Tuesday, December 30, 2008

Some call for investment in people, not bricks and bridges

A recent Milwaukee Talkie blog post asked, “Can’t we all get along when it comes to spending stimulus funds?” That post tackled state-vs.-local issues with regard to infrastructure spending, but not everyone is even at the point of agreeing that President-Elect Obama’s forthcoming New Deal-like plan to stimulate the economy by funding infrastructure has the right target.

In articles like “First, Repair the Human Infrastructure,” the head of a community health initiative claims that stimulus funding used to prevent chronic illness would save billions down the line in medical care and disability costs. Similarly, another blog makes a bid for human capital: “Lots of infrastructure is decaying in this country, and that includes the people and systems that comprise our social, educational, health and other kinds of human infrastructure. It isn’t just a matter of bricks and bridges.”

In the article “Don’t Forget the Human Infrastructure,” the Brookings Institute’s Isabel Sawhill presents some pragmatic arguments for making strategic investments in the nonprofit sector, which employs 10 percent of the workforce while providing a safety net for many, but is suffering in the bad economy. She notes that if such "human infrastructure" investments were made, the nonprofit sector would:

· Spend the money quickly and fully
· Employ people with a broad range of skills
· Be able to rely on a network of preexisting institutions
· Have the capacity to spread the dollars widely
· Avoid shrinkage, thus not adding to the ranks of the unemployed.

In Milwaukee, nonprofits are feeling the crunch. A Journal Sentinel article advised the sector: "Now is a time to be wary." The Nonprofit Portal of Milwaukee's most recent online newsletter links to five articles on weathering the economic crisis.

A commenter on a Seattle blog disagrees with Sawhill and others' human infrastructure arguments, cautioning against investing too heavily in recurring costs, “When you finance a building [or a road, bridge or rail line], you’re expecting to be able to use that building for maybe 50 years. You don’t need to build it again next year. . . . When we hire a teacher, however, the cost of their salary will recur each year.”

Others agree that we should be building things, but stress that short-term projects should be emphasized to stimulate the economy more quickly. An L.A. Times article describes how complex infrastructure projects like subways have a long lead time devoted to preparing engineering studies and environmental surveys, which can delay their stimulative effect. Lawrence E. Harris, a USC professor of finance counters, “But lots of tradesmen who know how to build houses can build community buildings, senior citizen centers and early childhood centers, which don’t take a long time.” Despite its emphasis on large infrastructure projects, Obama’s stimulus package is likely to highlight modernizing schools.

At least one women’s group is also concerned about Obama’s plan. Feminist Majority Foundation President Eleanor Smeal expressed alarm that the recovery package will emphasize construction jobs “which notoriously under-represent women workers.” She cautioned, “Although we support a physical infrastructure stimulus package, we believe it must be accompanied with a human infrastructure component that will employ a majority of women workers.”

Evidence abounds that many aspects of physical infrastructure have been neglected for too long in this country, as well as locally in Milwaukee. The number of voices pointing out that other aspects of the country’s “infrastructure” – from education to the nonprofit sector to hurricane protection – also are in disrepair speaks to the myriad challenges facing the new Obama administration. But perhaps no challenge is greater than this: while consensus seems to have emerged that we must stimulate the economy somehow, and while the battle therefore will continue over what sector or project gets the money, in the end we are still spending money we don't really have.

Tuesday, December 23, 2008

Can't we all get along when it comes to spending stimulus funds?

For years, state and local officials in Wisconsin and across the nation have pleaded with federal officials for more help in addressing their crumbling infrastructure. Now that it appears those pleas may be answered as part of a huge federal stimulus package, disagreement has arisen over who gets to control and spend the money.

State governments received welcome news earlier this month when President-elect Obama told the National Governors Association that the stimulus package he was planning would include substantial allocations to the states for roads, bridges, mass transit and other public works projects. That news, however, was not as well-received by local government officials.

Stateline.org reports the National League of Cities and National Association of Counties have sent a report to the Obama transition team arguing that local governments should receive the bulk of the funds, as they're better equipped than states to spend infrastructure dollars quickly and effectively. Local officials also argue they need more help than state governments because states already are hitting them with recession-induced cuts in state aids.

State officials counter that they're the appropriate recipients given the mechanisms already in place to receive and distribute federal infrastructure allocations. They also contend that states have a bigger picture view of infrastructure needs and can properly allocate stimulus dollars in a manner that will best serve the greatest number of residents.

This national dispute is being replicated in Milwaukee. After Governor Jim Doyle sent a $3.7 billion wish list of infrastructure projects to federal officials, Milwaukee Alderman Bob Bauman criticized the governor for failing to consult with local officials and sacrificing local road and bridge needs for state highway expansion projects. More recently, Milwaukee Mayor Tom Barrett sent his own list of $599 million in infrastructure projects to the president-elect.

So how should this dispute be settled? One interesting idea comes from a University of Maryland professor who suggests a national commission modeled after the federal base closing commission. The commission would review potential stimulus-funded infrastructure projects and provide a list for Congress that would receive an up or down vote in its entirety. That approach certainly has potential to eliminate the intrusion of pork-barrel spending, but could a national commission be fair to localized infrastructure projects, which tend to be far less glamorous than larger state projects?

