Local nonprofits still feeling impacts of recession

The 14th annual "Report Card on Charitable Giving" - released by the Forum today in partnership with the Greater Milwaukee Foundation - shows moderate improvement over last year in the fiscal health and general outlook of Metro Milwaukee nonprofit organizations. Nonetheless, nonprofit leaders continue to express a healthy dose of pessimism toward the state of philanthropy and continue to feel the impacts of the economic downturn in varied ways.

The report card is based on a comprehensive survey of nonprofit organizations in southeast Wisconsin. More than 150 nonprofits responded to this year's survey, with a little more than half (52%) from the human services sector, 17% from arts and culture, 16% from education, 10% from health organizations, and 3% from the environmental sector.

Among the key findings that emerged:

• For the second year in a row, nearly two-thirds of respondents feel that economic conditions are causing local giving to be less generous than usual. The 2010 result of 66% is slightly improved, however, from the 68% who felt that way in 2009.


• More than a third (38%) of this year's respondents report decreased total revenue, while half report increased total expenses.


• Half of the respondents feel they are financially healthy but vulnerable in the future, an improvement over the 57% who felt this way in 2009. Meanwhile, 30% feel they are financially healthy with no foreseeable problems in the near future, also improved from the 24% who responded that way in 2009.


• Arts and culture organizations expressed the greatest concern about their financial health among the various nonprofit sectors, with 35% reporting chronic financial problems, and another 50% reporting they are financially healthy but vulnerable in the future.


• Survey respondents cited the need for several personnel-related actions to address budget constraints, including salary freezes (40%), reductions in benefits (20%) and lay-offs (18%). Nearly half (48%) say they have considered collaborating with other organizations and 22% say they have considered merging with other organizations.


• A quarter of the respondents say their expectation of long-term sustainability is very high, while another 41% report it is high. Only 3% have low expectations for long-term sustainability.


• Nearly half (46%) of the respondents say they expect gifts from corporations to decline, while 43% expect gifts from individual donors to decline and 41% expect foundation grants to decline.

An executive summary of this year's report card and a copy of the full report can be accessed here. The report card is published and sponsored by the Greater Milwaukee Foundation, and co-sponsored by the Donors Forum of Wisconsin, Faye McBeath Foundation and United Way of Greater Milwaukee.

MATC facing growing demands, shrinking resources

Today, the Forum released the third in its series of financial reports on local taxpayer-funded entities in Metro Milwaukee: a comprehensive fiscal assessment of the Milwaukee Area Technical College (MATC). This report uses the same fiscal monitoring methodology as 2009 reports on Milwaukee County and the City of Milwaukee, which were recognized with an award for "most effective education" earlier this year from the Governmental Research Association.

Like the city and county reports, the report on MATC paints a somewhat alarming picture. It finds a local institution that has taken on increased importance in light of the economic downturn and community-wide efforts to increase the number of college degree-holders, but one that has been hit hard by the recent decline in property values.

Key findings from the MATC fiscal assessment include:

• Property tax revenues comprise roughly 60% of MATC's budget, causing it to rely on the property tax more than most local governments and school districts. MATC's budget has mirrored the ups and downs of the real estate market, with revenues climbing much faster than the rate of inflation from 2005 to 2009, but falling in the next two years.


• MATC has seen a steady decline in revenue from the state. The college was able to weather this decline when overall revenue growth was strong, but faces difficulty doing so in today's revenue climate.


• Student charges have been the college's fastest-growing revenue source of late, with tuition and fees rising nearly 40% since 2005, raising questions about impacts on student access.


• Fringe benefit and salary increases were responsible for about three-quarters of the college's expenditure growth during the five years under review, with health care expenditures rising twice as fast as those at the City of Milwaukee and Milwaukee County.


• A newly developed imbalance between ongoing expenditure needs and revenue capacity will continue to grow without substantive budgetary corrections, reaching a projected $11 million to $62 million within the next five years.

This turbulent financial picture leaves MATC little choice but to examine current levels of employee staffing, pay and benefits, which are quite robust based on comparisons with state and national peers. For example, the report finds that MATC ranks first among a group of 85 national peers in operating expenses, salary expenditures and fringe benefits expenditures per full-time equivalent student.

The report cautions, however, that any significant expenditure reductions must weigh impacts on the college's academic quality and its capacity to meet recent double-digit increases in enrollment. It also suggests that college leaders step up efforts to establish clear performance goals and collect performance data as part of the effort to address difficult budget issues.

Finally, the report offers an opportunity to compare the fiscal practices and condition of MATC - which operates as a local authority and is governed by an unelected board - with local governments operating under traditional elected models. It notes both similarities and differences in the manner in which these entities have responded to common fiscal challenges, and offers insights into what this tells us about the debate over government structure in our region.

A full copy of the report can be accessed here, and our media release here.

Merit-based pay for students and parents?

The notion of linking teacher salaries to student outcomes has been one of the country's most talked-about education reform topics of late, causing us to wonder in an earlier blog whether Milwaukee's new superintendent had this controversial idea on his radar screen.

