The Madison school district has two referendum questions on the November ballot. The first is an operations referendum that seeks the voters’ approval for the school district to exceed the state-imposed revenue limits by a total of $33 million over the next four years. The second is a facilities referendum that seeks approval to spend up to $317 million on upgrading the district’s four main high schools, building a new elementary school in the Rimrock Road area, and providing a permanent home to the alternative Capital High.
The discussion about the operations referendum has focused on the need for additional spending authority so that, in the district’s words, it can “support current staffing levels and continue the district’s equity investments in line with the Strategic Framework goals and outcomes for all students.”
While that is true enough, the rationale the district offers does not go far toward explaining the particular interplay of budgetary factors that have compelled the district to take its case to the voters. The following paragraphs dig a little deeper into the operations referendum numbers. (The facilities referendum deserves our support as well, but it isn’t addressed here.)
It All Starts With Revenue Limits
An operations referendum seeks voter approval for a school district to exceed the state-imposed revenue limits that put a cap on overall school district expenditures. Each school district has its own revenue limit, which is expressed in terms of spending per student. Currently, MMSD’s revenue limit is about $12,750 per student.
In each biennial budget, the state determines adjustments to revenue limits for the next two years. Prior to the Walker administration, the limits increased in a generally predictable manner that worked out to somewhere between $200 and $300 per student per year. The less said about the chaos of revenue limits during the Walker years, the better. Tony Evers has worked to restore more predictability to the process. The 2019-20 biennial budget calls for an increase in revenue limits of $179 per student for this year.
For revenue limits purposes, MMSD’s student count is about 27,400 students. A revenue limits increase of $179 means an overall increase of about $5 million in the district’s spending authority. The basic operations of the school district cost about $430 million per year. The increase in the revenue limits translates into a bit less than a 1.2% increase in spending on basic operations.
This isn’t enough. To understand why, it is useful to think of school district costs as falling into two categories – employee expense and everything else.
Where the Money Goes: Overwhelmingly to Teachers and Staff
About 82% of the MMSD budget is devoted to employee expense. In terms of year-to-year cost increases, the relevant budget categories are – (1) pay raises, (2) steps and lanes, and (3) health insurance and other employee benefits.
There is not a whole lot of room to maneuver on pay raises. Act 10 limited increases in teachers’ base wages to no more than an annual inflation adjustment. For this year, that adjustment is 1.8%. For Madison, the cost of raising base wages by 1.8% is $4.7 million. This is the one area of district expenditure that is still subject to collective bargaining. In bargaining, teachers argue they’re entitled to the full adjustment since under the current system they can never make up lost ground.
Steps and lanes refer to teachers’ salary structure. As teachers gain experience and seniority, they move up the steps of the salary ladder. If they undertake additional efforts to hone their skills by earning advanced degrees, they can quality for a different lane of the salary structure.
For a number of reasons – including the school district’s willingness to hire experienced teachers laterally rather than restricting hiring to newly-minted college graduates – MMSD’s expenses increase every year as a result of steps and lanes adjustments. Fully funding step and lane increases this year costs $5.3 million.
Finally, health insurance and other employee benefit costs increase every year. The district negotiates vigorously with its insurance partners to keep the annual increases down without sacrificing too much in terms of policy benefits.
Where the Money Goes: The Other Stuff
After employee expenses, the second main budget category is everything else. Critically, this category includes undertakings, such as the Black excellence initiative, that the district pursues as part of its equity agenda. Everything costs money, but committing to investments like full-day four-year-old kindergarten, updated curriculum and materials that are culturally and linguistically relevant, and increasing enrollment in the Early College STEM Academy at Madison College clearly promise payoffs for our students that justify their expense.
Everything’s related. Revenue limits put a cap on overall spending. That cap is rarely capacious enough to accommodate an inflation adjustment to base wages, the increased costs of steps and lanes, and whatever increase in health insurance premiums emerges from negotiations, to say nothing of the costs of any equity initiatives. This year is no exception.
Where to Cut? A Menu of Bad Options
To stay within revenue limits while retaining some ability to fund equity initiatives, the district undertakes the unhappy task of limiting increases in overall employee expenses. (The district also scours for savings in non-employee-related expenses, but realistically there is just not enough discretionary spending there for cuts to make much of a dent in projected budget shortfalls.) Cost-saving strategies can include shaving down the inflation adjustment to wages, increasing co-pays and making other changes to health insurance plans to mitigate rate increases, and – the bluntest but most impactful change – reducing the workforce through layoffs or otherwise.
Nobody likes getting rid of teachers or other employees. The fewer teachers there are, the more the remaining teachers are called upon to do. Worse, the district still handles reductions through a last-hired-first-fired approach, which can have the horrible effect of undoing the district’s recent hard work in hiring teachers of color and otherwise diversifying its workforce. There are other ways of handling layoffs, of course, but they all have challenges and drawbacks.
The Operations Referendum Solution
The operations referendum is based on the premise that, to the extent possible, our community wants to provide salaries and benefits to our teachers and staff that come close to reflecting their worth, wants the district to move forward on its equity initiatives, and wants to avoid layoffs and increased class sizes.
It simply isn’t possible for the school district to hold true to these objectives while remaining captive to the existing revenue limits. An alternative approach is to increase the size of the overall budget bucket rather than hacking away at the expanding pieces so they can all be crammed in. This is where the operations referendum comes in. It seeks the voters’ approval to increase MMSD’s revenue limits each year over the next four by $6 million, $8 million, $9 million, and $10 million.
A successful referendum does not obligate the school district to “tax to the max” and spend up to the revenue limit each year. Each year’s budget is subject to approval by the school board, and the board does try to keep spending down. It would not be a panacea for the school district’s budget challenges – tough spending decisions would still be necessary – but revenue limit relief would provide the school board with the flexibility necessary to craft prudent budgets that still reflect our community values.
Property Taxes: What It Will Cost You
Unfortunately, a successful referendum will raise property taxes. How much? There’s a lot of potential confusion on this score, so let’s try to explain it in terms of how much we Madison homeowners pay each year in property taxes.
MMSD’s total property tax levy last year was about $330 million. The operations referendum would authorize an additional $6 million in taxing authority in the first year. By itself, this represents an increase of about 1.8% in the school district’s tax levy, which is about 44% of a Madison homeowner’s property bill (The city, county and MATC account for the remaining 56%.).
If you’re a Madison homeowner, in the first year after a successful operations referendum you could see an increase in your property tax bill of about 0.8% (1.8% of 44%) attributable to the referendum, or about $8 for each $1,000 in property taxes you pay. So, it your property tax bill last year was $5,000, the first year of the operations referendum would bump those taxes up by about $40.
In the following three years, homeowners could see additional operations-referendum-attributable property tax increases of about 1%, 1.2% and 1.3%. At the end of the four years of the operations referendum, Madison homeowners’ property taxes could have gone up by about 4.4%, or $44 for each $1,000 in property taxes we pay. A successful facilities referendum will increase property taxes still more.
Vote Yes to Invest
In these Covid-riven times, it is certainly a big ask to expect Madisonians to vote to raise their already-hefty property taxes. But for the long-term health and vitality of all our community, there is no better investment than Madison’s public schools. Both referendum questions deserve our support.
Ed Hughes School Blog 