Analyzing workforce development services in Wisconsin

Wisconsin’s workforce development system is comprised of a broad range of employment and training services, from job search and placement assistance to vocational rehabilitation for individuals with disabilities. The Forum’s latest report – commissioned by the Wisconsin Department of Workforce Development (DWD) – offers policymakers and service providers a view of the system as a whole, including the variety of state and federal funding sources that support workforce development programs in Wisconsin. The report also provides analysis of the trends affecting the state’s workforce development system and offers observations on ways the system may be improved.

Key findings from the report include the following:

While it appears that some consolidation of employment and training funding has occurred in recent years, Wisconsin’s workforce development system remains somewhat fragmented. Overall, nine state departments will receive $407 million in federal and state funding in fiscal year 2012 to offer 36 programs that provide employment and training services. While many programs provide distinct services that target specific populations, state policymakers should consider whether the current structure is the most effective and efficient way to organize these services.

Projected changes in Wisconsin’s workforce and economy may demand increased attention to workforce attraction and retention as well as enhanced emphasis on worker training and education. Over the next 20 years, Wisconsin must address a projected decline in the size of its workforce while ensuring that workers have the training required for jobs that are expected to become available. According to DWD estimates, of the 78,570 projected annual job openings between 2008 and 2018, approximately 60% will require some form of “training” while 37% will require a formal degree. An important question for Wisconsin policymakers is whether the current array of workforce development programs and services is appropriately calibrated to meet the state’s evolving workforce needs, particularly in the areas of skills training and education.

The vast majority of funds supporting Wisconsin’s workforce development system are from federal sources, a trend that may not bode well for the future. The federal government will provide 92% of the funding that supports Wisconsin’s workforce development system in fiscal year 2012, an increase from 88% in 2008. This increase is largely attributable to the lingering national recession, which expanded enrollment for Wisconsin’s W-2 program and brought about a federal stimulus package that included additional support for workforce development programs.

Wisconsin’s acute dependence on federal support may not be sustainable or desirable because of the many restrictions typically attached to federal funds and because of the intense fiscal pressures facing the federal government, which place all federal discretionary funding at budgetary risk. In addition, federal funding for workforce development programs has been decreasing over the long term; the overall budgets for the six largest workforce development programs in Wisconsin have declined from a collective total of approximately $430 million in 2000 to $299 million in 2012.

Some new approaches to structuring workforce programs and diversifying funding sources have been initiated in Wisconsin, and those efforts should continue. For example, despite declining federal Workforce Investment Act allocations, the Milwaukee Area Workforce Investment Board has been able to increase its annual revenue, largely by diversifying its revenue sources. Also, the Milwaukee Area Workforce Funding Alliance (MAWFA), which was established in 2009, may serve as another model for cities and regions looking for additional funding streams to support workforce development programs. MAWFA is a consortium of private and public workforce development funders and service providers in the Milwaukee area that helps to coordinate the distribution of funding from private and public funders for local workforce development efforts.

We hope this report can serve as a guide in ongoing efforts to improve the effectiveness of Wisconsin's workforce development system.

PPF Pearls: Wisconsin and the Internet sales tax

Yesterday the Wall Street Journal reported that tight state budgets have resulted in several governors adopting Internet sales tax agreements with online retailers that require these sellers to collect state sales taxes at the time of purchase, even if they do not have a “brick-and-mortar” presence in the state.

Such agreements ensure these states receive the sales tax they are due; relying on each consumer to report and pay the sales tax owed often leaves state coffers short. For example, self-reported taxes on online purchases (use taxes) were collected from just 29,200 Wisconsin tax filers in 2009, totaling $1.72 million. This represents less than one percent of the total sales and use tax paid in that year. A 2009 University of Tennessee study projected Wisconsin would lose $126.1 million in state and local sales taxes in 2011 and $142.1 million this year from unpaid sales taxes on Internet purchases. Wisconsin’s 5% state sales tax totaled $4.1 billion in 2011, making up one-third of the state’s general purpose revenues, second only to the personal income tax.

While the recent agreements forged by governors help bolster the revenues of individual states, they result in a patchwork of policies across the country. This patchwork complicates business practices for online retailers and puts them in a different competitive stance with physically-present retailers in each state. The result is that a Wisconsin customer of Amazon.com, for example, would not have the state sales tax added to the cost of his or her purchase, but a resident of Kansas, Kentucky, Texas, or any other state with a collection agreement would. In addition, it means an item sold in a physical store in Wisconsin costs more at the time of purchase than the same item sold online, even if they are priced the same.

