Sept. 16, 2018 – West Bend, WI – On Monday, the voters of the West Bend School District are invited to attend the Annual Meeting of Electors. This is an annual meeting where, theoretically, the voters approve some of the big ticket items like the tax levy and budget. In reality, all of the votes are non-binding, so the School Board can still do whatever they want. Still, it is an opportunity for voters to show up and have their voices heard.
On the agenda this year is:
7. Consideration of Proposed Resolutions
a. Resolution No. 1 – Tax Levy
b. Resolution No. 2 – Disposal of District Property
c. Resolution No. 3 – Board Member Compensation
d. Resolution No. 4 – 2019-20 Annual Meeting Date
The only thing we have any information on is the proposed budget and tax levy, so the voters will be walking in blind to whatever the resolutions are about board member compensation and the disposal of district property. We’re going to take a deeper look at the budget and tax levy, but first, let’s discuss the process a little.
In years past, the West Bend School Board began its budget process in the spring. If I remember correctly (I’m sure someone will correct me if I’m wrong), we usually got a preliminary budget in the April/May time frame. That high-level preliminary budget was posted on the district web site and the people had some time with it.
This year, the first appearance of a preliminary budget from the school district that I saw was last Tuesday morning – after the Monday night board meeting. Perhaps it was posted Monday night. But now the Electors are being asked to vote on it a week later. One. Week. That’s all the voters get to read it and understand it. There hasn’t been any time for the media or interested parties to ask questions. There hasn’t even been another board meeting where citizens could voice their opinions on it. There is really no excuse for this kind of opaqueness from the West Bend School Board. They have had this information for months, but failed to be transparent about it. Their lack of transparency is not incompetence. It is willful.
That being said, let’s look at the budget. As we get into it, we must remember the context of this budget. The West Bend School Board just postponed action on a $85 million referendum. Budgets are where we define our priorities. There is always an unlimited list of needs/wants (the distinction between the two often being in the eye of the beholder) and a limited amount of money to pay for it. The budget is where you have to prioritize that list.
There are two versions of the West Bend School District’s Preliminary Budget. Here is the summary document that is being provided for the meeting on Monday. Here is a slightly more detailed version that was presented at the School Board meeting last week. Neither version is nearly as detailed as what other districts, like Slinger, provides. Again… transparency…
Let’s start with the revenue side of the budget. There are two primary sources of revenue for a Wisconsin school district – the local property tax levy and state aid. The West Bend School District is facing a demographic and societal shift that is causing a decline in enrollment for the foreseeable future. The estimates range between a 10% and 20% decline in enrollment in the next 10 years. This is a significant impact on the state aid that the district receives because it is based on enrollment. Also, enrollment affects the property tax levy limit for the district. In short, the West Bend School District is facing a sustained period of declining revenue. In the preliminary budget (focusing on the operating budget and not the special parts), we see this manifest in a projected $233,405 decrease in revenue.
That decrease in overall revenue is despite a property tax hike. The School District wants to increase the property tax levy by $928,249 – the maximum amount allowed by law. Most of this is offset by a decrease in the levy due to some debt service coming off the books, so the impact will be minimal. But taxpayers could be enjoying a rare tax decrease if not for the School Board’s desire to tax to the max.
In light of that fact, let’s take a closer look at the spending side of the budget. Overall, the preliminary budget proposes a $1.3 million spending increase. You’re reading that right. The preliminary budget has a structural $1.4 million deficit.
The School District must have a balanced budget, so they are raiding their reserve fund to fill the gap. Superintendent Don Kirkegard acknowledges that this is not sustainable and he will be working to bend the district’s cost into the revenue number next year. I cut him some slack because he has only been on the job since July and was handed this budget. Also, he comes from another state and it takes a little time to learn the Wisconsin Way of school budgeting. This budget is the product of the interim Superintendent, staff, and most of all, the School Board.
What is driving the spending increase? Almost all of it is due to a planned compensation increase for the teaching staff. Although salary negotiations are still underway, this budget includes a 2.1% base salary increase. That is the maximum that the School Board would have to give under Act 10. That amounts to a $929,853 compensation increase. That number is a little misleading because the budget number includes benefits, salary, and headcount fluctuations. But based on the commentary at the school board meeting last week, that number is about right. They are planning roughly a $900k salary increase.
