Madison Schools Biggest Loser

http://host.madison.com/ct/news/local/education/local_schools/article_419c64fc-3fcd-5186-... 6/7/2010

Madison schools -- the biggest loser
By SUSAN TROLLER | The Capital Times | stroller@madison.com | Posted: Wednesday, November 4, 2009 4:00 am

Despite an ailing economy, Madison School Board members were guardedly optimistic last spring as they put together the district's preliminary 2009-2010 budget. The community had overwhelmingly passed a referendum the previous fall that allowed the district to exceed state revenue caps, providing an extra $13 million to the district through 2012.

As a result, the board was anticipating a rare year where public school programs and services were not on the chopping block and was looking forward to crafting a budget with minimal property tax increases. Initial projections worked out to a $2.50 increase on an average $250,000 Madison home on this year's tax bill.

For once, it looked as if both parents and taxpayers would be happy with the budget, a rare scenario in Wisconsin where school spending formulas and revenue caps often seem tailor-made to pit taxpayers against school advocates.

But the preliminary budget plan the Madison district drew up and approved in May predated the news that Wisconsin's revenue situation was far worse than predicted. The result was a steep reduction in what the state's 438 school districts would get from Wisconsin's general school aid fund. The drop in general school aid amounted to $149 million, or 3 percent.

These cuts, however, would not be shared equally across every district, and the formula used was particularly unkind to Madison,which overnight saw a gaping hole of more than $9 million, a drop in aid not seen by any other district in the state.

"We were so happy last spring. In retrospect, it was really kind of pitiful," says Lucy Mathiak, vice president of Madison's School Board. The mood was decidedly more downbeat, she notes, in late October when the board gave its final approval to the $350 million 2009-2010 school district budget.

When property tax bills go out in December, taxpayers will be hit with a $92 increase in property taxes on a $250,000 home, far higher than the modest $2.50 increase the board had predicted in May. Next year looks even worse, with a budget gap now predicted to be somewhere between $23 million and $25 million for the Madison school district, said Erik Kass, the assistant superintendent for business services. With the prospect of steep cuts in education as well as the potential for a new round of tax increases, the road ahead looks rocky.

What happened? How did a formula designed to "equalize" resources among disparate school districts in Wisconsin create some of the unkindest cuts for Madison, the state's second-largest urban school district, with nearly half of its students qualifying for free or reduced lunch? And where was the help from powerful Democrats in state government who had championed school funding reform when they were the minority party in the Legislature?

The swift turnabout in Madison has left Madison School Board members bitter and exasperated. They're deeply frustrated with the arcane shared-revenue formula that hits Madison especially hard and with 15 years of revenue caps that have forced school districts to pass budgets that couldn't keep up with the rising costs.

As Arlene Silveira, Madison School Board president, puts it: "We've been talking for years about how this system is horribly broken, yet no one seems able to really step forward to change it."

Funding of education in Wisconsin is a three-part exercise involving money from the state aid fund collected through income and sales taxes; local property taxes; and funding from the federal government, mostly in the form of aid for low-income students and those with disabilities.

The funding formula, so complex it makes the tax code look like beach reading, seeks to equalize the cost of education among the state's poor and rich districts by distributing state aid based on each school district's relative affluence.

The system determines the wealth of a community through its property values, not income or ability to pay. Generally speaking, school districts in communities with high property values get less money from the state to educate their children because of their supposed ability to raise money through property taxes, while communities with low property values get more money to fill in what they are not able to raise through property taxes.

The state funding formula also takes into account the cost of education per student, which, on average statewide, is currently a little over $10,000 (excluding transportation costs, capital and debt service), according to figures from the Wisconsin Taxpayers Alliance, a nonpartisan watchdog group that gathers annual data on revenue, expenditures and other comparative information on public schools.

The funding formula first focuses on how much money a district can raise through property taxes to pay those costs and then, using the pot of state general aid, fills in to help the district reach the average amount. Multiple factors, including things like higher-than-average costs per student or declining enrollments, reduce the amount of money a district receives in general aid.

