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?

Fiscal estimates suggest quality early childhood education is costly yet beneficial

The annual cost of operating a high-quality child care or early education center in southeast Wisconsin is an estimated $11,500 per child, more than double the cost of a typical program in the region today, according to the Public Policy Forum’s latest report from its three-year research initiative on early childhood care and education.

The report, “The Price of Quality: Estimating the Cost of a Higher-Quality Early Childhood Care and Education System for Southeast Wisconsin” stresses that only high-quality programs reap the long-term benefits our region needs most, such as better student achievement and improved graduation rates.

Noting that many other states have invested in child care quality improvement policies in order to capture those long-term benefits, the report intends to help policymakers cost out their options for improving child care quality in Wisconsin. The report provides fiscal estimates on a status quo scenario, a mid-level option and a high quality scenario for state policymakers to consider. While the report’s estimates include only the seven-county southeast Wisconsin region, the policy decisions likely will be made at the state level.

Main findings include:

· The direct costs of operating the region’s current system of early childhood care and education is an estimated $370.5 million annually to serve over 66,700 children. To operate the same sized system at a high-quality level would cost an estimated $700.7 million annually;

· Policies aimed at maximizing quality would be the most expensive, while a more modest improvement in quality in the region would result in total direct costs of $506.2 million;

· While taxpayers pay for direct costs only to the extent that they subsidize costs for low-income families, certain indirect costs are paid for by taxpayers, including regulation and monitoring of child care providers. These indirect costs would increase if policies were put in place to improve quality in the region and are estimated to total almost $7.5 million during the initial phases of any quality improvement initiative;

· The long-term economic and social benefits that can result from improved quality care and education are maximized when the care is of the highest quality. In addition, the benefits for at-risk and low-income children are larger than for other children.

The report presents several policy options for policymakers, ranging from low-cost and low-return on investment to high-cost and high-return. The least costly option is to maintain the current regulatory system and the focus on fraud prevention. The most costly option is to reform the system as a whole, requiring smaller caregiver-child ratios and requiring caregivers to have four-year degrees, for example. Other options include incremental improvements in quality over a period of time, focusing on improving quality for the neediest children, or a Quality Rating and Improvement System that gives parents information about the relative quality of programs. The report also analyzes five different models for financing quality improvement initiatives.

The Governor and the Legislature have child care on their radar screens right now in light of the serious fraud problems that have arisen in the Wisconsin Shares program. For the sake of children and our regional economy, stamping out fraud in Wisconsin Shares must also involve consideration of how to improve quality. This report’s overview of costs and policy options aim to provide context for upcoming legislative deliberations.

The cost of Milwaukee's drop-outs, and what to do about it

A new report by the Alliance for Excellent Education estimates the economic costs to cities of having high drop-out rates. In the four-county Milwaukee metro area, it is estimated that cutting the drop-out rate in half, or having an additional 3,200 high school graduates annually, would result in an additional $7 million in annual state and local property, income, and sales tax revenue, due to the higher salaries and increased spending associated with being a high school graduate. The graduates themselves "would together earn nearly $41 million in additional wages over the course of an average year compared to their likely earnings without a diploma." The report also notes that in the Milwaukee area, of the 98 high schools analyzed, 23 were found to be "drop-out factories" in which fewer than 60% of freshman progress to their senior year on time.


How to remake these "drop-out factories" back into schools is the focus of another new report, this one by the National Governors Association (NGA) Center for Best Practices. The report recommends four actions that state governors can take to tackle high drop-out rates:

1. Promote high school graduation. The NGA suggests that governors increase the age of compulsory school attendance, weight graduation rates heavily in school accountability schemes, and appoint a drop-out czar or other high-level official to be accountable for statewide improvements.


2. Target youth at risk of dropping out. State data systems can be designed to help identify at risk students as early as possible, making them eligible for intervention and support programs prior to high school.


3. Re-engage youth who have dropped out. Re-entry programs for juvenile offenders can be an important tool for getting drop-outs back into school. States can also create financial incentives or rewards for schools that successfully matriculate and graduate former drop-outs.


4. Provide rigorous, relevant options for earning a high school diploma. This includes offering an array of high school programs focused on job readiness for those students planning to enter the workforce after high school.

As an NGA report, the recommendations are aimed at state policymakers. But some of these policies could be adopted at the local level. Connections between school and work are an example of an area in which an effective local policy might even be better than a state-wide effort.


