemployment rates in the region, southeast Wisconsin’s healthcare sector faces a distinctive challenge: finding sufficient numbers of qualified and trained workers to fill current and future job openings. Survey respondents said applicant quality (60.7%) and retaining qualified workers (30.2%) are the biggest challenges they face in meeting their organizations’ workforce needs. Gaps in applicants’ basic skills, especially soft skills such as professionalism, team skills and verbal communication, also make it harder for healthcare employers to recruit and hire competent job candidates.

The recent survey of 28 healthcare facilities included the four largest hospital systems in Southeast Wisconsin, as well as nursing and residential care facilities such as medical offices and diagnostics labs.

Respondents said current job openings are greatest for registered nurses and nursing aides and attendants. However, a significant number of respondents were unwilling or unable to provide data on current job openings or predict how demand for healthcare professionals will change in the next one to three years.

This is important because lack of job growth data limits the ability of workforce development officials to adjust regional workforce development training resources to address healthcare employers’ short-term needs. Nevertheless, the challenges indentified in the survey point to areas for regional workforce development organizations and area healthcare employers to work together to increase the supply of healthcare workers.

The Public Policy Forum conducted the survey on behalf of the Milwaukee Area Healthcare Alliance (MAHA), a new workforce development partnership between the YWCA of Greater Milwaukee and the Milwaukee Area Health Education. The Research Brief titled Assessing Healthcare Employers Workforce Development Needs in Southeastern Wisconsin, which can be accessed here, details the survey’s results and highlights challenges healthcare employers face in hiring and retaining a qualified workforce.

Tuesday, April 27, 2010

Never waste a good crisis

Faced with its toughest budget ever, Colorado Springs, Colorado, has made service cuts so severe they've garnered national (and international) media attention from outlets ranging from CNN to the Wall Street Journal. The stories have each been written in one of two ways:

  1. If taxpayers refuse to support tax increases, government will be forced to make draconian cuts in service. Colorado Springs is a warning.
  2. Quality of life does not have to be dependent on big government; certain services are best provided by the private sector. Colorado Springs is a model.
For those of us here in southeastern Wisconsin who are used to government services such as garbage pick-up, residential street snow plowing, etc., it should be pointed out that the Springs (I'm a Springs native, so I can call it that) has never provided that level of service. The cuts, therefore, are mostly in more basic city services. For instance, a third of the city's street lights have been decommissioned, there is no budget for street repaving, buses no longer run in the evenings or on weekends, firefighters and police have been laid off, city zoning ordinances are not being enforced in residential neighborhoods, and nearly all capital projects are on hold.

When the proposed FY 2010 budget was presented, residents of the Springs debated whether these service cuts were a bluff intended to get voters to pass a proposed increase in the property tax rate or whether there were other, less painful cuts that could be made. After the referendum failed (and sales tax receipts declined more than expected), the basic-service cuts were implemented and joined by additional cuts. The city no longer mows in neighborhood parks nor waters any green spaces; it has removed the parks' garbage cans; the city's museum, pools, and community centers are closed; and neighborhood services such as after-school programs, recreation programs, preschool, and senior lunches have ended as well.

When residents, businesses, churches, and philanthropists came to the rescue of some of these quality of life services (one community center is being operated by a church, grants will keep the museum open another year, volunteers are mowing parks and "adopting" garbage cans, and the U.S. Olympic Training Center is funding the recreation department), the storyline of Colorado Springs as a model of right-sized government was written. The Wall Street Journal quotes a city council member as saying: "We're a model of how cities can creatively adapt to budget adversity. You can have great quality of life without a great big government at the heart of it."

The point that's been missed in the media coverage of this budget crisis, however, is that these cuts are mostly reaping short-term savings only. The opportunity to bring attention to the city's essential role and mission hasn't been seized. Instead of debating whether or not to allow advertising on garbage cans or whether every third or fourth street light should be dark, shouldn't citizens be debating which city services are valuable and essential and which are not? Should the city operate a hospital? Should the city or the regional transportation authority be paving major roads and funding traffic improvement projects? Should the city have its own park system separate from the county's?

