Thursday, November 20, 2008

A ray of hope in Milwaukee County's annual budget fracas?

With the dust finally settled on this year's Milwaukee County budget debate, it's hard to avoid thinking of the movie "Groundhog Day".

Once again, the county executive submitted a budget that did not raise property taxes and that was heavy on privatization, reduction of full-time parks workers and cuts in programs treasured by the county board. Once again, the county board denied most outsourcing, restored positions and added funds for favored programs. Once again, the county executive vetoed most of what the board restored, and once again, the board overrode most of his vetoes.

Most disconcerting, as we pointed out in our 2009 county budget brief and budget testimony, is that once again, the county did virtually nothing to address its perennial and growing structural imbalance. To hammer home that point, our budget testimony cited the components that added up to a $41 million budget hole for 2010 even before the ink was dry on the 2009 budget. The county budget office recently conducted its own review and trumped our estimate by an additional $16 million. That's right - while the 2009 budget technically is balanced, for 2010 the county already is looking at a $57 million hole, meaning we're likely to see the Groundhog Day scenario surface all over again.

Or are we? Tucked into the county executive's veto message is the following ray of hope:

During deliberations on the 2009 budget a number of Supervisors expressed a desire to move forward with a strategic planning process to provide an improved framework for making budgetary decisions...As a result, I have directed the Director of the Department of Administrative Services to immediately begin working with the County Board staff on the
following fundamental components of an integrated strategic planning and budget process:

  • Creation of a 5-year financial forecast that defines the County's budgetary structural deficit and resulting fiscal challenges,

  • Identification of County financial policies and practices that need to be strengthened or modified,

  • Development of a new process for estimating County revenues that ensures that revenue estimates made during all phases of the budget process are realistic and based on solid analysis, and

  • Development of a space plan that identifies County facilities that are currently underutilized, estimates the potential market value of County facilities and plans for the potential relocation of County functions to maximize the utilization of County facilities while vacating and making surplus underutilized facilities.
While implementation of these measures certainly won't solve the county's budget problems, they would at least position the county executive and board to debate the 2010 budget with a common understanding of the five-year fiscal outlook and with some critical tools for ensuring that the process is objective and realistic. Might that, in turn, finally move the county past Groundhog Day and toward some long-term budget solutions? We can only hope so.

Thursday, November 13, 2008

Despite article, some areas in the region lack banks

From the sound of this week’s Journal Sentinel article entitled, “Bank branches proliferate in state,” our community streets are being practically taken over by bank branches. The president of Community Bankers of Wisconsin is quoted as saying “There’s no doubt Wisconsin is very bank-heavy.” But count the banks in certain areas of Milwaukee, and you get a decidedly different story.

A report released just two weeks ago highlights the marked lack of banking options in northwest Milwaukee. The Federal Reserve and Brookings Institution report, “The Enduring Challenge of Concentrated Poverty in America,” includes case studies from 16 high-poverty communities across the country, each chosen to illustrate different facets of the poverty story.

The boundaries of the Milwaukee area they studied were based on Census data tracts. With a poverty rate nearly five times that of the rest of Milwaukee’s Metropolitan Statistical Area (MSA), the area includes all or part of the Sherman Park, Metcalfe Park, Uptown, Washington Park, Walnut Hill, Midtown, Martin Drive, and Cold Spring Park neighborhoods, covering parts of the zip codes 53205, 53206, 53208, 53210, and 53233.

This northwest area of Milwaukee, with over 23,000 residents, has just two bank branches (three banks lie just over borders of the study area). The area, however, is heavily populated with nontraditional financial service providers such as currency exchanges, check cashing, pawnshops, and payday lenders.

The report explains that an absence of basic banking services is linked to higher costs for financial transactions for working class and minority communities. While traditional financial institutions provide residents with access to cash, savings and capital, conducting financial transactions through nontraditional providers not only costs more, the report claims, but offers fewer ways to save money and plan for long-term financial management.

