Public Policy Forum's top five research findings of 2012

If it’s December, then it must be time for the Forum’s annual list of its top five research findings of the year.  Last year’s list included findings on MMSD’s daunting capital needs, the dramatic decline in Milwaukee County’s corrections population, the City of Milwaukee's reliance on state shared revenue, and our region’s tardiness in embracing strategic economic development planning.  The 2012 list is summarized below in chronological order:

1. More than four-fifths of Milwaukee County’s rated child care providers stand to lose funding under YoungStar, the state’s new child care quality rating system.  Our January report analyzing the first year of Youngstar implementation examined the ratings earned by 534 child care providers in Milwaukee County as of December 2011.  We found that 428 (80.1%) received 2-star ratings and 33 (6.2%) received 1-star ratings.  In light of the state’s plan to reduce Wisconsin Shares subsidy payments for 2-star providers and disqualify 1-star providers from Wisconsin Share payments entirely, that meant more than 80% of the rated providers would lose funding under YoungStar, a consequence that could impact the availability of child care options.

2. Much of the growth in the Milwaukee Parental Choice Program in the past year appeared to come from existing private school students.  The 2011-12 school year was the first to reflect the impact of major changes to school choice program eligibility adopted in the 2011-13 state budget, including an increase in the enrollment cap, broader eligibility limits, and expansion to schools outside the City of Milwaukee.  Our annual survey of voucher school participants released in February revealed not only that much of the growth in voucher use from the previous year was in schools that already participated in the program, but also that it appeared to have come from students already enrolled in those schools.  

3. Fire department consolidation that preserves existing capacity can still save millions.  In May, we released a comprehensive report on options for sharing or consolidating fire services in the southern Milwaukee County communities of Franklin, Greendale, Greenfield, Hales Corners and Oak Creek.  Our finding that a full consolidation option could save nearly $2 million annually may not have been surprising to those who have examined fire service consolidation proposals in other states, or to those familiar with Milwaukee County’s consolidated North Shore Fire Department.  It was illuminating to find, however, that such substantial savings were achievable without eliminating any fire stations or reducing direct firefighting staff.

4. MATC’s technical diploma offerings are generally attuned with the region’s projected job openings.  Our December report on the activities and resources of Milwaukee’s key workforce development players examined MATC’s role in providing non-degree occupational training to job seekers.  We found that despite longstanding criticism of the college for failing to appropriately align itself with the needs of area employers, MATC’s technical diploma offerings match up well with Department of Workforce Development projections regarding future job openings.  Nursing, Barber/Cosmetologist and Emergency Medical Technician were the most heavily enrolled technical diploma programs in the 2010-11 academic year. 

5. MPS’ five-year fiscal forecast is more optimistic than those of Milwaukee County or the City of Milwaukee.  Our December fiscal assessment of the Milwaukee Public Schools examined the district’s most recent five-year fiscal forecast and found that its projection of a $41 million deficit in 2017 is plausible and perhaps even a bit on the conservative side.  While a projected deficit of that magnitude certainly is not ideal, it is more optimistic than the five-year deficits projected by the City of Milwaukee and Milwaukee County earlier this year.  It is important to note that each government’s five-year forecast is based on financial modeling that is somewhat speculative in nature, and that a complete understanding of the fiscal condition of each must go far beyond their five-year forecasts.  Nevertheless, given the substantial position cuts and general gloom surrounding MPS’ budget in recent years, to find that MPS’ five-year challenges may not be deeper than those of the city and county was somewhat surprising. 

With 18 research reports in 2012, it was not easy to reduce our list of top findings to five. Left off the list this year were important findings related to the application of the state’s new child care ratings system to afterschool care providers; the out-of-classroom spending habits of Milwaukee County suburban school districts; the range of case management services available to persons with mental illness in Milwaukee County; opinions on mental health redesign by nurses and their employers; and the continued impacts of pension and health care benefits on Milwaukee's city and county budgets. Those interested in reviewing those and other findings can access the Forum’s full list of research publications here.

