New Law Gives Elmbrook District Path to, Tools for, Fiscal Responsibility

By James Wigderson
Special Guest Perspective for the MacIver Institute

When Brookfield is mentioned, thoughts turn to how the city of Brookfield saved Justice David Prosser’s re-election campaign when it was discovered that the city’s votes were not included in the initial tally. That the final vote was so overwhelmingly in favor of Prosser must indicate a conservative community, truly a defender of the taxpayers.

Then we think of Elmbrook, the school district that includes most of Brookfield, Elm Grove, and part of New Berlin. The image evoked is not quite so conservative.

The district made headlines when it held a referendum in 2007 asking for a whopping $108 million for renovations to two high schools, the highest referendum amount ever. When the referendum failed (despite supporters spending over $70,000 in the campaign), the district asked in 2008 for a more “modest” $62.2 million in a referendum that passed. Of that, $21 million was designated to even the number of gyms per high school at four each.

It’s a good thing the ACT scores are so high in the Elmbrook district. The students will well-understand the meaning of the word “opulence” even as they experience it.

Yet they face problems of their own making in the not to distant future. Prior to the passage of Act 10, the budget repair law that limited collective bargaining privileges for public employees, the Elmbrook district was looking at a budget shortfall of $16 million over the next five years. After the implementation of Act 10, the five-year plan for Elmbrook shows a budget shortfall of $11 million, an improvement, but the district must still find some efficiencies.

Assistant Superintendent for Finance and Operations Keith Brightman asserts that Act 10 caused the district to make tough cuts in the coming year, including increased class sizes. Even if you accept that assertion, in the long-term the district will benefit from having revenue more aligned with expenses.

In past years under the Qualified Economic Offer, Brightman said the growth in expenses and the growth in revenue were not aligned. While expenses rose nearly 4% every year due to the increase in teacher salaries, the revenue the district was allowed to collect only rose about 2%. Act 10 changes that, bringing the costs more in line with potential revenue.

Adding to the district’s budget woes is the reality of declining enrollment. A study in 2009 predicted enrollment to decline by 7.4 percent through the 2014-15 school year. Less enrollment usually means lower state aid. In Elmbrook’s case that does not matter as much as the district only receives a small amount of basic state educational funding. For Elmbrook, the budget hit comes from the reduced taxing authority, a 5.5% reduction in the per-pupil revenue cap.

Combine that with declining enrollment and pre-existing budget issues and the district was looking at trying to fill an $8 million hole. Act 10 saved the district $4.2 million, but that still meant the district had to find $3.2 million in cuts/savings.

There are some things the district is doing to keep its finances under control. The district has been innovative in its health care and has had for many years a self-financed health plan. . A change in the health plan, scheduled to take place after January 1, 2012, will save the district an additional $878,674 in savings next year, double that in the following years.

Meanwhile, a change in the sick leave benefit will save $76,500. Restructuring in the Human Resources Department after the Assistant Superintendent for Human Resources left for the Waukesha School District will save the district $93,000 annually. The district also found savings in adjusting the long-term maintenance budget.

Not only does the declining enrollment mean a loss in revenue, it also means excess capacity and possibly an opportunity to find savings. The school district is debating whether to close elementary schools in order to shed the district of excess capacity and lower operating costs.

The two oldest elementary schools, Hillside and Tonawanda, are the most likely to be closed, each saving the district $650,000 annually. However, a recent study recommended only closing one elementary school because of the possibility of increased open enrollment and the possible addition of four-year-old kindergarten.

Brightman said open enrollment is a net gain in students, but that might not necessarily be a good thing. The district is studying whether the increased revenue gained from open enrollment meets the costs of having the necessary facilities to accommodate the students from outside the district.

Elmbrook kept the 2010-2011 tax levy within 1% of the 2009-2010 tax levy. And the previous year’s tax levy growth was within 1% of the previous year’s tax levy. Normally that may be praiseworthy, but Brightman said that the small increase in the tax levy was not by choice. The district, he said, has a “tax to the max” philosophy, and the small increases were the result of state law. If Elmbrook could tax more, they would.

“Tax to the max” is the belief that it’s necessary for a school district or another local unit of government to raise as much tax revenue as possible to allow them to tax even more later. As each year’s tax levy goes up, that becomes the base for judging the next year’s tax levy growth.

In Elmbrook’s case, a property-rich district, “tax to the max” means very small increases due to the state’s school funding formula and the limits imposed by it. Or as Brightman said on Monday about the less than 1% increases in the levy, “It’s nothing that we did.”

That’s part of the problem with the Elmbrook District. It takes someone or something external to say no to its appetite. Revenue caps imposed by Madison have restricted the district’s appetite for revenue before. This year there has been a change in that the state is also giving Elmbrook a chance to control labor costs, too. While it would certainly be the wish of the administration of the Elmbrook to be free to tax as much as it likes, the reality is that it would be unlikely the district would be searching for more efficiencies now and in the long-term plan.