Residents in northwest Milwaukee are also likely to pay more for credit: In 2005, 65% of the area’s mortgages originated as sub-prime or other high-cost loans, compared to 26% in Milwaukee’s MSA.

The report identifies the myriad challenges related to concentrated poverty facing northwest Milwaukee, including high rates of returning ex-offenders, unemployment, and jobs that disappeared or moved to the suburbs. Local nonprofit programs working to improve the area are also highlighted along with some noteworthy successes.

While the newspaper quotes a Franklin resident exclaiming “Not another bank!,” the article’s juxtaposition with the recent Brookings Institution report underscores one of the many differences between inner city Milwaukee and other areas of southeastern Wisconsin.

Friday, November 7, 2008

All politics is local...and global

This week none other than The New York Times and National Public Radio are making national stories from news about local school districts in our state. It's a reminder that Wisconsin is, in fact, on the globe.

The story, covered locally by the Journal Sentinel, can be simplified as follows: Several school districts around Wisconsin participated in high-risk investments using borrowed funds and are now in danger of losing millions. The Irish bank to which these loans are owed is now on the hook, threatening the viability of that bank and the larger German bank that owns it. The German government has stepped in to save the banks, which now find themselves unable to conduct business as usual, affecting the many local governments around the world that have been their loan customers.

The details are not actually that important. The lesson to be learned is that local decisions can have a global impact. As hard as it may be to believe, your neighbor on your local school board is now a player in the German economy.

Couple this new paradigm with the observation from yesterday's Milwaukee Talkie post that deficient local decision-making could result in less local control should the state be required to step in, and you have a recipe for uncompetitive local elections and poor turnout. Who would want to serve on a school board, pension board, or village board when the decisions are this complicated, this tough, and this far-reaching? And even if there are enough people willing to run for these positions, do voters understand the true nature of the job and the types of decisions the elected officials will be required to make?

Unfortunately, the end result may be a vicious cycle in which low voter turnout and unchallenged candidates lead to ineffective leadership and justify loss of local control. Once that happens there is even less incentive for future voters to be informed or for qualified candidates to step forward. The market and the economy are indisputably global. Is it inevitable that governance shall be, too?

Thursday, November 6, 2008

So you think MPS has troubles?

Those who think there couldn't possibly be another major urban school district under greater fiscal stress than Milwaukee Public Schools (MPS) need look no further than across Lake Michigan. Articles in Saturday's and today's Detroit News report how Detroit Public Schools (DPS) was required either to accept a consent decree issued by a state review team examining its fiscal situation, or have a state-appointed manager take control of its finances. The school board opted to accept the decree, which requires it to submit a deficit elimination plan within four weeks and abide by a host of stringent reporting requirements.

How did the Detroit school district get into this predicament? To start, there is the district's perennial budget deficit (at least $10 million per year since 2000), which at one point earlier this year was estimated at $400 million in a $1.1 billion annual budget. Then there was the district's inability to meet payroll obligations during two separate months last summer, necessitating a $103 million advance in state aid payments, and its continued heavy reliance on borrowing to address cash flow needs.

DPS also faces steep declining enrollment, with a reduction of 67,000 students since 2000 to the current estimate of 98,000 students. In a recent article in Education Week, an official with the Council of the Great City Schools attributed this decline both to the flight of Detroit residents with school-age children out of the city and to competition from charter schools.

These problems led Michigan Governor Jennifer Granholm to appoint an outside review team early last month to examine DPS' books. It is this review team that developed the consent decree.

Is this the direction in which MPS may be headed? Some of the parallels are strong - huge budget difficulties, declining enrollment, a governor- and mayor-directed audit, talk of dissolution or a city takeover. However, it appears that DPS' fiscal issues are even more longstanding and severe than those facing MPS, and that they are not as closely tied to the state's school funding formula.