Instead of seeking tax collection agreements with individual Internet retailers, Wisconsin has joined several other states in looking to Congress to pass legislation allowing states to require online sellers to collect state sales tax. In 1992, the Supreme Court ruled in Quill Corporation v. North Dakota that retailers must have some sort of physical presence in a state before they can be required to collect state sales tax on behalf of that state. Three bills currently under consideration in Congress would tackle Quill’s prohibition by voiding the requirement of a physical nexus.

The Main Street Fairness Act, proposed by Democrats, would allow states that have joined the Streamlined Sales and Use Tax Agreement (SSUTA) to require online retailers to collect state sales tax at the time of purchase. The SSUTA, which seeks uniformity among states by standardizing the definitions of products and taxable items, as well as standardizing and simplifying tax calculations and collection procedures, has a long history in Wisconsin. In our 2000 white paper on tax policy for the new economy, the Forum noted that Wisconsin served as a co-chair of the effort, which began in 1999 with the help of the National Governors’ Association and the National Conference of State Legislators. It wasn’t until 2009, however, that Wisconsin passed the state legislation adopting the standardized definitions required to become a SSUTA member.

The second bill, the Marketplace Equity Act, will be the subject of a hearing in the House Judiciary Committee on July 24. It has been introduced in both the House and Senate with bi-partisan support and appears to be gaining momentum. This act proposes that states wishing to require online tax collection adopt a set of simplified tax rules that are somewhat similar to the SSUTA standards. Some online business groups are worried, however, that by not aligning directly with the SSUTA, the standardization and simplification goals will not be met, as the 22 SSUTA states will be reluctant to pass new and different standards. These states could choose to continue to seek agreements with individual retailers, causing big headaches for national online retailers who would be subject to many differing state tax rules if the act were to pass.

In response to these critiques, a third bill, the Marketplace Fairness Act, has been introduced in the Senate with bi-partisan sponsors. This bill would allow states who are members of the SSUTA to require online sales tax collection, but would also allow non-member states to do so as well, as long as they adopt an alternative set of simplified taxation standards.

Opponents of all three bills argue that by eliminating the nexus requirement for sales and use taxes, Congress would be at the precipice of a slippery slope that could result in all types of new taxes far removed from the activities being taxed. There is also an argument that the requiring sales tax collection by online retailers, even if simplified and standardized, would be so burdensome that it would stifle Internet entrepreneurship.

A May survey by the International Council of Shopping Centers found that 62% of Wisconsin residents polled understand they are supposed to pay a tax on items purchased online, even if the tax was not collected by the retailer at the time of purchase, and that 72% feel having the retailer collect the tax would be easier. In addition, 65% of respondents say they would support a federal law allowing retailers to collect the tax. Until Congress acts, count on Wisconsin’s Department of Revenue to continue to aggressively remind taxpayers that their online shopping sprees are not duty-free.

UPDATE 7/24: More coverage of this issue in the Milwaukee Journal Sentinel http://www.jsonline.com/business/online-retailers-might-have-to-collect-sales-tax-a766ati-163483146.html

Paradigm shifts in state budgeting

In 2003, California could have laid off every one of its state employees and still had a deficit, according to Alan Greenblatt of Governing Magazine. He explains, "Most of what states do, after all, is simply write checks to schools, hospitals and other entities that actually provide services." Which helps explain why, traditionally, attempts to reign in state costs have focused less on state personnel, overhead and administrative costs and more on programmatic and service cuts. Not anymore—with employee pension and health care costs soaring, across the nation states are now engaging in a cost-cutting paradigm shift and are focusing on getting state internal costs down in order to preserve services as much as possible.

Wisconsin appears to be leading the charge, at least so far as personnel cost-cutting goes. The most recent data from the U.S. Bureau of Labor Statistics show the number of state employees declined faster in Wisconsin in the second quarter of 2011 than in any other state. With a 10.1% decrease in the number of state employees compared to the second quarter of 2010, Wisconsin's state job-cutting surpassed every other state's over that year.

In addition, the recent final report from the governor's Commission on Waste, Fraud, and Abuse identifies other, mostly administrative, savings to the state. Suggestions in the report aimed at internal savings include changes to overtime policies, better uses of technology in order to improve efficiency, and greater use of quality assurance systems for infrastructure projects.

Balancing the state budget with significant internal cost-cutting, as opposed merely to passing the cuts along to local governments, is a laudable goal. If it rights the state's financial house, it has the potential to benefit taxpayers today and tomorrow. What remains to be seen, however, is the extent to which a balanced budget will empower state policymakers to invest in service quality and/or access.

What if Wisconsin were to be at the forefront of a new wave of policymaking: one where policy and budget decisions were made based on citizens' needs and desires, programs' efficacy and outcomes, and statewide strategic goals?

Are Milwaukee County's child care providers ready for YoungStar?