This is a very difficult issue to referee because both sides have a point. Federal transportation dollars typically are distributed to states precisely because the feds have little interest or capacity to get involved in divvying up dollars to local projects. Also, state government does have an appropriate role to play in funding and coordinating a statewide transportation network that serves residents and businesses beyond local boundaries.

It is this very dynamic, however, that often prevents local transportation needs and wants from being addressed. Projects like the Marquette Interchange always receive priority from state officials because of their statewide importance and the number of people they serve. Such prioritization arguably would be fully justified and acceptable if there were some remaining fiscal capacity to also fund high priority local road and transit projects.

Too often, however, there is not. Furthermore, in Wisconsin, the requirement that the non-federal share of transit projects must be funded at least in part with local dollars is an additional huge impediment. Consequently, localized transportation projects either fall to the local property taxpayer or simply don't get done. The City of Milwaukee's huge local street repair backlog and continued inaction on commuter rail and light rail/bus rapid transit exemplify this dynamic.

Alderman Bauman is right about the need for better consultation between state and local officials, albeit without the hyperbole that typically accompanies transportation discussions in southeast Wisconsin. In light of the certain strife that will occur between the state and local governments when it comes time to cut the state budget, it certainly would be refreshing to see consultation and cooperation regarding how to spend that rare influx of federal transportation dollars.

Tuesday, December 16, 2008

Mitigating the risk of making a bad schooling choice

'Tis the season for school shopping, as certain programs and schools have deadlines for fall enrollment quickly approaching. An article last week in the New York Times covered this subject by following one mother's struggle to find the right high school for her daughter. The irony was that this mother was an expert on the city's schools. Says the article:

"...Ms. Hemphill literally wrote the book on the subject — her series of “New York City’s Best Schools” books are regarded as the bible for navigating school choices — yet she has found herself befuddled and overwhelmed trying to help her 13-year-old daughter, Allison Snyder, find a spot."

Choosing from among the best and most selective public high schools in New York City is the kind of problem many parents in Milwaukee would like to have. But choosing a school here in Milwaukee can be similarly daunting. City residents can choose:

  • a neighborhood MPS school;

  • a specialty MPS school, with options including Montessori, Waldorf, fine arts, or technical careers, among many others;

  • a charter school, chartered by either the city, UWM, or MPS;

  • a suburban public school, either through open enrollment or the city-suburb integration program;

  • or a private school, with those who can afford it paying tuition and those who can't using a tax-payer funded voucher.
Perhaps someone needs to write a book on Milwaukee's best schools. Having spent nine years at the Forum studying schooling in Milwaukee and co-authoring a previous book on school choice, I could be a good candidate to do so. But I would have to reveal the dirty little secret about choosing schools: There's no rule requiring parents to choose schools based on academic criteria. Parents can choose a school for any reason whatsoever.

I learned the secret when I was choosing a school in Milwaukee for my own son. I found myself, one of the "experts," basing my choice on location, a full-day pre-Kindergarten program, and an award-winning afterschool program. It made sense for us, becasue my husband and I both work downtown full-time and having eight hours of convenient child care a day was important. But academics didn't really enter the picture and we could have chosen based on any number of quirky reasons. In fact, we briefly considered a private school, but rejected it based on the junk-food-laden lunch menu.

The New York family narrowed their choices using arbitrary criteria of their own. Reports The Times: "She focused on smaller schools that were no more than 45 minutes from home and would offer her a chance to take advanced classes but also give her enough time to focus on dance and theater after school."

There may be facets of a school that are a greater priority than academic performance for the parents choosing that school--religious instruction, teaching methodology, and student discipline, for example. Certain schools can thus attract parents despite low scores. But, as a result, competition among schools may not result in better school performance and there is little evidence that it has, in Milwaukee.

So, if even school performance "experts" find choosing schools difficult and overwhelming, due to all the factors that could be considered, can anything be done to help regular parents exercise their choice more efficiently and with better results?

The answer is simple: mitigate the risk of making the choice. Parents who are wealthy enough to exercise their school choice by choosing to buy a home in a good school district don't have much risk attached to that decision-making process. They are able to choose from among a host of academically good options.

School choice in its various guises in Milwaukee was supposed to result in similar empowerment for Milwaukee's low-income parents, but it has not, mainly because their choices carry risks: quite a few of the schools available to them are not performing adequately, according to data from a state-sanctioned evaluation of voucher schools and charter school test scores. If parents were making choices based on school performance, this would not be a concern, as we could assume they would not choose bad schools. But they aren't (which we know from the number of voucher schools that have failed despite having rather large enrollments) and so, despite the availability of choice, many children in Milwaukee are continuing to suffer educationally.

The state has recently taken steps aimed at mitigating the risk of choice, by requiring voucher schools to be accredited, for example. But there are few other regulations regarding academic offerings and accountability.