Also, DPS already has been subject to a state takeover. That one occurred in 1999, when state legislation created a new school board consisting of the state superintendent of public instruction and six appointees by the Detroit mayor. That experiment lasted until 2005, when voters returned control of Detroit's schools to an elected 11-member board.

While MPS may not yet be in the same straits as DPS, an important lesson here is that local elected officials cannot act with impunity when it comes to managing - or failing to manage - government finances. There can come a time when a local school district or government's failure to address its fiscal problems will lead to loss of local control.

The threshhold for such action is impossible to define, and may come down to whether the new controlling authority perceives it to be in its best interest to take over or significantly intervene in the school district or local government that is experiencing the fiscal crisis. Another factor - both here and elsewhere - is whether state government is the correct entity to be "rescuing" a local school district or government. As one Detroit parent put it, "I don't think the state can take care of its own mess."

Monday, November 3, 2008

Local media coverage of politics impacts federal spending

A recent working paper by professors James Snyder of MIT and David Stromberg of the University of Stockholm, published by the National Bureau of Economic Research, finds that local media coverage of politics affects not only citizens' knowledge of their elected U.S. representatives, but also how hard those officials work and how much federal money they bring back to their districts.

From the paper's abstract:

Voters living in areas with less coverage of their U.S. House representative are less likely to recall their representative's name, and less able to describe and rate them. Congressmen who are less covered by the local press work less for their constituencies: they are less likely to stand witness before congressional hearings, to serve on constituency-oriented committees (perhaps), and to vote against the party line. Finally, this congressional behavior affects policy. Federal spending is lower in areas where there is less press coverage of the local members of congress
What the authors found, specifically, was that in print media markets in which most readers lived in one particular congressional district, newspapers printed more stories mentioning the elected representative of that district, while newspapers with markets covering several districts covered Congressional representatives less often. Survey work found that citizens who live in the "highly congruent" media markets covering fewer districts were more likely to know the name of at least one candidate in the last Congressional campaign in their district. The authors argue that greater knowledge among citizens leads to greater accountability for elected officials.

This argument underpins their next finding, that representatives of districts with congruent newspaper markets worked harder for their constituents than those of districts that either overlapped with many media markets or "fell through the cracks" of surrounding markets. Indeed, they found Congressmen from highly congruent districts to be "more disciplined by their constituencies." Significantly, they voted along party lines less often, they testified before congressional hearings more often, and they were more likely to serve on committees having more relevancy to their constituency than on committees with broad policy orientation.

With that finding, the authors hypothesized that these representatives would have greater ability to have policy impacts at home, as measured by the federal spending per capita in the counties in their district. They in fact found this to be the case.

Interestingly, however, they found only a weakly significant positive relationship between media market congruence and voter turnout. The elected representatives' behavior was predicable from the amount of newspaper coverage despite the fact that the media coverage did not affect voter turnout.

These findings have relevance for metro Milwaukee, where there is one large newspaper with a large market area that covers more than one Congressional district. Thus, we live in an incongruent market, where the print media's readers live in several districts. According to the findings of this research, we should each therefore expect less coverage of our own U.S. Representative. Southeast Wisconsin's Congressmen and Congresswomen, for their part, should expect less media scrutiny and less knowledgeable constituents, which may lead them to do less to ensure the region's citizens get a healthy return on their federal tax dollars. Indeed, the Forum's analysis of 2003 federal spending in the nation's 50 largest metro areas found Milwaukee ranked 40th, at $5,321 per capita.

The authors compare their findings to similar research on media competition and find that congruence may be a bigger factor than the number of newspapers covering a district. When Milwaukee's two newspapers merged in the early 1990's, readers openly and loudly worried about the quality of news coverage. When, in the early 2000's, the paper decided to focus more on the suburban readership, thereby expanding its market, readers worried about the effects on coverage of urban issues. What we should also have been worried about, perhaps, was how it would affect the quality of our political clout in Washington.