New results from a statewide survey of 1,425 child care providers show that Milwaukee County providers compare favorably to providers across the state with respect to several measures that will be rewarded under the state's new YoungStar child care rating system.

The survey, conducted by the Forum in partnership with the Wisconsin Early Childhood Association, was designed to provide a picture of the status of the early childhood workforce in the state. Provider characteristics such as educational attainment, experience, professional credentials, and salary were measured. Providers were also given a chance to express their opinions about the new rating system.

Key findings include:

• The 223 respondents from Milwaukee County demonstrate higher educational attainment and earned professional credentials than their colleagues statewide, factors that can earn a provider a higher rating under YoungStar.


• Providers in Milwaukee County appear to enjoy greater access to professional development than providers elsewhere in the state, via higher rates of membership in professional associations and use of scholarship and stipend programs.


• Providers in Milwaukee County have higher median wages than the state as a whole and have higher child care subsidy usage rates. Not surprisingly, Milwaukee County providers also charge higher fees.


• Child care centers in Milwaukee County are more likely to be accredited. Accreditation can mean a center automatically receives the highest rating under YoungStar.


• Milwaukee County providers are more likely to see YoungStar as an opportunity to improve the quality of their early childhood programming than providers statewide.

For the full report, visit the Forum's website.

The cruel world of local government finance

In the weeks since release of the governor's proposed 2011-13 state budget, much has been spoken and written about the potential impacts of cuts in state aids on local government budgets and services. Yet, while much of the discussion has focused on high-profile cuts to shared revenues, municipal recycling grants and general transportation aids, buried within the budget are dozens of less-publicized, complicated provisions that also may have far-reaching impacts.

One of those relatively obscure provisions is related to the new property tax levy limit on municipal and county governments. The limit itself has received considerable attention, as instead of having their annual allowable property tax growth capped at no lower than 3%, counties and municipalities would be capped at the greater of 0% or the percentage growth in equalized value resulting from new construction. Because the change in new construction is projected to be less than 1% in many counties and municipalities, that's a significant reduction.

But perhaps equally noteworthy is a provision that would require counties and municipalities to decrease their allowable levy in any year in which they experience a decrease in debt service on debt issued before July 1, 2005, by an amount equal to the decrease. In other words, if a local government is fortunate enough to experience a lower overall debt service payment from one year to the next, then instead of having the discretion to do as it pleases with those savings, it may be required to pass the savings back to its property taxpayers.

Without taking up the issue of whether the new provision is good or bad for those taxpayers, it does throw a curveball at those local governments that have consciously tried to keep a lid on their debt issuances as a strategy for obtaining long-term operating budget relief.

One such government is Milwaukee County. Despite the county's overall budget woes (as documented in several reports by the Public Policy Forum and others), one of its true fiscal success stories has been in the area of debt management. Just last month, for example, the Standard & Poor's ratings agency praised the county for its "moderate debt burden with rapid debt amortization."

As we explained in our recent Milwaukee County Executive Election Brief, after it decided to refinance a major portion of its debt in 2003, the county made a concerted and deliberate effort to keep a lid on annual borrowing. In fact, its discipline in adhering to self-imposed caps on general obligation bonding, while arguably contributing to its vast backlog of infrastructure needs, has positioned the county to benefit from a significant decrease in annual debt service payments by 2015. In that year, according to the county's 2011 budget, the annual debt service payment could drop from $63 million to $47 million.

Until recently, county fiscal officials viewed the funds freed up from potential reduced debt payments as a critical piece of a long-term approach to dissolving the county's structural deficit. In fact, given the painful nature of all other potential strategies, this was one of the few bright spots in the county's long-term fiscal picture.

If the new requirement that local governments reduce their levies commensurate with reductions in annual debt service payments is adopted, however, then one of the only promising tools in Milwaukee County's limited deficit-reduction toolbox will be eliminated. Such is the world of local government finance, where even the best laid plans can be wiped out by higher levels of government at a moment's notice.

Diminishing returns to public sector employment

Most local governments in Wisconsin have certainly given their employee compensation packages a closer look over the last few weeks as the budget repair bill receives judicial consideration in Madison. The eventual implementation of what now has passed as Wisconsin Act 10 may soon be approaching, and elements within it are certain to help governments in some respects, but may tie their hands in others.

One knot that has yet to be fully assessed is the effective decline in salary growth for public sector employees resulting from new compensation guidelines. Limited salary growth paired with elevating fringe benefit costs will eat into take home pay. Though this diminished growth may be a fiscal necessity, locking it into perpetuity raises some difficult questions.

Under the budget repair bill, total base wages for all public employees would be prohibited from growing annually beyond the increase of inflation (measured by the national average CPI-U), unless approved by referendum. This measure of inflation has averaged a rate of 2.5% over the last 10 years.