But now, out of Houston, comes a concept that undoubtedly would generate even more controversy if attempted locally: paying students and parents for improved academic performance.

A recent article in the Houston Chronicle describes a $1.5 million pilot program approved by the Houston Independent School District (HISD) that will allow families at certain HISD schools to earn more than $1,000 for enhanced student achievement in fifth grade math. The program will be funded by a Dallas foundation.

According to the article, fifth graders at the selected schools will be able to earn up to $440 for passing tests showing they have mastered certain mathematical concepts. Parents of successful students can earn another $400 as a reward for making sure their children did the necessary work to pass the tests, as well as $180 for attending nine parent-teacher conferences. There's also something in the deal for teachers, who can earn up to $40 per student for holding the parent-teacher conferences.

Interestingly, a third party to this seemingly radical idea is Harvard University's Education Innovation Laboratory, which has formed a research partnership with HISD. The same Harvard researchers conducted a comprehensive experiment of the "pay for grades" concept in Chicago, Dallas, New York and Washington that was featured last spring in Time magazine. The research team will compare student test scores at HISD schools that are participating in the program with schools that are not. It also will examine the incentives' impacts on other barometers of student success, such as attendance rates and behavior.

The Chronicle story engendered howls of outrage from readers commenting on the paper's website, many of whom questioned why anyone should be rewarding parents for fulfilling their parental responsibilities and students for doing what's in their own best interest. School district officials quoted in the article argue, however, that over-worked and over-stressed low-income parents may need an incentive to become more involved, and at this point it's just a research project aimed at determining whether financial incentives truly would make a difference.

Given the political outcry that likely would occur even if the pilot turns out to be successful, it's difficult to imagine it taking hold across the country. Still, in light of the constant refrain for bold and innovative reform in our urban schools, can you blame Houston for trying?

Wisconsin ranks in top ten in child care costs: child care more expensive than college

Wisconsin ranks among the 10 most expensive states for child care in a new report from the National Association of Child Care Resource and Referral Agencies.


The NACCRRA found that full-time care for an infant in the average Wisconsin child care center, at $10,520 per year, exceeds 13% of the annual median family income for a two-parent family, placing Wisconsin among 36 states for which the cost of infant care exceeds 10% of the median family income. For a family earning at the poverty line, full-time infant care would exceed 57% of annual income.

In addition, Wisconsin is 4th most expensive when the cost of center-based care for a 4-year-old is considered ($9,039 per year, or over 11% of the median family income) and 3rd most expensive for afterschool care for school-aged children ($8,223 per year, or over 10% of the median family income).

As someone who no longer needs full-time child care with last week's start of the school year, I was well aware of the cost. But I was quite surprised by the report's finding that child care has become one of the largest monthly outlays for Wisconsin families, costing more than the average monthly rent payment, grocery bill, utility bill, and even health care. In fact, average child care costs for two children exceed the average mortgage cost for Wisconsin families.


The good news, if you choose to see it that way, is that these Wisconsin families should have no problem affording college tuition when the time comes--they are already paying more for child care than they would for most of our state's public four-year universities.

PPF annual analysis of school district performance: How's your district doing?

The Forum's annual analysis of public school districts in southeast Wisconsin is released today, and finds the regional academic achievement scores continue to come more in line with the statewide scores. Unfortunately, lower scores in the rest of the state contribute to the smaller difference as much as improved scores in the seven-county region.

The report also finds that while the region does well on ACT and AP exams, as compared to the rest of the state, it is lagging more and more in graduation rates, mostly due to the low graduation rates in MPS.

The region's large racial achievement gap has been highlighted in several previous editions of the report. This year's analysis shows little progress has been made toward closing the gap in scores between white and African-American students--it is nearly as large now as it was five years ago and is persistent across all districts. All districts also show a significant gender achievement gap in reading, with girls outperforming boys at every grade level.

Other findings:

• This year's 8th graders' reading proficiency rate slipped down as compared to the rate for last year's 7th graders, a trend that has been true statewide in previous years but has occured in the region for the first time this year.


• Total enrollment in the region remained virtually static, but the number of minority students attending public schools in the region grew by 39%.


• The number of students participating in the free or reduced-price lunch program grew significantly this year for both the region and the state as a whole. Almost all districts in southeast Wisconsin had more students qualify for the program serving low-income children.

The full report, as well as a poster-sized summary detailing data from individual districts, can be found here.

Underwriters of this year's edition include: Alverno College, Multiple Listing Service, Northwestern Mutual Foundation, Southeastern Wisconsin Schools Alliance, Stifel Nicolaus, and Waukesha County Technical College.

We're far from alone when it comes to fiscal chaos

Every summer, members of the Governmental Research Association (GRA) - an association comprised of organizations devoted to government research from across the United States - get together to exchange research ideas, discuss topical issues and recognize outstanding research products.

It should come as no surprise that at this year's conference, held in New York City last week, a primary topic of discussion was the fiscal difficulties facing state and local governments.

