The Shocking Demise of SDC

Social Development Commission North, 1730 W. North Ave. File photo by Carl Baehr.

Less than two weeks ago we learned that the antipoverty agency, the Social Development Commission, had suddenly shut its doors. This was not your average nonprofit, but a huge, 61-year-old, quasi-governmental agency established by state legislation with an 18-member board of directors, one-third of whom were low-income residents elected to represent six districts in Milwaukee. How could an organization with four offices that claimed to have $30.5 million budget and 85 employees running some 30 programs disappear overnight?

The impact was soon felt by Democratic Congresswoman Gwen Moore, whose Milwaukee-based district includes the offices run by SDC. “My office has been receiving calls from very distressed constituents who depend on SDC for services as well as providers of early childhood programs and senior centers” who depend on SDC’s food delivery services “which have been discontinued” she wrote.

“Constituents are calling about energy and housing assistance and emergency services” provided by SDC and also about its tax filing assistance program. “Constituents are calling my office with concerns regarding personal identifying information they dropped off for tax filing purposes that are still in SDC’s possession.”

This was in a letter Moore wrote to Xavier Becerra, the Secretary of Health for the U.S. Department of Health & Human Services, “urging [him] to work quickly with affected stakeholders, including state and local officials, and other Community Action Agencies in the State, among others, to help ensure access to federally funded services” overseen by SDC is continued.

That sounds like trying to put Humpty Dumpty back together again. All the state audits and all the state’s experts may find it too broken to fix.

SDC was established by state statute in 1963 as an intergovernmental commission and in 1964, it became the only Community Action Agency for Milwaukee County. SDC soon became the largest anti-poverty social service agency in the state, winning countless federal grants and subcontracting the money to smaller non-profit agencies, some of whom bemoaned SDC’s role as middle man that grabbed a cut of the grants.

For 45 years SDC ran the largest Head Start program in the county, serving 3,000 children a year. It was also a major player in the state’s Wisconsin Works or W-2 program. But it was a big unwieldy agency that going back to at least the 1990s has faced periodic controversies for mismanagement, fiscal problems and board squabbles.

Perhaps because money was flowing into SDC from so many governments — federal, state, county and city — details about its budget were often less than precise. In one year alone, 1993, stories by the old Milwaukee Journal and Milwaukee Sentinel reported that SDC’s total budget was $16 million, $19.3 million and $22.5 million, with 500 or 530 employees, 70 or 74 programs. And in 1994, the two paper’s stories told readers that SDC’s budget was $20 million, $25 million and $26 million. (The mantra for the papers’ editors to “check the clips” apparently fell on deaf ears.)

Questions about its actual size continue to this day. SDC’s 2020 annual report declared a budget of $32.6 million. Yet its audit of 2020 found it had a budget of approximately $22 million.

There isn’t room in one story to detail all the controversies the agency has faced, but the highlights include a mid-1990s blowup over financial shortfalls, stolen records and more than a million pounds of surplus food intended for Milwaukee’s poor accumulating in storage. The state, county and United Way all withheld funding to SDC because of concerns over mismanagement and the State of Wisconsin did an audit that made 40 recommendations for changes at the agency.

In 1999 an audit firm hired by SDC found “serious cash flow problems” at the agency that could potentially result in bankruptcy. And a 2000 state Legislative Audit Bureau report found the agency couldn’t account for more than $1.2 million in federal meal funds.

Then came a near collapse in 2013 that Urban Milwaukee analyzed. After state officials and reports criticized SDC’s work as one of the local administrators of W-2, it lost the funding (some $11 million a year) in 2012. The following year it lost its longtime Head Start contract, some $22 million in funding, after federal officials cited concerns about the health and safety of children served by SDC and of problems with its record-keeping and management. As a result, the organization reported its budget had shrunk to about $16 million, down from $50 million before the losses of these two programs, and the number of employees had dropped from 400 to about 150. This came during a one-year period of three interim CEOs and five different board chairs for SDC.

In October of 2013 George Hinton was hired as CEO and he served for more than a decade, seemingly rebuilding the agency. As of this year it claimed a budget of $30.5 million, up from $16 million in 2013, yet with far fewer employees (90) than a decade ago (150).

But last month Hinton was forced out “after a series of missteps including the misallocation of more than $100,000 in taxpayer funds resulting in the closure of the weatherization program, layoffs of 28 employees and the termination of the finance director,” as Gina Lee Castro and Cary Spivak reported. The agency also faced a state forensic audit.

One week later SDC shut its doors, the two reported, while sending a letter laying off all its employees in what it called a “temporary closure.”

“SDC has lost funding and is under an incredible amount of financial stress due to the finance department not doing its job,” said SDC’s attorney William Sulton.

Over the years there have been calls to change SDC to a private nonprofit. In the 1990s then-Milwaukee County Executive Tom Ament, who later created the infamous and financially disastrous county pension plan, proposed that the county take over SDC. In 1998, based on a state audit recommendation, SDC’s board was cut to 18 members, down from 24, which was considered unwieldy. Some years it’s been hard for SDC to find anyone to run for the six district board positions. And of course the organization has had oh-so-many CEOs and board members. But the problems never seem to go away, until finally, SDC itself went away.

Even if it somehow reopens, the decades-long troubles of SDC present an an issue that seems big enough for something like a governor’s blue ribbon commission, with representatives from Milwaukee County and the City of Milwaukee to determine the best way to handle federal anti-poverty funding that flows to this state’s biggest city. The shutdown of SDC was a distress signal, and it needs to be answered.