Waukesha District Uses the “Tools” to Fix Budget, Improve Schools for Kids

By James Wigderson
Special Guest Perspective for the MacIver Institute

Can Wisconsin’s public school districts lower costs without increasing class sizes and laying off teachers, all while still not raising taxes? In light of state and federal funding cuts, school districts across the state are asking that question. They may want to look to the Waukesha School District for the answer.

The Waukesha School District is losing $5.1 million in state aid and $3.7 million in federal stimulus money. Despite the cuts, the school district is maintaining class sizes while the tax levy drops $2.5 million. The tax rate for the district is dropping 8 cents per $1000. The school district has not laid-off teachers for three years, and there is no plan to lay-off teachers next year, too.

On the debt side, the school district is expecting the credit rating to go back up once the issue of an investment plan that went awry is finally dealt with. The school district is also looking at become debt free in the 2012-2013 school year.

Meanwhile, enrollment in the district has stabilized, and is even seeing a positive growth because of the popularity of the STEM schools and the IQ Academy, an online charter school in the district.

When Waukesha School District Superintendent Todd Gray took over in 2008, the district faced many challenges. There were under-utilized school buildings that nobody wanted to address, a teachers union accustomed to getting its way, and a salary table that was completely bizarre. The school district was actually giving teachers raises above the Qualified Economic Offer needed to avoid arbitration, and teachers could move to the top of the salary table in as little as nine years.

The school district also had an issue with a failed borrow-and-invest scheme in an effort to fund retirement obligations, an issue that finally seems to be coming to a resolution. The district borrowed money to invest in what they were told was safe securities. Just prior to Gray becoming superintendent, the market crashed on them, leaving the district with a debt and worthless investments. That situation is finally headed towards resolution, partly thanks to action by the Securities and Exchange Commission, but not before the district took a short-term hit in the credit rating.

The city of Waukesha mayor was offering to lead the charge for another referendum. Waukesha was ground zero for the debate over a state funding formula that punished the district. Even State Rep. Sondy Pope-Roberts (D-Middleton) made an appearance at an education funding forum to discuss school funding, only to foolishly announce she had a “secret plan” in her desk. Pope-Roberts also conceded that any change in the school funding formula would only hurt Waukesha.One of the leading proponents of using the Waukesha School District as an example to get rid of the QEO, Ruth Page-Jones of the Wisconsin Alliance for Excellent Schools, even ran for state Assembly in Waukesha.

Waukesha was the non-Milwaukee poster child of impending financial ruin for school districts in Southeastern Wisconsin, and advocates of even more spending on education were poised to take advantage.

Gray replaced Superintendent David Schmidt and quickly said he didn’t think the district needed to move to a referendum to take care of its long-term funding issues. Instead, Gray focused on consolidation to reduce costs and bringing the teacher salary table under control. Now the school district is actually well-positioned to handle both the financial challenges and opportunities presented by the changes in Madison.

Since taking over the district, Gray has closed three elementary schools and is in the process of closing another.

Closing Pleasant Hill Elementary saved $300,000 per year in operating and staffing costs. In contrast to the Milwaukee Public Schools, which has been reluctant to sell their empty schools to the competition, the Waukesha School District is actually leasing the building to a private school for an additional $150,000 per year.

Randall Elementary was closed and then turned into a STEM school, a school so successful there is now a waiting list. Saratoga Elementary was converted to a STEM middle school, allowing the district to move the district’s sixth grade students into the middle schools. This saved the district another $300,000 per year. And next year when White Rock is closed, the district estimates they will save over $400,000 per year in operating, staffing, and busing costs.

Also unlike their neighbors to the east, the Waukesha School District addressed the issue of labor costs by playing a little hard ball for the first time in recent memory. During the protests in Madison, other school districts were rushing to sign contracts tying their hands for the near future. The Waukesha School District was also trying to sign a contract – for the two years prior. Negotiations for a contract with the teachers union almost pulled the two sides into binding arbitration.

At stake were the salary table and the district’s desire not to use WEA Trust for insurance.

In 2009, the school district changed from WEA Trust to United Healthcare. The district estimates a savings this year of $2 million from this switch. The contract signed last spring recognized the change in insurance carriers, settling the issue.

The contract also changed the salary table so it now takes a teacher 18 years to reach the top instead of nine. This was especially significant given the high number of teachers, 130, that retired at the end of the school year.

Part of the reason the number of retirements was so high is that the school district did not allow teachers to retire early when that provision in the previous contract expired. Early retirements were held up while the new contract was negotiated, preventing as many as 40 teachers from retiring early. That put pressure on the union to negotiate on the other items.

With the retirements, younger teachers replacing them, and the change in the salary table, the school district will see long-term savings in the budget, not just next year.

This year the school district will also take advantage of one-time federal funding to help cover labor costs and retain teachers. The school district received approximate $3.8 million in the federal “teacher bailout” but only spent approximately $400,000. The rest was held by the district in anticipation of state and federal funding cuts in the 2011-2012 school year.

By contrast, Milwaukee spent the entire sum they were given the first year because the union refused to renegotiate their contract and the district was faced with the possibility of laying-off 480 teachers in 2010.

The district intends on taking advantage of the changes in union bargaining privileges by pursuing health insurance changes. Already this year the district is putting into place a wellness plan that could save the district $3 million. Employees of the district will pay 12% of their health insurance premium costs, but if they do not participate in the wellness program the employee contribution goes up to 17%.

According to Gray, the changes brought by Act 10 will have even more of an impact on insurance costs for future district budgets. In an interview Friday, Gray said he was “really optimistic that we can offer a really good plan at a lower cost.” He anticipated it would be a “win-win” with less money out-of-pocket for teachers for their health insurance.

So the situation in Waukesha looks a lot better than it did just a few years ago. Nobody is talking about a need for referendums and the district’s finances are looking better.

It can be done, but it takes a school district looking out for the best interests of the taxpayers as well as the employees. Gray credits his success on focusing on streamlining operations to find efficiencies and working to lower labor costs. The formula is working.

It’s too bad that now that the district is doing so much better financially that State Rep. Sondy Pope-Roberts and all of the special interest groups advocating for more state spending on education aren’t coming to Waukesha to talk about school funding now. They might just learn something.