Madison, with 24,496 students, 47 percent of whom qualify for free or reduced lunch, will this year get just over $51.5 million in general state aid. The district got hit especially hard this time around because, unlike much of the rest of the state, its property values remained relatively stable despite the slump in the housing market. It did have some company in this regard. The Middleton-Cross Plains School District in Dane County, property-rich districts around northern Wisconsin lakes, and suburban areas in the greater Milwaukee area were also socked with the maximum 15 percent reduction in state aid because of their high
property values.

But unlike many suburban districts with high property values, Madison has other challenges, including a significant population of low-income students, English language learners and children with disabilities. The cost to educate these children is high, partly because of state and federal mandates that describe in detail what's required to provide an adequate education.

Unfortunately for Madison, the state general aid formula doesn't account for these high-needs students when calculating who gets what. Meanwhile, the percentage of funding available from government through "categorical" aids targeted at these students has been steadily dropping for more than a decade.

"You may disagree with the goals, but when push comes to shove, the formula generally does a pretty good job of leveling the playing field," says Todd Berry, president of the Wisconsin Taxpayers Alliance. "That said, there's one kind of district - with Madison being an example - where the formula doesn't meet its goals as well."

The kind of district Berry is describing is one where property values are high as are the number of high-need students. That produces high per-pupil spending, which the formula penalizes.

Other urban districts in Wisconsin fare better when it comes to getting aid from the state's general fund, according to figures fromthe Department of Public Instruction:

* Milwaukee, with 87,376 students and a poverty rate of 77 percent, will get about $584.5 million in state aid. Milwaukee lost just under half a percent compared to last year's state aid distribution.

* Green Bay, with a new 4K program, 20,573 students and a poverty rate of 52 percent, increased its aid allotment over last year by about 1 percent and will get $126 million from the state aid fund.

* Eau Claire, with 10,725 students, 33 percent of them eligible for free and reduced lunch, gets more state aid than Madison: $58.4 million, a drop of about 4 percent from last year.

Rep. Sondy Pope-Roberts, D-Middleton, chairwoman of the Wisconsin Assembly's education committee, says part of the problem is that the changing demographics of the Madison school district, with nearly a 50 percent poverty rate, have not yet pierced the perception around the state that the district largely consists of well-off families.

"You do hear the comments," she says. "'Oh, Madison. Their idea of really cutting back is eliminating 4th grade strings.'"

Madison School Board members are feeling particularly stung by this year's budget cuts because, the economy notwithstanding, they thought this year might be different. After years of Republican control of the Statehouse, not only were Democrats in control of the Legislature and governor's office, but Madison-area lawmakers were in charge of the budget process.

As co-chairs of the Joint Finance Committee, the Legislature's powerful budget-writing panel, Sen. Mark Miller and Rep. Mark Pocan were arguably in the most powerful positions to influence the process.
But board members say they got little help from Democratic leaders, both on the specific problems surrounding the 2009-2010 budget and on broader questions about fixing the state's long-term school funding.

"I understand that the economy is terrible, but for years we heard that the reason we had this school funding mess was because we had Republicans in charge who were basically content with the status quo," says board member Marj Passman. "I had expected so much change and leadership on school funding issues with a Democratic governor and a Democratic Legislature. Honestly, we've got Rep. Pocan and Sen. Miller as co-chairs of the Joint Finance Committee and Democratic majorities in both houses! Frankly, it's been a huge disappointment. I'd love to see that little beer tax raised and have it go to education."

Adds Silveira: "There's been a great deal of talk about the importance of education and improving the system but very little real action that really helps us do a better job of meeting both student needs and taxpayer needs."

She says all local municipal officials bear a particularly heavy burden, forced to cut budgets and services and go back on their promises to hold the line on property taxes.

