SCHOOL DISTRICT SURVEY REPORT:

The Impact of Revenue Limits on
Metro Milwaukee Area School Districts

Institute for Wisconsin's Future
December 1998

INTRODUCTION

In February, 1998, the Institute for Wisconsin’s Future released a report on a statewide survey of school principals designed to assess the impact of financial shortfalls and revenue limits on Wisconsin public schools. The survey indicated that nine out of ten schools responding experienced budgetary problems due to the revenue limits. These problems resulted in cutbacks in academic programming, reductions in extracurricular activities, delays in technology development and significantly decreased building maintenance.

During 1998, numerous public school administrators in the greater Milwaukee area have expressed concern regarding the growing financial shortfalls caused by revenue limits. To update the state survey and determine the impact of spending on local school districts, IWF coordinated an abbreviated research effort to survey Milwaukee and neighboring suburbs regarding the incidence and impact of state spending caps.

METHODS

A survey was mailed to 30 school districts in the metropolitan Milwaukee area.

School superintendents or business/finance directors were asked to complete a series of questions about district enrollment and the financial impact of the revenue limit legislation since it was enacted. Twenty-five (83%) were returned (See Appendix). The results were compiled to generate a numeric analysis.

FINDINGS

Enrollment

The revenue caps went into effect in 1994. Since that time, the enrollment of half of the districts (13 of 25) has decreased or remained the same, while twelve districts have seen their enrollment increase.

District Enrollment Changes

District Enrollment	Number	Percent
Increased	12	48%
Decreased	10	40%
Stayed the same	3	12%
TOTAL	25	100%

Level of Impact

Overall, revenue limits have negatively impacted every responding district, 76% of them moderately to severely.

Rating the Financial Impact of Revenue Limits

Level of Impact	Number	Percent
No Impact	0	0
Small Impact	6	24%
Moderate Impact	11	44%
Moderate to Severe Impact	2	8%
Severe Impact	6	24%
TOTAL	25	100%

If the enrollment levels are factored into the assessment of the impact of the revenue limits, nine out of ten schools with decreasing enrollment have been negatively impacted by revenue limits to a significant degree (moderate to severe). Ten out of twelve districts with increasing enrollment reported a small to moderate impact and three indicated that the small impact was due to enrollment growth within the district. Several of these respondents noted that the impact would worsen significantly for the 1999-2000 school year and beyond.

Specific Areas of School Impact

The effects of revenue limits are widespread. On average, revenue limits have had negative impacts in three or more aspects of school operations. The most frequently impacted area was building maintenance and repairs. Over three-quarters of the responding districts have been forced to postpone maintenance and repair plans due to the revenue limits.

More than half of the districts reported increased class sizes and reduced equipment, materials and supplies as a result of the revenue caps. Forty-six percent have reduced their school staffing levels and 48% have delayed construction or major rehab projects since the limits were put in place. Ten of the responding districts have resorted to cutting programs and services for students.

Impact of Revenue Limits on Schools

Area of Impact	Number	Percent
Delays in Building Maintenance and Repairs	19	76%
Increased Class Size	14	58%
Reduced/Inadequate Equipment, Supplies, Materials	13	56%
Postponement of Construction or Major Rehab Projects	12	48%
Reduced School Staffing Levels	11	46%
Reductions in Programs and Services	10	42%

School Referenda

Since revenue caps went into effect, 21 or 83% of the responding districts have held referenda. Several have held more than one -- three districts have conducted two and one district has held four. Only four districts have not held a referendum since 1993.

Outcome of School Referenda

Outcome	Number	Percent
Passed	17	63%
Failed	10	37%
TOTAL	27	100%

The majority of successful referenda were for building repairs, maintenance and construction. Failed referenda were also for building projects, but these often included funds for recurring costs, technology and revenue cap exemptions.

The amount of funding sought through referenda ranged from $250,000 to $37.4 million. The median amount of funding approved in successful referenda was $5 million.

The median amount of funding in failed referenda was $8.63 million. The three referenda with the largest amounts requested ($28 million, $32.9 million and $37.4 million) all failed. The four smallest referenda requests (ranging from $250,000 to $700,000) for staffing, recurring amounts and revenue cap exemptions also failed.