While an annual salary increase of 2.5% does not appear unreasonable, it is important to recognize that most public sector workers also will be asked to pay more for their pension and health care costs year after year. Those costs, incidentally, have grown far faster than the CPI-U. The inability of salary growth to keep pace with the rise of fringe benefit costs may cause public employees to experience successive years of increasingly stagnant compensation.

A quick look at fringe benefit growth historically reveals the potential for diminishing growth in public sector pay. The table below shows five years of pension contributions and health care premiums for general employees working for the State of Wisconsin.

This information shows that the growth in annual pension contributions has been relatively flat, as the contribution to the Wisconsin Retirement System (WRS) has averaged a 1.9% increase annually from 2007 to 2011. This would signify that annual salary increases allowed under the new law could be sufficient to offset the growth in the employee share of pension costs. However, it has been suggested that pension contributions to WRS may need to increase significantly in the future to reflect more realistic interest rate assumptions and other factors. If that development does occur, employees could see pension costs grow more rapidly than inflation, resulting in take-home salary growth that does not keep pace with inflation.

Health care costs pose an even bigger problem for public sector employees, as premiums have steadily climbed far faster than inflation. Premiums for the state’s Tier I family plans, for example, have grown at an average of 8.3% from 2007 to 2011. Because it appears unlikely that health care inflation will be reduced to a level equivalent to general inflation, public employee salary increases are unlikely to keep pace with growing health care contributions.

While a compelling case can be made for the need to require public sector employees to contribute significantly more to their health care and pensions costs, and while many private sector workers face similar salary and benefit pressures, public sector administrators face several important long-term questions.

For example, what tools will administrators have at their disposal to attract and retain valued employees if pension and health care cost increases negatively impact earnings potential? Will the repeal of most collective bargaining rights allow administrators new liberties in shifting salary dollars to ensure they can recruit for priority positions, whether it be through altering salary schedules, adjusting position classifications, or offering bonuses? And if so, what would such a shift mean for the rest of the employees, given that total salary expenditure increases are restricted? In light of the many retirements projected in response to Wisconsin Act 10, state and local government administrators may be seeking answers in the very near future.

UPDATE: It has been correctly pointed out that the inflationary limit on public sector pay increases applies to public sector workers who are subject to collective bargaining agreements only. However, the compensation changes of non-represented employees often mirror those granted to represented employees.

Some good news from Milwaukee County's mental health complex

While the problems experienced by Milwaukee County's Behavioral Health Division (BHD) justifiably receive considerable attention in the local news media, there also are some shining success stories that seldom are reported.

One obvious example is the division's Wraparound Milwaukee program for children with complex mental health and emotional needs, which received an "innovations" award from Harvard's Kennedy School of Government in September 2009. Another - discussed recently in a report submitted to the county's Health and Human Needs Committee - is its WIser Choice program for individuals suffering from substance abuse.

WIser Choice was created by BHD and the state after they were awarded a three-year, $22 million federal Access to Recovery (ATR) grant in 2004. The grant funds gave BHD the resources to transform its substance abuse program into one that provides a comprehensive blend of recovery-oriented services. Those services extend beyond traditional drug and alcohol treatment to also include pre-employment education/training, transportation, housing, life skills training and other supports. The county and state successfully collaborated on a second three-year ATR award in 2007 and recently received federal approval for a third three-year installment.

The program's success in competing for scarce federal funds is a direct reflection of its impressive client outcomes. In fact, according to BHD, those outcomes - based on national measures established as part of ATR - generally have been the best of any ATR grantee. Also, in the 2002-2004 pre-WIser Choice period, Milwaukee had the highest rate (13.47%) of any urban area in the nation of persons with a past-year substance use disorder. From 2006-2008, however, Milwaukee’s rate dropped to 9.96%, which ranks it only 22nd among urban areas.

Recently released federal data also show the following impressive results:

• Milwaukee dropped from 1st among urban areas to 7th in binge drinking.


• Milwaukee dropped from 2nd to 20th among urban areas in past-year treatment gap for alcohol use disorders.


• Milwaukee’s rate of substance use disorders dropped 20.1% from 2004 to 2008, while the nation’s rate as a whole decreased only 1.8%.

The success of Wraparound and WIser Choice has relevance to efforts to address the serious problems plaguing BHD's adult mental health operations. A report released in October by the Forum and Human Services Research Institute argues for a redesign of those operations, highlighted by a much greater emphasis on community-based services and a gradual downsizing of the county's role in inpatient and long-term care. A few of the encouraging lessons from Wraparound and WIser Choice that might inspire the adult mental health redesign effort:

1. BHD has shown that with sufficient resources and appropriate support from elected officials, it is fully capable of designing and implementing successful models of behavioral health care and treatment.