"By the time we found out about what a huge hit we were taking in aid from the state, we were already close to the end of our fiscal year and were locked into most contracts and programs for the school year. Basically, our hands were tied," Silveira says. "The trouble with the politicians is that they tell us that they won't raise taxes, but that we can. It puts us in a horrible position with our own community, which has been so supportive of our schools. It doesn't seem fair."

Although Pocan is sympathetic to the frustrations of Madison School Board members, he says he and other legislators must balance the needs of the entire state. He agrees with Silveira and others that the funding system needs a "complete overhaul" but says that kind of change would likely come with a huge price tag, which some school funding experts suggest could reach a billion dollars.

"Given the current economy, that's not feasible," he says. "I'd love to do something that helps Madison, but the system is so complex with 20 or 30 threads all together that if you just pull one, something else unravels."

He argues that even returning $100 million to the state general aid fund for this budget cycle wouldn't have helped Madison because the current formula would direct the vast majority to other districts that get more favorable treatment under the existing system.

Andrew Reschovsky, a University of Wisconsin economist and expert on school funding, concurs that Madison was hit harderthan other districts.

"The real problem is the longer-term structural problems with the funding system. Some aspects of the existing formula really penalize Madison because it doesn't reflect the district's challenges of educating a student population with a high poverty rate and multiple languages," he says.

Frustration over school funding is nothing new. For years, various groups, from academic experts to legislative panels, have studied how to make the state's multibillion-dollar system more sustainable and more equitable.

But when it comes to changing the law, little of substance has happened, reflecting the political difficulties of bridging deep divisions between what various school districts and communities want, as well as between various school stakeholders, from the teachers union to school board members to taxpayer groups.

Pope-Roberts has been involved with education issues, including funding reform, since she was elected to the Assembly in 2002.

She says Wisconsin's current dismal economy constrains even those who are most committed to education and most dedicated to exploring a range of ideas.

"It's very bad out there in the state. I think there may actually be some school districts that simply won't have enough money to operate after this year."

But Pocan and Pope-Roberts say they see glimmers of hope in some new, broad-based coalitions that are coming together to work on school funding reform.

For example, the School Finance Network includes representatives from the Wisconsin Association of School District Administrators, the Wisconsin Education Association Council, the Wisconsin Parent Teacher Association and the Wisconsin Alliance for Excellent Schools, among others.

Despite political differences that often put them at fierce odds in the past, as a group they agree that the current funding system is divisive, unsustainable and the reason many school districts lurch from budget to budget, with expenses rising faster than allowable tax increases.

In its literature, the network notes that education has a profound long-term impact on Wisconsin's economy and, that, if current conditions continue, it won't be long before a number of school districts will be insolvent.

Thomas Mertz, spokesman for the Wisconsin Alliance for Excellent Schools, says the state funding system also has the unintended consequence of dividing communities instead of bringing them together through their schools. "Under the current system, the state shifts much of the tax burden and the blame to the local level," he says. "Yeah, it's difficult for anyone to raise taxes in this economy but the current system is broken."

Mertz, who teaches at Edgewood College and is a Madison district parent and longtime observer of public school issues, says his group of parents and concerned citizens is advocating for a sales tax increase - a program it describes as Pennies for Kids. While the proposal is not in a final form, he says he is hopeful the state Legislature will consider a 1 percent hike in the state sales tax.

"A penny boost in the sales tax would bring us in line with surrounding states and would provide $830 million a year in aid for education," Mertz says.

The extra pennies would surely be welcomed in the coming years. With approval of the 2009-2010 budget under its belt, the Madison School Board is already beginning to focus on ways to address the larger shortfalls predicted for the following year.

And so are other districts around the state. The Milwaukee Journal Sentinel recently reported that some suburban districts in the Milwaukee area are already hearing from residents unhappy about double-digit increases in local tax levies, and are considering potential program changes like combining athletic teams.

"If there's a silver lining in this, and if you were a real optimist, you could say that this current crisis may, finally, lead to system reform," says UW's Reschovsky. "I'm not sure I believe that, though."