Editor's note: This is the third in a four-part series looking into a May 2023 Wisconsin Policy Forum report on upcoming school budgets. 

MADISON, Wis. — Across the state, Wisconsin school districts are grappling with rising inflation, shrinking enrollment, frozen state revenue limits and rising debt levels. Madison Metropolitan School District — the second largest school district in the state — is no exception.

MMSD has been able to confront these issues head on for the last few years because of federal pandemic aid and a 2020 referendum, which increased MMSD’s operating budget over four years. However, that federal pandemic aid is set to expire in 2024. 2024 also marks the last year of operating budget increases from the referendum.

MMSD is projected to continue “losing state general school aids, putting added responsibility on local property taxpayers to cover the costs of students,” per Wisconsin Policy Forum.

In a new report, Wisconsin Policy Forum took a look into funding for Wisconsin schools.

Staffing cuts

Under MMSD’s preliminary 2023-2024 budget plan, staff would decrease by 3.7% — or 155 positions. Currently, there are 4,170.8 full-time-equivalent employees. Under the proposed budget, that number drops to 4,015.7.

The budget specified this would include a 3.1% decrease in teaching positions and a 13.7% decrease in educational assistants. Wisconsin Policy Forum said this reflects the loss in student enrollment in MMSD.

The report noted that staffing cuts could continue in 2025, as the preliminary proposal utilized federal pandemic aid to fund 84.5 positions that would end after the school year concludes. Because that money is temporary, MMSD cannot rely on it to fund pay checks long term. Even so, MMSD opted to allocate some of that money to pay for 110.9 positions that would continue to exist even after the one-time funding ran out.

Wisconsin Policy Forum noted there’s still a risk those positions could be cut, if there’s no money to fill in the gaps.

Under the preliminary budget, “regular education teachers in all types of schools will decline” in MMSD. However, some student service positions will see slight increases. For instance, there will be five new mental health professional positions in the school district, as well as a new psychologist and a new bilingual resource teacher.

The preliminary budget included a 5.5% average pay raise for staff members to account for inflation rates — the larges raise in “recent years,” per the report.

In the proposed budget, base wages would increase by 3.5%. MMSD staff with more experience or higher education levels could be eligible for an additional 2% pay increase, totaling in 5.5%.

Act 10 would allow for a base wage increase of up to 8%.

“While this percentage increase is greater than in past years while minimizing the district’s budget imbalance, certain hourly employees also received a $5 per hour raise last year and overall pay raises would lag the recent rate of inflation.

Wisconsin Policy Forum’s report said it was unclear how MMSD expected vacant positions and employee turnover to impact its budget. 

Impact of independent charters and private vouchers

When students who live within the geographic boundaries of MMSD attend certain independent charter schools or private schools participating in the voucher program, the school district loses money, the report explained. 

Since 2018, three independent charter schools opened in Madison, Wis. — One City, Isthmus, Montessori Academy and Milestone Democratic School. Students who live in the MMSD region and attend one of those three schools “are counted for the purposes of the district’s revenue limit and general aid totals,” Wisconsin Policy Forum explained. But as a result, Wisconsin reduces aid payments to MMSD “to account for those students and the district cannot levy property taxes to ‘backfill’ the lost aid.”

Over the last few years, MMSD has made increasingly higher payments to Wisconsin for that “lost aid” from students attending independent charter and private voucher schools.

Last year, MMSD paid the state $6.9 million. This year, MMSD will pay $11 million — a 59.5% increase. MMSD projected an additional 19.6% increase, and expects to pay the state $13.2 million next year.

The district pays $9,264 for every full-time-equivalent student who attends a charter school instead of MMSD. That money goes to the student’s respective charter school.

The report noted that the increasing payments reflect an increase in Madison’s independent charter and private voucher schools.

In 2019, 275 students attended the newly opened One City, Isthmus and Montessori Academy combined. This year, 663 students attended those schools, and an additional 42 went to Milestone Democratic School.

“While independent charter enrollment had been increasing steadily prior to this year, the 48.7% jump this year was by far the highest of any year since any of these schools opened their doors. MMSD’s loss in state aid, recorded as a payment to the state, has grown as a result,” Wisconsin Policy Forum said.

Students who live in MMSD’s region but attend certain private schools, and whose families fall below the state’s income threshold, are eligible to participate in Wisconsin’s school voucher program. This, the report noted, can also lessen state aid. However, MMSD does not have the exact number of participating students. Wisconsin Policy Forum said there were 515 students living in Dane County who were eligible for the program in 2022. That number has since risen by 18.6% to 610.9 students. 

School aid shrinks

K-12 schools are primarily funded by school aids, according to Wisconsin Policy Forum. But general school aids for MMSD could shrink in 2024.

In fact, this aid has been on an overall decline since 2013. In 2013, MMSD had $58.5 million in general school aid. By 2024, that’s projected to drop to $37.4 million — that’s the lowest in more than a decade, according to MMSD data.

This dip, the report said, would force MMSD to be “even more dependent on local property taxpayers.”

As MMSD spends more money from referenda, its general school aid allotment is destined to be lowered, furthering the property taxpayer dependence.

MMSD’s aid has declined for two main reasons. One, MMSD’s area property values are high. In fact, they’re “rising more rapidly then in the rest of the state.” Two, MMSD spends more money than the average Wisconsin school district.

These two factors result in MMSD getting “less favorable treatment under than state’s main aid formula,” according to a May 2020 Wisconsin Policy Forum report.

The new report said that the current state aid formula does not factor in challenges MMSD students face.

“At present, the state funding formula factors in MMSD’s high property values but not its fairly sizable numbers of low-income students and students who do not speak English as a first language – populations who typically cost more to serve,” Wisconsin Policy Forum said. “These realities may be worth considering by lawmakers who craft the formula as well as by MMSD officials and voters as they consider any future referenda.” 

In MMSD’s new budget proposal, it proposed a property tax levy of $372.8 million, which is a 2.8% increase — $10.3 million — over this year’s budget.

The value of property in MMSD’s geographical region has increased by 8%, Wisconsin Policy Forum said. MMSD’s projected tax rate under the budget proposal would fall to “$9.49 per $1,000 of equalized property value.” That’s $2 less than the rate two years ago.

But MMSD is working under projected numbers, so this could change. For instance, if the legislature raises state revenue limits beyond MMSD’s estimate, MMSD could ask taxpayers to spend more money on school funding. However, MMSD also budgeted for a 15% drop in state general school aid — going from $44.2 million to $37.4 million. That’s the largest decrease allowed by law. But, if the decrease is smaller, that would offset a potential property tax increase. 

Operating referendum

In 2016, voters passed a four-year referendum that upped property taxes and boosted school spending by $26 million. That was fully implemented in 2019.

In 2020, voters passed another four-year referendum, “which will phase in its full increase of $33 million in 2024.”

MMSD may need to ask voters to pass another referendum, according to Wisconsin Policy Forum.

“Declining enrollment, inflation and expiring federal COVID-19 aid are creating a mix of fiscal pressures that may cause MMSD to consider yet another operating referendum in 2024,“ Wisconsin Policy Forum said.

The report noted that should MMSD successfully pass another referendum, there could be consequences. For instance, that would likely mean the district would get less state general aid. MMSD could still up spending levels, but would simultaneously increase the long-term cost for taxpayers. 

Read the full report below: 

UpInTheAir_BudgetBrief-1 by Aly Prouty

Read the proposed MMSD budget below:

PreliminaryBudget2023-2024AprilDraftFinal (1) by Aly Prouty on Scribd