2. BHD and the Wisconsin Department of Health Services have shown they can put the politics of their elected leaders aside to collaborate effectively and bring additional federal resources to Milwaukee County.


3. BHD has deftly created and managed relationships with community-based providers in both programs to achieve results that benefit both clients and taxpayers.

Good news from Milwaukee County’s mental health complex may be rare, but in this case it should provide hope for the future.

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.

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.

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.

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.

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.

Milwaukee County Government: Should it stay or should it go?

This morning, the Forum released Should it Stay or Should it Go, our eagerly anticipated report on potential restructuring of Milwaukee County government. It's long (160 pages), complicated and nuanced - which should come as no surprise given the enormity of the topic.

Indeed, that's a message that hopefully will resonate with this report. At a time when many metro Milwaukeeans justifiably are frustrated with their problem-plagued public institutions, it is tempting to seek broad, sweeping solutions that purportedly will solve all the problems at once. Unfortunately, such solutions seldom exist, and many that are tossed around pose significant and legitimate policy-oriented, legal and logistical considerations.

That doesn't mean we shouldn't pursue bold and far-reaching solutions. It does mean, however, that they demand thoughtful, objective and rigorous analysis, and that sometimes incremental reform is a more appropriate strategy.

Milwaukee County government has been around for 175 years and consideration of its dismantling requires great care. Our approach is to examine the government "function-by-function." This allows us to consider why each service is housed in county government; who might provide the services if not the county; alternative ways in which other metro areas are administering the same services; and the pros, cons and logistical considerations associated with those alternative ways.

We conclude that any attempt to eliminate Milwaukee County government would require "resolute leadership from state government and a willingness by the state to devote considerable human resources and an up-front financial investment." We also suggest that, as an alternative to complete dismantling, consideration might be given to removing the major discretionary functions (e.g. parks, culture and transit) and creating a streamlined executive and legislative structure with the goal of producing less ideological acrimony and better fiscal management.

Finally, we outline a series of policy options to isolate and control pension and retiree health care costs; and we even suggest consideration of folding certain municipal functions into county government if the right type of administrative structure can be created.

While we strongly urge interested parties to read the full report, an executive summary and media release can be accessed here and here. The Forum looks forward to a lively and thoughtful public policy discussion.

Let the "Race to the Top" begin

Governor Doyle has not been shy about his desire to see the mayor of Milwaukee governing the Milwaukee Public School (MPS) district as part of an effort to make Wisconsin more competitive for new federal K-12 education dollars. The dollars at stake, called the "Race to the Top Fund," will not automatically go to every state, but will be disbursed to selected states based on their promise to fulfill certain criteria.


While the desirability of chasing after these funds has been controversial in Wisconsin, we're not the only ones debating major education reform policies as a result of the Race to the Top challenge. This week's Education Week highlights some of the policies being considered in other states:

• Several states are responding with policies that would tie teacher pay to student performance. Maine's governor has proposed allowing student achievement data to be considered in teacher evaluations, as have Michigan's and Tennessee's governors.


• Many states are focusing on increasing the number of charter schools, or in the case of Alabama, enabling charter school operations for the first time.


• The strategy that seems to be garnering the most attention from the states is "turning around" low-performing schools via state intervention. In Michigan, a newly signed law allows the state to take over low-performing schools or districts and place them under the direction of a "reform officer." In New York, proposed legislation also empowers the state to intervene in the lowest-performing schools, by authorizing new management under private educational management organizations. Tennessee's governor has proposed allowing the state to take over "chronically" underperforming schools.

The Obama administration has promised to provide states who miss out on the first round of funds with enough guidance to allow them to resubmit stronger proposals in the second round. With Governor Doyle's announcement last week that Wisconsin's application will not include a proposed mayoral takeover of MPS, optimism among education policy wonks about our chances at first-round funding has waned. If the successful first-round state applications are those with state-led school turn-around plans, might the debate in Wisconsin shift from, "Should the mayor be running MPS?" to "Should the state be running MPS?"

Will 2010 bring resolution to difficult state and local budget issues?

While many state and local budget officials undoubtedly were thrilled to see 2009 come to a close, two recent national news articles indicate the outlook for 2010 and beyond isn't much rosier.

The first, from the Wall Street Journal, cites a 7% decline in local and state tax collections in the third quarter of last year and warns that despite indications of economic recovery, the worst may be yet to come for state and local government budgets.

The article notes that rebounds in state and local tax revenues tend to lag upturns in the general economy by several months because tax collections trail increases in store sales and incomes. In addition, while the economic downturn already has produced significant hits to state and local income and sales tax collections, the impact of falling property values has not been fully felt on property tax collections. The bottom line, according to an expert with the Brookings Institution, is that local governments "will be working through the catastrophic drops in revenue for the next 18 months to two years."

