Public Policy Forum Blog

2015 MPS budget reflects improvement but continued uncertainty

With its major revenue streams flat or declining in 2015, MPS will continue to try to do more with less.  That’s one of the major findings in the Forum’s 2015 MPS budget brief, which we release this morning.  This brief will be an annual staple in our research portfolio, accompanying our annual briefs on the City of Milwaukee and Milwaukee County budgets, which are released in October.

A major theme of MPS’ 2015 budget is the positive impact of fringe benefit changes that were first initiated in 2010 and that are expected to produce $400 million in annual cost reductions through 2017.  The changes also produce a $1.4 billion (50%) reduction in the district’s unfunded retiree health care liability (an issue we discussed in detail in our 2012 fiscal assessment – Passing the Test, But Making the Grade?

In addition, the departure of more than 4,300 staff during the past four years – mostly due to retirement – has allowed the district to realize annual savings in salary expenditures because of the ability to reduce staffing levels and hire new employees at lower levels of existing pay ranges.  The proposed budget also continues a recent theme of prioritizing expenditure reductions in the area of central services.  These expenditure reductions have provided the district breathing room to put more resources into school-based operations and even to launch some modest new initiatives, despite the fact that its major revenue sources continue on a flat or declining pace.

While the 2015 proposed budget is largely pain-free, the out years continue to look precarious.  Even assuming stable enrollment, a freeze in salaries, and modest annual increases in total revenues, the district’s latest five-year forecast projects a $51 million budget gap in 2019, as shown in the figure below.  This figure shows both the good news and the bad.  While the gap would have been far worse had no changes occurred to mitigate fringe benefit costs, there remains a persistent and sizable budget gap in the out years.

Comparison of prior budget gap projections for general school operations

According to MPS officials, this gap – which is caused primarily by projected inflationary health care increases – could require the elimination of 450 teaching positions if not addressed in some other way.  Simply put, MPS lacks the wherewithal to keep up even with inflationary increases in personnel costs without enrollment gains or greater support from the state – two variables that are mostly beyond its control.  While redesigned health care benefits have generated substantial near-term savings and allowed the district to alleviate inflationary pressures over the longer term, those pressures still remain and must be addressed in the context of an extremely uncertain revenue picture.  

Overall, MPS’ proposed 2015 budget is largely a “good news” document that reflects the district’s astonishing success in reducing fringe benefit costs and that avoids staffing reductions and other cuts in school operations that have detracted from educational quality in the past.  Yet, despite another year of relative budget calm, a series of unsettling questions remains.  Not the least of those is whether the modest quality improvement initiatives are enough for a school district that continues to struggle with poor academic performance and the huge range of challenges associated with educating students who are predominately low-income and disadvantaged, with a high rate of mobility.

The 2015 MPS budget brief can be accessed here and our media release here.

Vanessa Allen