Drop-outs are a costly problem for the regional economy and southeast Wisconsin cannot afford to wait for whomever next holds the governor's office to tackle this problem. With support of local political and business leaders, best practices could be implemented at the district level sooner, rather than later.

The People Speak: Citizens' views on transportation, education reform, taxation

The second installment of the results of the autumn People Speak poll, conducted in partnership with the University of Wisconsin--Milwaukee's Center for Urban Initiatives and Research and The Business Journal Serving Greater Milwaukee, focuses on public policy issues such as mass transit and mayoral takover of MPS.

The People Speak is a tracking poll that will be conducted at regular intervals throughout the year. Its purpose it to gather information from local citizens about their interests in, preferences for, and concerns about public policy. By gathering and reporting out these citizen perspectives, the partners hope to expand the public voice in policy matters affecting Greater Milwaukee.

Highlights from the most current Research Brief include:

• A majority of residents of southeastern Wisconsin favor high speed rail connecting Chicago, Milwaukee and Madison, as well as commuter rail connecting Racine, Kenosha, and Milwaukee. A downtown streetcar line in the City of Milwaukee is less favorable, but still garners support from half of Milwaukee County residents.


• When it comes to funding transportation improvements, toll roads have the most support, with about half of all residents in favor. Increasing the gasoline tax is not favored by most residents, nor is the creation of a regional transit authority funded by an increased sales tax.


• A mayoral takeover of the Milwaukee Public Schools is favored by 43% of poll participants in the region. The level of support among City of Milwaukee residents is the same--43%. The greatest support comes from Democrats, 50% of whom are in favor of the idea.


• Establishing a regional authority to oversee parks and cultural facilities for all of southeast Wisconsin garners the support of a majority of poll participants across the region. The only county in which a majority of respondents is not in favor is Ozaukee.


• Residents of the region are split on whether they would favor increased user fees in order to lower property taxes. Increased sales taxes for this purpose are slightly less favored.

For full results of the poll, go to the poll website.

Mayoral control isn't magic, but it might be muscle

In 2007, when the New York General Assembly was considering whether to renew the legislation authorizing mayoral control of the New York City public schools, a Commission on School Governance was appointed to study the policy's benefits, drawbacks, and outcomes and to recommend whether renewal was appropriate.

The Commission heard testimony from many stakeholders and collected research from policy analysts and education experts. They met for nearly 11 months and issued a 20-page report of their findings. In the end, they recommended the renewal of mayoral control.

During the first six years of mayoral control, from 2002 to 2007, test scores in New York City schools improved. But the Commission looked over all the evidence, and noting that scores in many other New York districts also improved over that time, decided that test score improvements on state tests could not be attributed solely to mayoral control. In fact, when scores on national tests were considered, they found no clear evidence of a relationship between governance structure and student outcomes.

But they did recommend a continuation of the mayoral control policy, and cited four primary reasons:

1. A single, elected mayor is more accountable than an elected governing body.
2. Mayoral control had resulted in dramatic increases in state and local funding for the schools.
3. Mayoral control had changed the collective bargaining dynamic, "better balancing incentives for fostering school improvement" with controlling costs.
4. Mayoral control creates a governance structure "that allows a mayor or chancellor to exercise leadership when the public demands it."

It is the last point that seems to have tipped the scales for the Commission:

Does governance matter? Of course it does. The amount of change that occurs over a given period of time is a relevant factor to consider when evaluating a governance structure, especially when one purpose of the governance plan under consideration was to foster change. In the past six years, the New York City school system has undergone more change than it has in any similar period in its history. This change must at least in part be attributed to mayoral control.

In other words, mayors can show leadership, which can lead to changes, which in turn can lead to improvement in student outcomes. Wouldn't it be nice to know exactly what those changes were and how they brought about higher achievement?

Recent research sheds some light on these questions. UCLA professor William Ouchi has found that mayoral control in New York resulted in decentralization of decision-making, allowing principals to control their budgeting, staffing, and curricular decisions. The principals used this new power to reduce the numbers of non-teaching staff in their schools, lowering what is called the teacher-student load, or the total number of students for whom a teacher is responsible. They found that high school principals reduced the load to an average of 87.7 students per teacher, much less than the contractual maximum of 170 students per teacher. Teachers with fewer students reported being able to recognize students' weaknesses sooner and intervene more quickly and more intensively. Graduation rates during this time increased from 65.8 percent to 74.5 percent.