Meanwhile, the second article, from the Washington Post, puts a damper on the notion that federal assistance might continue to be a significant source of relief. The Post article cites increasing support from the Obama administration and members of Congress for a new commission to tackle the skyrocketing federal budget deficit. The bipartisan commission would have broad power to recommend both spending cuts and tax increases. Its recommendations would be presented to Congress as an unamendable "take it or leave it" package, thus increasing the odds of passage.

Prospects both for the formation of a new commission and for its ability to agree on a major deficit-reduction strategy are uncertain. What is more certain, however, is that the escalating federal debt no longer can be ignored by the administration and Congress, which spells bad news for state and local policymakers who have relied heavily on stimulus funds and other federal dollars to help alleviate budget pain during the past year.

So what does this mean for state, county and municipal officials in Wisconsin? It means that the fundamental problems that have created persistent and growing structural deficits at the state, Milwaukee County and City of Milwaukee will not magically disappear and must be the subject of equally persistent focus in 2010.

Simply put, the programs, services and spending commitments currently in place at those levels of government cannot be supported by their existing revenue streams. As the Pew Center on the States recently reported, efforts to paper over this reality at the state level with questionable short-term budget tactics have run their course. And, as the Forum has found, the same holds true for Milwaukee County, while the City of Milwaukee is on the verge of needing to revert to similar tactics or face major cuts in core services.

Hopefully, policymakers at all levels will resolve this year to honestly discuss what it costs to provide the government services that are desired by citizens and required by law, and whether the government structures and revenue sources currently in place are the best way to administer and pay for those services. Such a resolution also should include a pledge to provide specifics regarding which programs and services should be cut if increased revenues aren't part of the answer, and just how much new revenue is needed from taxpayers if expenditure cuts are not a big part of the equation.

Whether 2010 will be the year that elected officials openly confront their unpleasant budget realities is questionable given the November elections for governor and many legislative seats. Then again, could there ever be a better time to put these issues on the table and demand that candidates responsibly address them?

How do we compare to our neighbors? Depends on whom you ask

You know the drill: Wisconsin’s economic strategy just isn’t measuring up compared to others.

A July 18th editorial claimed “Wisconsin is struggling.” It said Iowa seems to have a better plan. An August 8th column by John Torinus argued, “We get outgunned by states with much larger budgets for economic development.” He said Michigan seems to be doing better. On October 3rd, Torinus wrote that Wisconsin was falling behind Illinois and Minnesota. He quoted a UW-Madison expert as stating the state economy is in “very bad shape.” Meanwhile, Marc Levine’s recent editorial blasts local economic development efforts as being prey to “irrational exuberance.”

While that’s the tone we’re used to, it appears others see our economy and business climate differently. A two-part series (here and here) in the Minneapolis Star Tribune by Thomas Lee details a competition for biotech firms in which Minnesota is clearly the underdog. “When it comes to innovation,” Lee states, “Minnesota is quickly falling behind its neighbor.”

The articles cite a number of Minnesota-grown biotech start-ups fleeing to Wisconsin, where businesses interviewed claimed they had access to more money, and where organizations like the Wisconsin Alumni Research Foundation, University Research Park and Accelerate Wisconsin, along with tax incentives and investor capital, create a friendly climate for new ventures. (The Milwaukee County Research Park's Technology Innovation Center uses similar strategies locally.)

Even with a $6.5 billion deficit, the budget passed by Wisconsin legislators increases angel investor tax credits from $5.5 million to $18.25 million and venture capital credits from $6 million to $18.75 million. Minnesota has no comparable tax credits and, while Minnesota does not appear to track angel investors, Wisconsin has 22 angel groups that made 53 deals in 2008.

In the Star Tribune, Wisconsin and its Madison university are compared to Silicon Valley, North Carolina’s Research Triangle Park, MIT, and Stanford University and are said to feature “the most formidable university technology transfer program in the country” as well as “the country’s most industrial workforce.”

The director of business development at a Minneapolis health consulting group explains, “There is a real desire to succeed in Wisconsin. The state has no stodgy culture. It’s a culture of newness, a desire to try new things.” Another executive gushes, “Wisconsin is a very exciting place. You just get a sense of forward motion. Wisconsin is doing something right.”

What are we to make of the contrast in tones between how we see ourselves and how others perceive us? Judging from the above-referenced inter-state economic comparisons, as well as the Public Policy Forum’s own analysis of the Minnesota business community’s involvement with early childhood education reforms, in some ways, the grass is always greener on the other side. However, that does not change the fact that comparison with other states is an important tool for seeing one’s own state – its problem areas and its strengths – in sharper focus.