These big picture questions must be tackled to result in a sustainable budget over the long term, especially for jurisdictions with limited abilities to increase property taxes. The decision whether to mow, water, or clean-up the parks is not the same as deciding whether the parks are better run by another government entity with another revenue stream. If Colorado Springs is an object lesson for the rest of us, the lesson is neither "death by a thousand cuts," nor "death of big government." The real lesson is about a fundamental failure to balance resources with mission.

Monday, April 26, 2010

Local mental health planning effort can learn from others' mistakes

The need to engage in long-term strategic planning has been a consistent theme from the Public Policy Forum in our analyses of local government budgets, as well as our reports on local government policies in areas like economic development and housing.

It is important to note that our passion for planning does not stem from an idealistic belief that the problems of local government can be solved simply by getting people in a room for a day-long retreat. Rather, it is based on our concern that short-term election cycles discourage effective long-term decision-making; and our strong conviction that an effective and accountable government must establish clear objectives that are tied to measurable indicators and that emanate from a long-term strategic vision.

There are times, however, when government planning can backfire. A recent example comes from our neighboring state of Minnesota, where the Minneapolis Star Tribune reports that a restructuring of state mental health services has come under duress.

The overhaul was designed by the Minnesota Department of Human Services. Its main component was creation of a statewide network of community "mini-hospitals" to replace large institutions in caring for those with severe and persistent mental illness. It was thought that serving individuals close to their community and linking psychiatric care with medical care would provide superior treatment and shorten hospital stays.

An added bonus was the opportunity to receive partial Medicaid reimbursement for the cost of treatment. Under federal law, such reimbursement is not provided for most patients treated in large "institutes of mental disease", but is granted to smaller hospitals with 16 beds or less. {For this very reason, Milwaukee County explored the concept of creating 16-bed mini-hospitals as an alternative to its 96-bed mental health hospital a few years ago, but never moved past the discussion stage}.

In Minnesota, according to the Star Tribune article, this experiment has been a colossal failure. Nine of the 10 hospitals stand "half-empty" and the tenth closed for lack of use. Consequently, the state is now contemplating a new plan that would change the mission of the mini-hospitals and cut $17 million from the program's budget.

The article notes that while few Minnesotans appear to be questioning the need to develop a new plan, advocates are challenging the state's apparent intent to do so largely on its own. They say a fatal flaw in the previous plan was the state's lack of partnerships with local hospitals and community health organizations, and they are calling for inclusion of other key stakeholders.

Reports of the Minnesota planning mess arrive at a time when a planning effort surrounding Milwaukee County's adult mental health system is entering its final stages. The Forum is serving as local facilitator for this effort, which is being led by private and public sector entities that have made a concerted effort to involve all key stakeholders. Those include the major health care systems, the Medical Society of Milwaukee County, the Medical College of Wisconsin, county and state government, advocates, mental health consumers and civic leaders.

The project's objective is to redesign both the public and private systems that provide adult mental health care and treatment in Milwaukee County in a manner that will produce better coordination and better results. It's being led by a national consultant from Massachusetts - Human Services Research Institute - that has led similar efforts in other states. A project summary can be found here.

Stay tuned for the final report, which will be released sometime this summer.

Thursday, April 15, 2010

MPS labor relations and the new superintendent

Over the past few days, four former MPS superintendents have met in two public forums to share the lessons they have learned about running the state's largest school district. In both forums a recurring theme was Howard Fuller's contention that: "I was in charge, but I wasn't in control."

His meaning, with which the other former superintendents generally agreed, was that the labor contracts with the teachers and principals unions constrained his ability to make dramatic changes in the district. The implication was that the district's new superintendent, Gregory Thornton, would find it similarly difficult to improve outcomes under the current labor-management dynamic.

Whether this perception is accurate or not with regard to MPS, a new, still tentative, labor agreement in the Washington D.C. school district provides an example of a superintendent turning labor negotiating on its head. The D.C. superintendent, Michelle Rhee, has received much national press over the past two years as she pushed for a new paradigm of how, and how much, teachers are paid in D.C.

