In its annual review of the Milwaukee Public Schools (MPS) superintendent's proposed budget, the Milwaukee-based Public Policy Forum reports that the district is able to invest in several strategic priorities, even though it continues to struggle with its perennial challenges of flat state aids and frozen per-pupil revenue limits.

"District revenues decline by $1.3 million, which would seemingly preclude MPS' ability to invest in strategic plan initiatives, let alone accommodate inflationary increases in fixed costs," says the report. "Yet, the budget contains a variety of investments, including expansion of summer school and English as a Second Language services, 'bridge' programs for ninth graders, an increase in Advanced Placement and International Baccalaureate programming, and free driver's education."

The report notes that the budget also adds 183 positions, is able to allocate $12 million for salary increases, and invests in additional elements of the Regional Development Plan.

The proposed budget is able to fund these activities through internal reallocation, according to the report. Most notably, the budget transfers $8.5 million in property tax revenues from the construction fund to school operations; and it reduces by $31.2 million the district's contribution to its retirement liability reserves, thereby freeing up an equivalent amount for new and ongoing initiatives.

"The good news is that MPS' ability to invest in strategic plan initiatives that hold promise to improve academic achievement and stem the loss of enrollment is maintained in the proposed budget," says the report. "The bad news is that future-year challenges may be exacerbated, as the use of internal reallocation strategies may be more difficult to achieve in future years."

Other key findings from the Forum's 2017 MPS Proposed Budget Brief include the following:

• Fringe benefit spending is projected to increase by $3.3 million in 2017. While that increase pales by comparison to soaring fringe benefit costs experienced in the previous decade, it does appear to signify the end of several successive years of health care savings that MPS officials were able to utilize in previous years to redirect to classroom needs.
• MPS’ student enrollment, which is used to calculate equalization aid from the state, is projected to fall by 700 students in 2017, which would constitute a 5% decline since 2014. MPS will lose $11.2 million in its combined amount of equalization aid and property tax levy in 2017 as a consequence of recent and projected enrollment declines and a freeze in the per-pupil revenue limit.
• Categorical aids, which consist largely of grants from the federal government to serve special categories of disadvantaged students, are budgeted to decrease slightly in 2017, and have declined by 14.5% since 2013. A particular concern has been the district’s drop in Title I funding for disadvantaged students, a program that MPS closely aligns with ongoing school operations.

Looking to the future, the budget brief cites the long-lasting positive effects of MPS' efforts to "moderate" expenditures, primarily by curbing escalating fringe benefit costs. However, it also points out that student enrollments are projected to continue their decline and that prospects for revenue growth remain uncertain. This creates a pressing dilemma for district officials, who must balance the need to invest in popular academic programs and strengthen classroom instruction with the reality of a revenue structure that provides little wherewithal to do so.

The brief concludes that MPS' overall approach for 2017 "appears both financially defensible and strategically sound," in part because the district has shown the ability to generate internal savings to address ongoing fiscal pressures. It warns however, that "at some point, repurposing internal funding and instituting cost efficiencies will become more difficult. Cost reallocation can produce both winners and losers, and some types of program savings may not prove popular or feasible to achieve."

The budget brief can be downloaded from the Forum’s website: publicpolicyforum.org. Milwaukee-based Public Policy Forum, established in 1913 as a local government watchdog, is a nonpartisan, nonprofit organization dedicated to enhancing the effectiveness of government and the development of southeastern Wisconsin through objective research of public policy issues.