Revisiting the Missouri approach to juvenile corrections

In a blog post published in March 2008, we cited an innovative juvenile corrections model used by the state of Missouri and asked whether that might represent a cheaper, better approach for Wisconsin.

Eighteen months later, the Missouri model is attracting increased national attention. ABC News recently ran a feature on the model, which utilizes small community-based residential facilities featuring intensive treatment as an alternative to large correctional institutions. This approach, according to the report, "has chalked up results that have corrections experts across the country taking notice."

Policymakers in Wisconsin also are taking notice. In April 2008, the Legislature's Joint Legislative Council established a Special Committee on High-Risk Juvenile Offenders to examine best practices to reduce recidivism among high-risk offenders. In April of this year, the committee produced a report outlining its proceedings and describing several bills recommended as a result of its deliberations.

The committee took a look at the Missouri model and considered draft legislation to pilot two or three Missouri-like facilities. The legislation did not make it into the committee's final recommendations, however, perhaps in part because of a memorandum prepared by the Department of Corrections showing that the Missouri daily rate for serving juveniles at its residential facilities is quite similar to the daily rate in Wisconsin juvenile corrections institutions if all related costs are considered.

Notwithstanding that finding, there may be a range of reasons to consider a more diverse service delivery model for juvenile corrections in Wisconsin. One is the potential to re-examine whether the state's institutional capacity could be reduced given the significant drop in the number of youth being sentenced to those institutions from Milwaukee County. The county averaged well in excess of 350 commitments per year in the late 1990s before seeing a precipitous drop to below 200 by 2004. After increasing in 2006-07, the commitment number is now trending downward again. This trend suggests there may be no better time to re-examine the closure of one of the state's three institutions in light of its fiscal challenges.

If the state were to consider such a move, it may need to be accompanied by additional community-based options. One such option could be a partnership with Milwaukee County to open a local residential facility based on the Missouri model. County officials have long complained about the cost of sending delinquent youth to the state facilities and may be willing to try a local alternative. Also, in light of the county's successful track record in operating alternatives programming (such as the Firearm Supervision, Wraparound Milwaukee and Focus programs), Milwaukee County could be the logical place to pilot another innovative approach.

The fiscal circumstances facing state government suggest that some new thinking is needed to cut corrections costs and reduce recidivism among the juvenile population. Whether the Missouri approach is the right one for Wisconsin requires further deliberation, but such deliberation again may be warranted in light of the successful outcomes associated with that approach.

Is it time to dissolve Milwaukee County government?

With Milwaukee County Board Chairman Lee Holloway's proposal to abolish the position of county executive, and County Executive Scott Walker's counter-proposal to eliminate all of county government, policymakers and opinion leaders in Greater Milwaukee once again appear primed to discuss big changes in the structure of local government.

But will this iteration really lead to comprehensive structural change, or will it result only in minor reforms, as did the discussion following the 1996 report from Milwaukee County's 21st Century Commission, and the 2002/2003 discussion related to the county's pension scandal?

Research recently commenced by the Public Policy Forum may play a significant role in answering that question. The purpose of this research - which has been commissioned by the Greater Milwaukee Committee - is to explore the fiscal, legal and logistical issues involved with transferring the various services currently provided by county government to other entities, and the options that might exist for doing so.

Does that mean the Forum has taken a position in support of the elimination of county government and is preparing the plan for this endeavor? Absolutely not. We do believe, however, that this suggestion has received enough public attention and civic support, and that the fiscal issues facing county government are sufficiently severe, to at least merit rigorous and objective research as to whether downsizing or eliminating Milwaukee County government might be accomplished and, if so, what options exist.

The fact that rigorous research is needed should not be overlooked. While significant governance change often is seen as a panacea for difficult problems facing local governments or school districts, the experience of those who have attempted such change indicates that fiscal savings can be limited, and that the benefits associated with structural reform can take years to manifest.

In the case of Milwaukee County, the seemingly simple notion of "blowing it up" is fraught with complexity that is caused by some of the very factors that have created the county's current fiscal crisis. The county has more than $2 billion of pension and retiree "legacy" liabilities, as well as close to $500 million of outstanding general obligation debt, that don't simply disappear if the county ceases to provide certain functions. Either those costs must be distributed to the entities that take over county services - a proposition the receiving entity is unlikely to embrace - or they must remain with a shrunken county government that is even less equipped to pay for them with a reduced workforce and receding revenue streams.

The analysis we're undertaking will deconstruct the county budget, showing what the county is actually spending to deliver key services, as opposed to what is budgeted for those services because of the way the county distributes legacy costs across all departments (see our March 2009 report for more detailed description of this issue).