Passing the test, but making the grade?

When the Public Policy Forum decided to dive deeply into the finances of the Milwaukee Public Schools (MPS) six months ago, we did so with considerable trepidation. Having tracked MPS' finances on a general level for the past several years, we were well aware of the district's huge retiree health care liability, the fiscal threat posed by declining enrollment, and the impacts of the latest state budget. Despite the good news we were hearing from MPS officials about the impacts of soon-to-be-implemented fringe benefit changes, we were concerned about precisely what we would find when we lifted the hood and dug into the mechanics of MPS' finances.

Today, after completing our comprehensive assessment of MPS' fiscal condition, we are relieved to say that the school district’s short-term fiscal outlook is not as ominous as we had feared. In fact, the district’s most recent five-year forecast projects a 2017 deficit of about $41 million, which is actually more optimistic than similar forecasts prepared by the City of Milwaukee and Milwaukee County. We also find, however, that the volatile and uncontrollable fiscal environment in which the district must operate creates an “untenable fiscal structure” that continues to raise serious questions about MPS' longer-term future.

Our 84-page report - entitled Passing the Test, But Making the Grade? and released this morning – uses the same fiscal monitoring methodology used previously for reports on Milwaukee County, the City of Milwaukee, MATC, and MMSD. It examines fiscal trends, compares MPS to state and national peers, and analyzes the causes and scope of the district’s fiscal challenges.

A major undercurrent of the report is MPS' lack of control over its own financial destiny. The district is far more dependent than other local governments on state funding, and much more susceptible to fiscal upheaval from policy and program decisions made in Madison and elsewhere. Those decisions not only can involve state appropriations and revenue limits, but also regulatory changes to charter school or private school choice programs that can sharply affect MPS enrollment. MPS' finances also can be hit hard by the chartering decisions of outside entities, and by demographic trends impacting the city.

Other key findings from the Forum's new report on MPS' financial condition:

• While the near-term future is looking better, deep structural issues remain. MPS' health care changes planned for the 2013-14 school year – assuming the continued legality of Wisconsin Act 10 – will save almost $35 million annually and reduce its retiree health care liability by $1.4 billion. The longer-term future looks far more challenging, however, as the district’s revenue streams are likely to be constrained well into the future; its retiree health care liability will remain daunting; and its ability to further reduce personnel costs will be limited by its need to attract and retain quality teachers and administrators to compete with voucher, charter and suburban schools.
• MPS’ high expenditure levels must be placed in context. While prohibitive fringe benefit costs have been an issue, MPS’ high levels of per-pupil spending are driven much more by its receipt of large amounts of state and federal categorical aids. Those funds are used largely to support economically disadvantaged and special needs students, who comprise the vast majority of MPS’ student population. When categorical funds are excluded, the district’s per-pupil spending is only slightly above the state average.
• MPS’ greatest challenge is its lack of fiscal options. After its initial rounds of benefits changes, MPS will have few alternatives left to counter the effects of flat state funding and declining enrollments. The district does not have program revenue, as do other local governments, and it is unlikely to be able to grow the property tax at the same rate as in the past. Meanwhile, enrollment competition exerts pressure on MPS to maintain its teacher compensation structure and capital footprint, and potential programmatic cutbacks run the risk of reducing program quality and engendering further enrollment and revenue loss.

The report credits MPS leaders for pursuing a balanced approach to stabilize the district’s finances that includes not only substantial fringe benefits changes, but also a new facilities master plan and renewed dedication to operational efficiencies. Overall, however, it is difficult to gauge whether successful implementation of those strategies will be enough to solve the district’s fiscal challenges.