The other increases are scattered around the budget. It is a little hard to tease them out because the district is also reallocating a lot of expenses. According to the Superintendent, they are working on reallocating expenses to the building level so that they can have better visibility to where the expenses are actually being spent. That’s a good thing, but it makes year-to-year trending data difficult.
The story of this budget is not really what it does, but what it doesn’t do. The West Bend School Board is facing declining enrollment and, consequently, declining revenue. Next year they are planning to ask the taxpayers to dig deeper into their family budgets and pay more for bigger, newer facilities. This budget is the School Board’s statement of priorities before asking the taxpayers for more money and they chose to kick the can down the road another year. They are choosing to not make any hard decisions nor demonstrate that they will be good stewards if the taxpayers give them almost the equivalent of an entire year’s budget to spend all at once.
Here are just a couple things this budget does not do:
Maintenance. Many of the facilities needs that are driving the perceived need for a referendum are due to years of poor maintenance. Jackson Elementary is old and falling apart, they tell us. The High School building needs serious renovations and repairs, we’re told. I defy anyone to look at the preliminary budget and determine what the school district spends to maintain their facilities. There isn’t a line item for it. According to the Superintendent, the large, capital projects like roof replacements and such are covered by the Capital Projects Fund and is about $2.3 million. More routing maintenance like carpet replacements, door repairs, fixture replacements, light bulbs, etc. are kind of tucked into the “other support services” or “central services” budget items. But those line items blend a lot of “catch all” expenses.
It is safe to say, however, that despite these pressing needs that are fueling a referendum discussion, the budget makes no serious effort to spend more on maintenance.
I tried to find some good benchmarks for what schools should spend on maintenance, but they are hard to come by. This data from the Building Owners and Managers Association says that for office space (roughly equivalent), people spend about $8.07 per square foot for annual operating expenses. That number includes some things like security, administration, etc. that are not really pertinent in a school setting. If we just include repairs, maintenance, cleaning, etc., it’s about $4 per square foot per year. The West Bend School District has 1,141,656 sq. feet of building space – not including grounds, sports fields, parking lots, etc. It is reasonable to expect that the district needs to spend $4 to $4.5 million per year just to keep their facilities reasonable cleaned and maintained. I don’t see anything near that much in the budget even as I add up the line items.
This points to a trend of School Districts intentionally under-funding maintenance, allowing facilities to decline into disrepair, and then pushing for a referendum to make up for their neglect. This budget looks like it will continue that trend.
Labor Costs. Without a doubt, labor costs are the largest expense in any school district budget. If the School Board is ever going to control costs and bring them in line with revenue projections, they have to control the cost of labor. There are only a few ways to do that. They can cut overall compensation – salaries and benefits. They can reduce the number of employees. Or they can force employee churn to create a younger, cheaper workforce.
At some point, the district needs to reduce the number of employees. There are fewer and fewer kids to teach. Therefore, there will need to be fewer and fewer teachers, administrators, and support staff to serve those kids. This needs to be done intelligently and carefully, but it needs to be done.
The School Board and this budget fail to take advantage of Act 10 to control the overall compensation costs for the employees. Employees still have a sweetheart deal on benefits. The School Board is assuming a maximum base salary increase. The School Board has not implemented merit pay or other performance-driven compensation models. They haven’t done much of anything. The compensation package for West Bend School District employees looks much like it could have in 1999 or 2005.
Once again, this budget just kicks the can down the road and fails to do anything about rising labor costs in the face of declining revenue.
The preliminary budget for the West Bend School District sends a very clear message to the citizens of the district. Despite virulent protestations about needing tens of millions of dollars in a referendum to pay for critical facilities, the School Board intends to just keep doing the same thing as if there isn’t any need at all. They are not making any hard choices or shifting any additional spending to address those needs. They are also not addressing the structural funding issues that are already impacting the district’s revenue. The School Board is planning to ask the taxpayers to dig deeper into their family budgets and give up their own priorities, but the School Board is refusing to dig deeper into their own budget. Instead, they are doing what far too many school boards do: tax to the max; give employees as much of an increase as possible; starve facilities; refuse to innovate; keep doing everything the same way and wondering why you keep getting the same results.
I will believe that there is a crisis in the West Bend School District when they begin acting like it. This budget sends the message that the School Board thinks everything is fine the way it is.
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