Having a choice among mostly poorly performing schools is no better than not having a choice at all. Without accountability for academic performance, we put the burden on parents to be experts on schooling, instead of expecting schools to excel.

Friday, December 12, 2008

Could last resorts spur action on Milwaukee's mental health complex problem?

High on the list of "fiddling while Rome burns" situations is the plight of Milwaukee County's mental health complex.

For years, the county's Behavioral Health Division (BHD) has been trying to provide emergency, acute inpatient, and long-term mental health care services to indigent county residents in a sprawling complex that is falling apart and no longer meets its needs. In the meantime, it's hemorrhaging dollars it doesn't have (a $3.9 million projected deficit for 2008 after several previous years of budget holes), and its efforts to pursue a new home that might produce overhead savings and better quality of care have been bogged down by infighting between the county executive and county board.

For insight into what types of options might get tossed around if things get really bad, county policymakers and special interests who have been brawling over this issue may wish to consider what's going on in Georgia. There, the state is seeking to embark on what the Atlanta Journal Constitution calls an "uncharted course": full privatization of the state's psychiatric hospitals.

Understandably, this proposal has attracted considerable concern, primarily based on fears that the only way the private sector could profit from providing mental health inpatient services for largely uninsured individuals would be to significantly cut staffing and services. Given Georgia's already poor history of service delivery, that is a troublesome possibility. State officials, however, are touting this as the only option for attempting to provide better care within existing budget constraints due to the private sector's alleged ability to provide higher levels of service at lower cost.

Could such an approach be attempted in Milwaukee County? Interestingly, some county mental health officials looked long and hard at "getting out of the inpatient business" several years ago, as it became clear to them that the dollars needed for community-based care and supports would not be available as long as they were forced to pour increasing amounts of property tax dollars into inpatient and long-term care operations. The biggest obstacle at that time, however, was the perceived impossibility of securing a private sector entity to step in given the large uninsured population served at the mental health complex.

Might those circumstances be different today, in light of new Badger Care coverage for childless adults and a push for mental health "parity" at the federal level, both of which could lead to broader coverage for mental health services? That's hard to say, but it's not hard to imagine a scenario in which the county again would have to contemplate the privatization option - at least for some of its inpatient or long-term care operations - despite concerns about impacts on service capacity and quality.

The sad reality is that the county has few options left. While it has not moved forward on the proposed move to a renovated St. Michael hospital, and is now entertaining the thought of building a new mental health complex, the fiscal situation at BHD - as demonstrated by the size of the 2009 deficit - has grown worse. The structural problems that have created budget deficits for several years are no secret to policymakers, yet they have not been addressed (with the exception of an initiative to outsource dietary services) and are likely to cause another sizeable budget hole in 2009. In the meantime, it is now logical to ask whether either a move to a renovated St. Mike's or building a new complex is practical in light of the county's deteriorating fiscal condition, which is worsening by the moment as its pension fund assets shrink and its infrastructure and service needs grow.

None of this is to suggest that privatization of inpatient mental health services should be viewed as anything but a last resort or is even viable. However, unless county policymakers do something soon to reduce overhead costs at BHD to make the cost of care more affordable, last resorts may be the only resorts left on the table. That should be reason enough for them to start working together to identify and implement a realistic solution to their mental health complex problem.

Friday, December 5, 2008

What's Wrong With Local Competition?

Do regional economic development initiatives have plenty of gloss but little substance? That’s a question some are asking after a recent Journal Sentinel report that our own regional initiative, the M7, is shifting its strategic focus. The M7 commissioned a study to outline a strategy for recruiting some businesses that might like to relocate to the region. The study suggests that the M7 focus on recruiting from two industrial sectors: control and instruments technology and food processing.

While the report is a useful planning tool, it brings attention to the fact that M7 has yet to draw a major corporation to the area. We should commend the 5-year-old M7 for acknowledging that reality and announcing a new tactic. But, there’s a broader question here about regional cooperation as a strategy to attract new businesses. From a public policy perspective, are these sweeping regional cooperative efforts the best option?

Informal regional cooperation and governance initiatives similar to M7 became popular in the 1990s after a cycle of more formal regional governing institutions that sprang up during the 1960s and 70s, such as Unigov in Indianapolis and the federated tier system in Miami-Dade.

Unfortunately, there has been little empirical evidence linking regional cooperation initiatives or regional governing bodies with clear economic benefits. Local competition among municipalities appears to work just as well. In fact, there is much economic research, based on the “public choice” theory of Charles Tiebout, that argues that local competition is more efficient than regional cooperation.

More recent research shows that strong, tangible incentives from individual municipalities (along with state tax breaks) draw the first-class corporations, like Boeing moving to Chicago.

Regional efforts have more success in building regional infrastructure projects, which arguably have the largest economic benefits of all kinds of public spending. Regional cooperation in building specific infrastructure projects, such as public transit or intermodal freight stations, has been found consistently to raise local property values.

All this calls into question the appropriate goal for M7: should they continue to focus on business recruitment or should our regional efforts also concentrate on funneling local investments into larger regional projects?