Her original idea was to phase out tenure and the traditional salary step-increases by phasing in a new system that would determine salary increases by performance and would have teachers give up tenure for a year. In exchange for the uncertainty that would bring teachers as they planned their futures, she proposed to nearly double the base salary.

While the apparent end-point of the D.C. negotiations bears little resemblance to that starting point, the new contract does reflect some remarkable changes to the relationship between the district and its teachers. For example:

  • Teachers who qualify can opt to link their pay to performance. How their performance will be measured is yet to be determined, but the current language says it will not be limited to just student test scores.

  • The district will be able to adjust the size of its workforce through school closings or district-wide layoffs. Teachers who are affected by these workforce reductions, and who perform well under the evaluation system, could be eligible for either a $25,000 severance payment, retirement with full benefits (for those teachers with more than 20 years in the district), or a salaried year of placement services to help find a job elsewhere.

  • Base salaries increase by 20% over the five years of the contract (retroactive to October 2007); however, the higher price tag will not pinch taxpayers for now. Almost $65 million in private donations from the Broad Foundation, the Arnold Foundation, the Robertson Foundation, and the Walton Family Foundation will cover the costs of the increased base salaries, as well as the performance pay.
Neither the superintendent nor the union got all they wanted nor gave up as much as was asked of them, and some issues remain unresolved, including who will cover the costs once the grant funds run out in 2012. But the D.C. experience shows that determined leadership by a superintendent can bring new issues to the bargaining table. D.C.'s two years of very public and very contentious negotiations also show, however, that the process is likely to be quite slow and painful.

The debate in Milwaukee has lately focused on mayoral control and the powers of the state superintendent of public instruction, but this week's forums raise the possibility that the issue most likely to affect the new MPS superintendent's ability to implement a reform agenda will be his relationship with the teachers and principals unions. Will Gregory Thornton make waves or smooth out wrinkles?

Friday, April 9, 2010

Useful strategies but no easy answers in ending homelessness

A new study from the U.S. Housing and Urban Development Department (HUD) examines the costs of serving homeless individuals and families and explores cost-saving possibilities in differentiating services according to individual characteristics.

HUD finds that different types of first-time homeless individuals and families use system resources differently, so some opportunities exist to improve outcomes by developing tailored strategies to meet the needs of each type of individual and family. For example, the report describes how African American families are often homeless primarily due to poverty rather than mental illness or substance abuse, and therefore need permanent housing but not substantial supportive services. Similarly, childless single women have different needs than families.

Despite HUD’s support for tailored services, its cost analysis revealed that there are no loopholes or easy answers when it comes to cost savings. The study found that significant cost reductions are only achievable when targeting the few individuals and families with high levels of involvement in mainstream systems prior to homelessness. Accordingly, while narrowly targeted initiatives aimed at this group will yield the greatest savings-per-person, such initiatives would only be appropriate for a small number of people.

HUD's study was released as Milwaukee is considering its new ten-year plan to end homelessness. The County Board has already endorsed the plan, and so has a Common Council committee. If fully adopted, Milwaukee will join more than 800 cities and counties that have partnered in implementing at least 355 ten-year plans to end homelessness.

Milwaukee’s plan was developed by the Continuum of Care (a conglomeration of social service agencies that address issues facing the homeless) as well as other local participants. Among other things, it calls for both earmarked state funds and reapportioned federal and local expenditures to fund services for the homeless. It targets a number of key issues raised in the HUD study, including prevention, employment, behavioral health, and permanent housing. The plan also calls for revamping methods of discharge planning for those transitioning out of foster care, hospitals, mental health care and jails.

Milwaukee’s plan appears to meet the National Alliance to End Homelessness recommendations for successful planning by possessing four elements: identifying a person or body responsible for implementation; setting numeric outcomes; identifying a funding source; and setting a clear implementation timeline.

According to the U.S. Interagency Council on Homelessness, taking a 10-year plan from “good to great” requires extensive engagement of public officials and community champions, as well as the ability to sustain momentum for implementation through changes in political leadership and priorities. With changes in political leadership likely on the horizon here in Milwaukee, it would appear that momentum-building will need to be a top priority for plan supporters.

