Terry Falk
K-12 Education

MPS Faces Future Financial Crisis

System will see deficits explode beginning in 2026-27 school year.

By - May 22nd, 2023 02:16 pm
Riverwest Elementary School, 2765 N. Fratney St. Photo taken March 30th, 2021 by Dave Reid.

Riverwest Elementary School, 2765 N. Fratney St. File photo by Dave Reid.

Milwaukee Public Schools (MPS) faces a looming budget shortfall that could rise to more than $390 million by the 2027-28 school year, its own budget projections show. A new report by the Wisconsin Policy Forum (WPF) says it’s part of a financial challenges faced by a number of school districts in the state: “As school district leaders look to their 2024 budgets and beyond, many see that a key lifeline is fraying and about to break,” says the nonpartisan research group. Nowhere is the situation worse than in MPS. “MPS faces particular challenges that no other district in the state faces,” says WPF president Rob Henken in an interview with Urban Milwaukee.

While MPS may show a balanced budget this coming year and a small deficit in 2025-26, its deficit explodes to $171.6 million in 2026-27 and to $390.4 million in 2027-28. That’s a shortfall of nearly one-third of its projected budget of $1.14 billion for that year. Without massive restructuring of the district or a major infusion of funding from the state, MPS will face a financial catastrophe.

The WPF report finds no outright mismanagement of funds, rather a perfect storm of declining enrollment, a tight labor market that is forcing MPS to pay higher wages, a poor tax structure, and uncertain support from the state.

The state has frozen aid to schools because districts were getting federal pandemic aid, but the last of that aid must be fully committed by September 2024, giving districts one more year of COVID-19 relief before their budgets tighten.

“The revenue limit over the past two years caused lots of problems,” Henken says. “Federal relief dollars allowed [districts] to plug holes or where they are able to address pandemic related needs that have now been reduced. There are many school districts across the state that are facing very severe challenges that was reflected in the governor’s budget.”

But the governor’s budget was rejected by Republican legislators and it remains to be seen how much school aid will be increased.

“Legislators are saying there will be more money for schools, but I don’t know what that means,” says Dan Rossmiller, director of government relations for Wisconsin Association of School Boards. “They have not said an amount and what form that will take, whether that is a revenue adjustment, per pupil aid or what.”

MPS superintendent Keith Posley believes the situation is manageable and that compared to the system’s billion dollar budget, the two-year deficit is “a small fraction of that amount we are talking about.” His budget projections show a deficit of only $13.4 million as of the 2025-26 school year, before the deficit begins to balloon.

Chart from the MPS budget.

Chart from the MPS budget.

States Henken: MPS is just “trying to get by for another year.”

The district has fully implemented a yearly $87 million funding referendum approved by Milwaukee voters in 2020, that allowed it to raise this added amount from property taxes, but other sources of revenue are not keeping up.

The WPF report warns that “MPS’ five-year forecast indicates that the district may find itself no better off from a long-term financial perspective after its 2020 referendum phase-in than before the referendum’s adoption.”

Despite some criticism of how MPS has managed its finances, Henken gives MPS high marks in several areas. The district recognized that governmental pandemic funds were one time money, and the district used little of those funds for continuing district needs. MPS admits that it did underfund building maintenance in the past, and used pandemic funds to shore up repairs and upgrades.

MPS is losing 1,500 students per year due to lower birthrates and students leaving the district.

Although studies show declining school enrollment, Posley believes MPS can maintain its enrollment. “What is our new normal?… We are seeing students return back to us [after the pandemic.]” But he concedes, “We are looking at right-sizing.”

The district gave its teachers an 8% raise which makes some sense to Henken for a district fighting to staff schools. “What MPS is paying its teachers is not outlandish… [yet] how do you afford to pay your teachers and other staff more and compete in this labor market when your revenue situation is so uncertain?“

How MPS portrays its current staffing is a contentious issue. MPS wishes to employ more educators next year, but the proposed budget underfunds salaries and compensation by nearly $74 million. A recent Urban Milwaukee article outlined this underfunding, which has left MPS with 353 unfilled educator positions.

This underfunding of teachers, which the MPS budget has referred to as a “vacancy adjustment,” essentially hides a budget shortfall of $74 million or 14.4% of the money needed in the 2024 budget, leaving the system little choice but to not fill many teaching positions.

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2 thoughts on “K-12 Education: MPS Faces Future Financial Crisis”

  1. Ryan Cotic says:

    I think that MPS should finally start considering breaking up into smaller districts since ut is failing on so many levels. Sometimes change can bring good things

  2. Mingus says:

    MPS was broken into five separate districts decades ago called Service Delivery Areas. Like most all of the quick fix schemes, nothing changed and it was abandoned.

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