NB District Debt & A Dire Financial Forecast Re: Wis. School Districts
Earlier this month (Journal Sentinel, Aug. 11), education commentator Alan J. Borsuk warned that big financial problems loom for “fairly normal” school districts in Wisconsin.
Borsuk, a senior fellow in law and public policy at Marquette University Law School, stresses that the changes wrought by Gov. Scott Walker and Republicans in the Legislature sharply reduced how much schools have available to spend per student.
He states: “ In the great furor of 2011 over public employee unions and overall state spending, one step got relatively little attention. For more than a decade, the state had allowed school revenue (state aid and property taxes combined) to go up at least $200 per student per year. Suddenly, the cap on revenue was reduced by $500. It was a high-impact shift, tightening the spending in every school district in Wisconsin.”….
Borsuk refers to an analysis by Bob Borch, “an old hand at school finances”. ( Borch worked for several school districts in the Milwaukee area, including 23 years as business manager of Elmbrook Schools. Currently, Borch is a senior financial advisor for PMA Financial, a financial consulting firm that has among its clients, 140 school districts in Wisconsin.)
Borsuk reports that a year ago, Borch’s analysis showed that things would be OK in the first year for “fairly normal” school districts. State aid went down, but employees paid a bigger share of health and retirement costs.
But if the rules don't change, things aren’t so good in the second year. Although revenue stays pretty flat, expenses start climbing again—even without teachers unions having a say. There are modest raises, increases in health costs, costs for retirees, etc. School districts have to dip into their “fund balance” (which is like a long-term savings account).
Years 3 and 4 get worse. And by Year 5 ( 2015-16), the school district is running a big deficit, has used up all its savings and can’t pay its bills. Borsuk believes the term for that is bankruptcy, although he’s not sure what to call it when it happens to a government unit in Wis.) Bankruptcy! Yikes!
Did you catch the July 30, 2012 New Berlin NOW news article , which quotes Roger Dickson, the District of New Berlin’s financial director stating, “ Building Ronald Reagan Elementary School and making significant improvements to New Berlin West Middle/High School several years ago caused New Berlin to have more debt on a percentage basis than any school district in Wisconsin - and more debt in terms of dollars than any district except the biggest ones"?
Who's responsible for that situation? Well, so-called “fiscal conservatives” on the New Berlin School Board who liked to tell voters they didn’t raise taxes, borrowed heavily for expensive projects. They saddled the district with massive debt for many years, apparently with little concern about the long term impact on district quality and services. The money plus interest (debt service) must be repaid, of course. It will take years to wipe out the debt.
Clearly, the District of New Berlin is worse off and has less flexibility than other districts because of the huge amount of debt it carries in its operating budget. Already, it’s been shorting maintenance and other things.