If and when the Wisconsin state legislature takes up the issue of mayoral control for MPS, parents, voters, and taxpayers should urge them to take heed of the findings in New York. We must ask whether mayoral control is being sought simply for the sake of change, or is it being designed in a way that will increase accountability, bring more resources into classrooms, put more issues on the bargaining table, and provide leadership to implement school-level reforms that have been proven to result in higher student performance?

As we've said before when it comes to governance reform, "the devil is in the details."

Gasbag or effective legislator?

Some people accuse the U.S. Congress of being all talk and little action. Now there's a website that's tracking that talk in a fun, interactive way, allowing you to pit any two Senators or members of Congress against one another in a war of words.

For example, when Wisconsin's two Senators are compared, it's clear that Sen. Russ Feingold spends much more time in front of the mike than Sen. Herb Kohl. In the 110th Congress (2007-2008), Feingold spoke nearly five times more words from the Senate floor than Kohl, with 113,965 to Kohl's 23,107, ranking Feingold 13th most loquacious. Of all the words uttered by Wisconsin's 10 legislators, Feingold spoke 42% and Kohl spoke 8%.

And what were they speaking about? The most commonly uttered word by Feingold was Iraq, with Americans and security also ranking highly. Kohl said care most often, and help and health frequently as well.

The stats for the rest of the state's delegation (in alphabetical order):
Rep. Tammy Baldwin (D)--13,672 words, health, insurance, and care are most common
Rep. Steve Kagen (D)--18,875, health, care, children
Rep. Ron Kind (D)--18,243, country, farm, tax
Rep. Gwen Moore (D)--12,457, Milwaukee, school, health
Rep. Dave Obey (D)--34,643, billion, earmarks, percent
Rep. Tom Petri (R)--9,710, loan, students, FAA
Rep. Paul Ryan (R)--25,177, budget, tax, spending
Rep. Jim Sensenbrenner (R)--3,395, rights, property, research

It's probably fair to say, based on the stats above, that Feingold is most responsible for Wisconsin's rank of 18th among states in terms of verbosity.

Unfortunately, the site can't tell you whether the legislators were speaking for or against any of these ideas. But now you can judge whether you think you're getting too much talk or not enough out of your representatives in D.C., and whether the talk is on the issues that matter most to you.

The People Speak: Greater Milwaukee citizens' views on the economy

The Public Policy Forum is pleased to launch a new research product today in partnership with UWM's Center for Urban Initiatives and Research (CUIR) and The Business Journal Serving Greater Milwaukee: results from our new The People Speak poll.

The People Speak is a tracking poll that will be conducted at regular intervals throughout the year. Its purpose it to gather information from local citizens about their interests in, preferences for, and concerns about public policy. By gathering and reporting out these citizen perspectives, the partners hope to expand the public voice in policy matters affecting Greater Milwaukee.

Each poll will have a set of standard questions on topical public policy issues, the responses to which we can track over the long term. Because some of those questions are identical to those used by the Forum in previous public opinion surveys of southeastern Wisconsin residents, we'll also be able to compare the results to those we obtained several years ago.

In addition, each poll will have a set of questions that centers on a specific public policy theme. The poll results released today (from polling conducted during the last week of September) center on the economy: both how the economic downturn is impacting Greater Milwaukee residents, and how residents view governmental efforts to get the economy back on track.

Accompanying each set of poll results will be a Research Brief that analyzes key results. The Research Brief released today can be accessed here at the new The People Speak web site. The following are some highlights:

• About a third of respondents say they have experienced problems saving or paying for retirement, paying bills, and paying for health care during the past six months. Nevertheless, 64% are optimistic about their financial futures.


• Milwaukee area residents are more supportive of state and local tactics to revive the economy than federal efforts. For example, solid majorities believe that state and local governments should be doing and spending more to promote development and attract new businesses, yet only 45% believe the federal stimulus legislation was a wise use of public funds and 35% believe another stimulus package is warranted.


• While "jobs" ranked only as high as fourth or fifth in citizens' rankings of most important issues facing the four-county Milwaukee region in polls conducted from 1999-2002, it ranked first in the 2009 poll. The issues of crime/violence, schools/education and transportation ranked lower than ever before.

Stay tuned for release next month of results and analysis of the general public policy questions from our September survey.