The Future of Schools Under Revenue Caps

School districts were asked to project the future impact of revenue limits over the coming three years. They were asked if, under revenue caps, their district would be able to cover basic school costs over the coming three years. Almost one-quarter indicated that they would not be able to maintain basic costs. Over one-third indicated that they could only meet operational costs after severe reductions had been made to educational programs.

District Capacity to Meet School Costs In Three Years

Ability to Meet Future Costs	Number	Percent
No - Unable to meet costs in three years	6	24%
Yes- Only after severe reductions	9	36%
Yes	8	32%
Don’t Know	2	8%
TOTAL	25	100%

In those districts where referenda have failed, 80% reported that they either could not meet future costs or would be forced to make severe cuts in educational programs to cover school costs. In those districts where referenda passed, over one-third stated they would be able to cover costs in the coming three years.

SUMMARY

The survey results from 25 greater Milwaukee area school districts show that approximately half have increasing student enrollment and half have stable or decreasing enrollment. Responses indicate a clear pattern of financial difficulty caused by state revenue limits. The vast majority, 19 of the 25 districts, are experiencing significant negative impact from the revenue limits. This financial shortfall is resulting in delays in building maintenance and repairs, increased class size, and reduced or inadequate availability of educational supplies and equipment.

Most districts have utilized the referendum mechanism to secure additional funds, generally to cover capital costs. Of the 25 districts, 21 have held referenda. Of these referenda, 63% have passed and 37% have failed.

Over 60% of the districts will either not be able to cover school costs in the next three years or will only be able to meet costs by enacting severe cuts in educational programs.

Those districts where referenda have failed are more likely to be unable to meet future costs or to be forced to make significant cuts in programming.

RECOMMENDATIONS

School district administrators were asked to provide their recommendations for changes to the revenue limits policy. Their responses were categorized and placed in rank order, with the most common responses listed first.

1. Create Exemptions/Carve-outs to the Revenue Limits that cover:

Maintenance and repair of existing buildings
Capital improvement projects
Technology-related expenses

2. Increase Revenue Limit Levels:

Equalize to the QEO adjustable to any changes in settlement limits.
Cover increases in utilities that are above inflation.
Increases annual increments. Suggestions: raise at a 3.5% to 3.8% rate each year; change calculation to a percentage of the prior year per member; use the preceding three years, and not current enrollment, in the calculation.

3. Extend or make permanent the hold harmless provisions.

4. Make provisions for declining enrollment districts; maintain current revenue enrollment decline provision.

5. Increase flexibility for borrowing and referenda:

Allow local control to borrow funds outside of caps without a referendum.
Exclude principal and interest payments from cost and aid calculations.
Allow borrowing for maintenance projects up to $500,000 and $250/pupil outside of revenue limits.
Don’t require referendum for projects under $5 million.

6. Extend revenue limits to other governmental bodies, such as cities, counties, technical schools, etc.

7. Repeal the revenue limits.

8. Other Suggestions:

Provide lower spending districts the ability to exceed the revenue limits without going to referendum to decrease disparity between districts.
Allow 3% school surpluses (non-expenditure, therefore non-revenue) to be outside the revenue limit.
Provide full credit for summer school FTE’s in pupil count.
Treat decreases in state categorical rates as a transfer of service (added to the revenue limit)
Adjust for EEN cost increases.

APPENDIX

Responding School Districts

Metro Milwaukee Area
Revenue Limits Impact Survey

Brown Deer	New Berlin
Elmbrook	Nicolet
Fox Point-Bayside	Oconomowoc
Franklin	Oak Creek-Franklin
Germantown	Port Washington-Saukville
Glendale-River Hills	Shorewood
Greendale	South Milwaukee
Greenfield	St. Francis
Maple Dale-Indian Hill	Waukesha
Milwaukee	West Allis-West Milwaukee
Menomonee Falls	Whitefish Bay
Mukwonago	Whitnall
Muskego-Norway

Institute for Wisconsin's Future. (1998, December). School district survey report: The impact of revenue limits on metro Milwaukee area school districts. Milwaukee, WI: Institute for Wisconsin's Future.

To obtain a printed copy of this report, order online or contact IWF at 414-384-9094 or iwf@wisconsinsfuture.org.

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