Among the many sessions that focused on those difficulties was a luncheon address by New York Lieutenant Governor Richard Ravitch that described the political dimensions of that state's budget challenges; a panel discussion on state finances with budget officials from New York, New Jersey and Connecticut, as well as an official from the Standard & Poor's bond rating agency and the vice president of the California Taxpayers Association; a panel discussion on city finances with a group of officials and experts from New York City, Philadelphia and Boston; and a session on the "roots of dysfunction" with a panel of researchers from New York, Chicago, Louisiana and New Jersey.

Those sessions and discussion with fellow GRA members revealed several common themes, which might sound familiar to those who have followed recent budget deliberations in Madison and locally:

• Stimulus dollars were enormously important in staving off deep budget cuts and/or tax hikes in 2009, but state and city governments now are alarmingly ill-equipped to deal with the loss of those dollars, especially given that the expected economic recovery has not meaningfully materialized.


• Unfunded pension and retiree health care liabilities are huge problems virtually across the board, yet very little can be done to reduce their fiscal burden in the short-term because of legal protections.


• Elected officials are maddeningly unwilling and/or incapable of responsibly dealing with their complex and difficult budget challenges. A researcher from Rutgers University, for example, lamented the unwillingness of legislators in his state to acknowledge and use fiscal data, while a New York budget official cited one anonymous legislator who publicly decried the irresponsibility of raising taxes to fill the state's huge budget hole while pushing behind the scenes for pork barrel spending in his district.


• There is a feeling among government insiders in many states (and most notably, California and New York) that the political class has given up - they know the problems they face demand difficult and unpopular solutions, so they have resorted to posturing and kicking the problems down the road for someone else.

Despite the pessimism that permeated these sessions, the "misery loves company" dynamic certainly came into play. Indeed, while we tend to think of our state and some of our local government budgets as hopelessly imbalanced, it was perversely satisfying to realize there are others in worse shape.

California and Connecticut, for example, are being dragged down by immense unfunded retirement liabilities, while Wisconsin's state retirement system is in reasonably good shape. And Philadelphia and New York City are just as dependent on state aids as Milwaukee, yet their capacity to weather continued state cuts is far inferior given the huge reductions in personnel and depletion of reserves they have already implemented.

An interesting perspective also emerged, albeit from an unlikely place. State leaders in New Jersey - widely known as a hotbed of irresponsible budgeting - instituted a strict property tax levy cap as part of an initial package of state budget cuts, which also included sharp reductions in state aids to local governments. Instead of leaving local elected officials to fend for themselves, however, state officials have engaged them to identify the reforms in state law they would need in order to live within the cap without slashing valued services. A scenario in which state and local officials here would attempt to work together in similar fashion certainly would be refreshing.

Overall, it's clear that state and city budgets across the country are in a state of disarray. At the GRA conference, the hope was that strong leadership based on solid data and sound research would emerge to address those challenges.

Could a budget crisis reform teaching?

Tight budgets are causing many local governments to revisit labor agreements in search of cost savings. Around Milwaukee we've seen labor concessions to avoid layoffs at MATC and the city; unpaid furlough days at the city and county; and teacher layoffs at MPS. While a portion of the laid-off teachers were called back last week, the MPS layoffs have been portrayed as the most drastic labor management tactics of any local government in response to the budget crisis.

Facing its own budget troubles, the Chicago Public School District (CPS) is also looking at the potential for layoffs. But the CPS board of education approved a new policy last month that would prioritize the release of tenured teachers with the poorest performance ratings over newer teachers with higher ratings. The policy would save the district money every time a more costly senior teacher is laid off instead of a lower paid, more recent hire. The policy would go into effect if the district reaches class sizes of 35, another attempt at coping with a gaping budget hole, or if student enrollment drops enough to require layoffs.

The Chicago teachers union is arguing that the district cannot implement the policy, as it violates the negotiated teacher contract. The contract, in place since 2007, requires layoffs to be based on seniority. The district claims state law allows it the discretion to use teacher performance evaluations in making layoff determinations. The district and the union are debating whether the discretion granted by the state law is abandoned when a district signs a contract that does not include a provision for performance-based layoffs. (The union also contends that the teacher evaluation process is too arbitrary to be used for this purpose, a universal issue with regard to teacher performance measurement.)

If CPS prevails, it will be among the first to abandon the traditional "last hired, first fired" model for mass layoffs. However, it is not likely to be the last. Education reform advocates wanted the $10 billion federal education jobs bill, which passed the House July 1 and is now pending in the Senate, to include a provision requiring states to outlaw seniority-based layoffs in order to be eligible for the aid. (The bill does not contain the provision.) Arizona is currently the only state with such a law on the books, although Gov. Schwarzenegger has stated his support for a similar proposal in California.

While Wisconsin has yet to take on the issue, it is not unreasonable to expect pinched districts to look for new ways to relieve their budgetary stress. Education reform is not usually driven by the need to save money and often, in fact, requires an influx of money. Could this be the reform that structural deficits hath wrought?