By isolating county retirement costs and their true impact on county services, we hope to engender an informed policy discussion about how those costs should be managed and whether alternatives might exist to prevent them from continuing to diminish the level and quality of every county service. We will then analyze and assess the fiscal and non-fiscal impacts and considerations associated with moving certain functions out of county government, and the pros and cons of various alternative government structures.

As long as the notion of dissolving county government or radically altering its structure is seen as a possibility, it will serve as a convenient excuse by some to delay meaningful action on the dozens of excruciating financial and policy decisions that face the county right now, and that have been pushed off for years. It is time to take the next step in determining whether such an approach is possible and desirable. Stay tuned for our report, which we hope to release by the end of this year.

Is Wisconsin state-of-the-art for K-12 science and math education?

The Public Policy Forum's latest report, released today, finds that of the 10 career clusters predicted to grow the most over the next five years, seven include occupations requiring strong backgrounds in science, math, technology, or engineering (STEM). Of the 10 specific jobs predicted to be the fastest growing in the state, eight require STEM skills or knowledge and six require a post-secondary degree.

Do Wisconsin's state educational policies reflect this growing need for STEM-savvy and skilled workers? Are Wisconsin education officials focusing on STEM in a coherent and coordinated way? Our new report probes those issues by examining state workforce development data and reviewing state-level policies and standards that impact STEM education.

We present several policy options that could be considered to build on localized STEM initiatives and establish a greater statewide imperative to prioritize STEM activities in coordination with workforce needs. Those include:

* Strengthening state standards in science, math, and other STEM fields, creating model curricula in STEM fields, and aligning standards to workforce needs and college matriculation requirements.

* Creating incentives to recruit and retain qualified STEM teachers and ensuring districts use teacher standards and professional development goals in hiring, evaluation, promotion, and possibly compensation.

* Creating incentives for more coordination of local efforts and increasing support, both financial and regulatory, for district-level STEM initiatives.

The data indicate that a coordinated state-level focus on STEM education will be critical in meeting our state's future workforce needs. Is Wisconsin up for the challenge?

Go to the full report: PREPARING THE FUTURE WORKFORCE Science, Technology, Engineering and Math (STEM) Policy in K12 Education

Budget woes demand collective response

Former UW-Madison political science professor Donald F. Kettl, leader of the "Kettl Commission" (which worked on reforming government structure in Wisconsin nearly a decade ago), pens a foreboding piece in this month's Governing magazine.

Entitled "After the Stimulus Ends", the article warns of the "long-term fiscal crisis" facing most state and local governments. Kettl says the crisis may be alleviated somewhat by stimulus funding but is not going away. He cites growing pension and retiree health care obligations and an increasing state Medicaid burden as the primary drivers of the worsening state and local fiscal mess and predicts the likely need for more federal support two years from now:

"Barring major reform, looming deficits will force state and local governments to come back again (and again) for more federal cash. They won't be able to cover their share of the rising health care costs without increasing taxes to unacceptable levels or slashing their spending even further, which would mean less money for their other serious crisis in the construction and maintenance of infrastructure."

Of course, that warning comes as no surprise to observers of government budgets in Greater Milwaukee, who recently have become painfully aware of the precise magnitude of budget woes facing Milwaukee County, the City of Milwaukee and Milwaukee Public Schools, not to mention the State of Wisconsin's $5 billion-plus budget hole, which appears to be worsening.

So amidst all of this bad news, is there any hope? If hope means silver bullets, then the answer is "no." Undoubtedly, the financial problems facing all levels of government will require considering a mix of painful cuts in programs and services; additional cost sharing by public sector employees for their pensions and health care; privatization of some public sector assets; and increases in fees and taxes to support programs and services that are too critical to diminish or eliminate.

But if hope means using the financial crisis to produce innovative and creative ways to improve government services with fewer resources, then the answer has to be "yes." It is somewhat surprising that Professor Kettl, in his Governing article, did not evoke the words of the commission he led, which argued for "innovative partnerships among Wisconsin’s state and local governments that will...deliver better value for taxpayers' dollars...reduce tension in the political system and make Wisconsin’s state and local governments genuine partners instead of adversaries."

If ever the time were ripe for radical change in the way our various layers of government relate to one another and generate and distribute revenue, wouldn't that time be now, when the four largest government entities in the State of Wisconsin are in such dire fiscal shape? Could this fiscal crisis create the ingredients necessary to reasonably discuss a collective solution in an atmosphere devoid of turf battles, partisan politics and undue influence from special interests?

Unfortunately, this morning's Journal Sentinel article regarding renewed hostilities between Milwaukee County and the state over public assistance funding indicates the notion of genuine partisanship remains an elusive dream. It's time, however, for our various levels of government to recognize that by fighting with each other during times of crisis, they are only making matters worse.