Thursday, October 28, 2010

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.

Thursday, October 21, 2010

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.

Monday, October 18, 2010

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?

Friday, October 15, 2010

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.

Thursday, October 14, 2010

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.

Wednesday, October 13, 2010

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.

Monday, October 11, 2010

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.

Wednesday, October 6, 2010

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.

Tuesday, October 5, 2010

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.