Armed With Flexibility and Control, Wisconsin School Districts Reduce Debt

2011 legislation opened opportunities for education reform and debt reduction in Wisconsin's schools



By 06/27/2013

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Ashley Inman, ashley_inman@hks.harvard.edu, (707) 332-1184, Education Next Communications Office

Armed With Flexibility and Control, Wisconsin School Districts Reduce Debt
2011 legislation opened opportunities for education reform and debt reduction in Wisconsin’s schools

As Governor Scott Walker of Wisconsin considers signing into law the 2013-2015 Wisconsin budget, school districts around the state are already using new tools and flexibility to exercise more control over their budgets. Power to choose a district’s benefits packages based on a competitive bidding process, employee benefit contributions, and teacher retirements along with wage freezes and salary schedule flexibility have enabled many districts to reduce their debt.

In a new article appearing in the Fall 2013 issue of Education Next, and available now at www.educationnext.org, Christian D’Andrea discusses the impact of the 2011-2013 Wisconsin Budget Repair Bill, or Act 10, on the state’s school districts.

Act 10 limited collective bargaining for certain public-sector employees, among them public school teachers, causing a storm of protest that lasted for months, until the Wisconsin Supreme Court validated the legislation. While the plan called for a cut of 5.5 percent to education, dropping per-pupil funding by $550, funding limits could be offset at the district level by increased employee contributions to health care and pension programs, and by giving local school districts other tools such as wage freezes and adjustments in salary schedules.

The midsized district of Kaukauna turned a $400,000 deficit into a $1.5 million surplus, in part by requiring employees to cover 12.6 percent of the costs of their health-care coverage.  Appleton, a district with more than 15,000 students, saved 3.1 million when the union –backed WEA Trust, which had a monopoly on providing health-care services, matched the lowest bid from a new, outside competitor.  Even Madison, the epi-center of protests, saved $10 million by paring down the number of available insurers and plans.

Many districts that used the cost-cutting tools of Act 10 were able to reduce their debt through a combination of employee pension contributions and teacher retirements, in addition to health-insurance changes.  The Oconomowoc School Board used the collective bargaining changes to reduce its high school staff from 75 to 60 teachers, while offering the remaining teachers $14,000 stipends to take on extra classes.  The move saved more than a half million dollars, which the district then used to bolster its funding in elementary and middle schools, where it had experienced a significant rise in class sizes.

Not every district used the opportunities created by Act 10, the most notable example being Milwaukee, a traditionally low-performing district with a relatively high proportion of state funding.  As Walker’s election approached in 2010, the district committed to a four-year pact with its teachers.  The contract included modest health-care contributions of 1 to 2 percent and a pay freeze.  With that pact in place, the district was able to delay the effects of Act 10, and it was hoped that legal and political challenges to the legislation would eliminate or lessen the impact of the act.  That proved to be a costly strategy for the district.  Milwaukee saw not only a decrease in state aid, but a loss of $82 million in federal stimulus aid that expired that same year.  Increased employee contributions would restore much of the funding, but not enough to recall the 519 teachers who had been laid off.  To take advantage of higher employee contributions, the city would have to reopen its contract.  However, 52 percent of the union’s members refused because re-opening the contract would force the district to be compliant with Act 10, and as a result, the 2011-12 school year brought a 7 percent reduction in staff.

While no district wants to face cuts, Act 10 allowed districts consolidate power, customize their education offerings, and recoup some or all of the funding that was lost in the 2011-2013 state budget.  In the 2013-2015 state budget, money for districts will be tight again, creating a new round of challenges, which D’Andrea says will probably include merit pay, a teacher effectiveness program, the expansion of school choice, and maybe the creation of a statewide charter authorizer.

About the Authors

Christian D’Andrea is policy analyst at the John K. MacIver Institute for Public Policy based in Madison, Wisconsin. He is available for interviews.

About Education Next

Education Next is a scholarly journal published by the Hoover Institution that is committed to careful examination of evidence relating to school reform. Other sponsoring institutions are the Program on Education Policy and Governance at Harvard University, part of the Taubman Center for State and Local Government at the Harvard Kennedy School, and the Thomas B. Fordham Foundation. For more information about Education Next, please visit: http://educationnext.org.




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