Wednesday, April 7, 2010

Doling out justice more efficiently

Amid all the concern about government budget woes both nationally and locally, good news is emerging about the ability of some governments to respond by pursuing greater efficiencies.

A recent example comes from Philadelphia, where the Inquirer reports the city expects to save $9 million this year in incarceration costs from "what appear to be groundbreaking changes in the way courts and prisons operate."

Admittedly, some of the savings will come from changes in state law that simply shift costs from the city budget to the state corrections budget. A sizable portion, however, comes from relatively simple changes in court processing procedures, as well as from data-driven strategies aimed at reducing the number of prisoners in the city jail who are awaiting hearings and pose little threat to the community.

Indeed, budget crises are forcing state and local governments across the country to take a renewed look at corrections budgets and policies. Last month, the Pew Center on the States reported that the 2010 state prison population declined for the first time in 38 years, in part because "several states have enacted reforms designed to get taxpayers a better return on their public safety dollars."

Of course, strategies to reduce corrections populations as a means of alleviating budget difficulties often are challenged on the grounds that they compromise public safety. That has been the case here in Wisconsin, where an early-release program passed by the Legislature last year continues to stir controversy.

Yet, no matter where one falls on the spectrum of law and order policy, perhaps all can agree that it makes sense to use data-driven tools and analysis to seek efficiencies in all aspects of the criminal justice system, from bail policies to diversion practices to processing procedures.

Just such a bipartisan effort has been initiated locally by the Milwaukee County Community Justice Council, which includes both the county executive and mayor, as well as other key justice officials with different political viewpoints. A new jail population analysis conducted by the Pretrial Justice Institute on the Council's behalf takes a comprehensive look at who is in the Milwaukee County jail, how long they stay there, and how they leave. It is seen by the Council as a critical first step in a larger strategic planning effort geared toward more cost-efficient and effective jail population management.

There's no doubt the economic downturn has caused real pain for government budgets and programs and the citizens who count on them. But if it also has instilled a lasting desire among government officials to work across jurisdictional and political boundaries in search of business practice improvements, then that pain will be a little easier to bear.

Thursday, April 1, 2010

Are local governments preparing for their new reality?

The severity of our recent recession has forced local governments to respond in ways that they would admit are less than ideal. For example, the need for instant savings has produced furloughs, shortened work weeks, and even truncated school weeks - strategies that may stave off immediate crises but may not be sustainable in the future.

Unfortunately, while the worst of the recession may be behind us, the long-term outlook for government is far from rosey. A recent article from Governing Magazine warns that the next several years will be a “lost decade” for governments, where “revenues probably won’t recover until 2014, and will then take another two years or so to pay for deferred costs for public pensions, health benefits and the like.”

A key question, therefore, is whether the budget cuts seen across the nation are ones that can successfully endure as federal stimulus funds recede and local revenues remain stagnant. The International City/County Management Association (ICMA) cautions governments to choose proactive rather than reactive approaches. A proactive approach aims to stabilize on a long-term basis. A reactive approach, on the other hand aims to maintain the status quo and "often involves across-the-board cuts, ignoring differences in importance and priority, failure to deal with the fundamental sources of inefficiency and instability, denial of fiscal sustainability problems, and an organization-wide sense that simply weathering the storm is appropriate.”

It appears that several governments are realizing the need for large and lasting alterations. A survey conducted by ICMA in late 2009 asked 1,500 local governments whether or not any of the changes they had implemented in reaction to the economic downturn reflected a long-term, new way of doing business. Sixty-seven percent of the respondents answered in the affirmative. In fact, since the recession began, 52 percent of survey respondents have already revised their long-range strategic plans.

A possible silver lining to the recession is that governments have been forced to develop innovative ways of doing more with less. Such innovation takes many forms, including advancing intergovernmental cooperation. A recent forum held in St. Paul, Minnesota, for example, gathered roughly 40 Minneapolis metro cities to contemplate new possibilities for shared services.

Since a recession of this magnitude was thought to be extinct, grasping the severity and duration of its impact is not easy. However, governments have had to learn how to operate with significantly depleted funds and come to terms with new modes of operation. Sustainability lies in those governments that realize their new long-term reality and take the requisite strides to prepare accordingly.