For example, the report's fiscal modeling shows that if the 2013-14 benefit changes are implemented, if the district can achieve marginal annual growth in combined equalization aids and property tax levy under future state revenue limits and appropriations, and if MPS can achieve a limited reduction in salary expenditures, then balanced budgets are readily achievable in the next five years. Under another plausible scenario, however, in which the benefits changes made possible by Act 10 do not fully take effect, major revenue streams remain flat, and salary expenditures decrease by a lesser amount, a dire fiscal picture emerges.

The report concludes by stating that “perhaps the most troublesome question raised by the fiscal assessment is whether any entity could be expected to effectively manage a fiscal predicament as challenging as that faced by MPS in an environment that is plagued with such uncertainty."

That finding leads us to urge local and state leaders to reach agreement – once and for all – on the role MPS will play in the city’s education framework, and to define and secure the resources required to effectively fulfill that role.

The full report can be accessed here.

Progress and challenges for workforce development efforts in Milwaukee

In a new report examining Milwaukee’s workforce development system, the Public Policy Forum cites a higher level of coordination and cohesion among key workforce development players since the establishment of the Milwaukee Area Workforce Investment Board (MAWIB) in 2007, but suggests a need for better coordination between the city’s economic development priorities and the needs of its unemployed.

The report – "Pathways to Employment" – analyzes the resources, programming, and priorities of MAWIB and the Milwaukee Area Technical College (MATC), widely considered the two most prominent workforce development entities in Milwaukee, and also summarizes the activities and spending of other key workforce agencies. In addition, the report explores promising efforts to coordinate workforce development activities in Milwaukee’s health care, manufacturing, and food and beverage sectors. 

On the whole, we find that sector-specific workforce strategies show considerable promise for the economy at large, but that many of the individuals being served by MAWIB may not have the education or skill levels to meet the requirements of area employers in sectors being targeted by economic development leaders – like advanced manufacturing, financial services, and water – or to benefit from related technical diploma programs at MATC or WCTC. As Milwaukee identifies economic development goals, therefore, it is important to determine the extent to which those goals should influence workforce development policies and programs. 

That is not to suggest the individuals MAWIB serves cannot advance beyond low-skill, entry-level positions through additional work experience and/or education, nor that the sectors targeted by regional economic development efforts should change. It does suggest, however, that MAWIB‘s role as the entity serving those with the greatest barriers to employment demands a commitment to a broad array of services and strategies that respond both to the needs of key industry sectors and the needs of its clientele.
Other key findings from the report include the following:

• MAWIB has made substantial progress in addressing several longstanding concerns that had surrounded its predecessor (the Private Industry Council), including improved coordination of local workforce development services and greater involvement of major area employers. Interviews with key stakeholders, however, indicate there is more progress to be made. 
• MATC’s technical diploma program offerings seem generally attuned to the demands of the Milwaukee area job market, as estimated by the Wisconsin Department of Workforce Development. In tandem with those offered at Waukesha County Technical College (WCTC), most MATC technical diploma programs seem to be appropriately scaled in relation to job projection numbers, though in many cases retention appears to be a problem. 
• The Milwaukee W-2 agencies’ designation as the one-stop job centers for Milwaukee County, and the sheer size of their funding base, make those organizations major players in Milwaukee’s workforce development system. Consequently, the education and skills levels of W-2 participants logically should play a prominent role in determining the city’s workforce development priorities and strategies. 
• Employment and training services in Milwaukee are largely supported by federal funding sources, which have been declining for many years. Consequently, local workforce development organizations must continue to pursue new revenue sources and improve efficiency in order to maintain existing service levels. The recent creation of the Milwaukee Area Workforce Funding Alliance to better leverage the funding contributions of local philanthropists and to pursue additional funding from national foundations has represented a positive start toward that effort. 

The report concludes by asking whether the region’s economic development vision – and the demands of specific area employers – should drive MAWIB funding priorities, MATC program offerings and Milwaukee’s overall workforce development strategies, or whether the education and skill levels of the local workforce should be the major factor in the development of both regional economic development planning and workforce development priorities.

The goal, it suggests, should be to strike a proper balance between the two.