The Ad- Hoc Community Engagement Committee (the Committee ) has been given the task by the Mequon Thiensville School District ( MTSD ) School Board: To study how to financially sustain the quality of MTSD, and to provide actionable recommendations. Although the School Board s specific charge to the Committee was somewhat more expansive, due to the constraints noted below, we believe this summary of recommendations is the best that we can achieve as a volunteer community advisory group. Why the Committee was established Wisconsin s funding for schools is based upon enrollment and is administered through a universally applied formula, determined at the state level. The MTSD s budgets have been increasingly tougher to balance due to decreasing enrollment and the impact of the revenue caps imposed by the state funding formula. The MTSD has been managing its budget through cost reductions every year since 2004, but has become stymied by the increasingly narrow options for further cost reductions without unacceptably compromising educational quality. The MTSD School Board felt that it would be helpful and productive to turn to a representative and diverse group of leaders in the community for ideas and counsel on how to potentially address the problem. How the Committee was composed The Committee was composed of a cross section of perspectives, political and social viewpoints, opinions, professional/personal experiences and backgrounds to reflect the strengths and diversity of the community as well as the divergent opinions that exist within it. A total of 17 volunteer community members were selected, after reviewing nominations and applications. Attorneys Brian Levy and Jonathan Safran served as Co- Chairs, and the Committee was also assisted by professional facilitator, Howard Bellman. Assessing the situation; Developing and evaluating Ideas The Committee divided its task into three parts. First, MTSD Administration provided the Committee with a thorough and detailed review of the of MTSD s current and projected financial picture. This included an overview of how the state funding formula operates, a detailed analysis of MTSD s budget projections and balance sheet, information about MTSD s aging facilities as well as a historical review of the cost reduction steps undertaken each year in order to achieve a balanced budget. MTSD Administrators highlighted for the Committee how the MTSD premium ranking and the prestige of its brand have been sustained through a strategy of Shielding the Classroom. As described, MTSD has focused its cost reductions on those elements that it believes have the least impact on the quality of the academic offering. Ironically, it appears that the Shielding strategy has masked the fundamental problem in the eyes of the community: namely, that under Wisconsin s current school funding formulas, MTSD s ability to operate under its current 1
model is unsustainable. It is the Committee s belief that while it is now apprised of the depth and critical nature of the problem, the community at large still generally views the high ranking performance of MTSD as consistent and undiminished, leaving many community members to wonder if there is even a problem. The insights of Superintendent, Dr. Demond Means; Executive Director of Business Services, Gail Grieger; Assistant Superintendent of Educational Services, Matt Joynt; and Executive Director of Human Resources, Sarah Zelazoski; were invaluable as they spent many hours over multiple meetings ensuring that our information was comprehensive and that our questions were answered in detail. The Committee expresses its deep appreciation for their efforts and assistance. Next, the Committee was given free rein to develop ideas for addressing the problem and was encouraged to think outside of the box. The process was designed to ensure that no idea, big or small, would be left out of the discussion, and that everyone s input would be provided. Ultimately, the co- chairs asked each member to identify their top five ideas as a means to begin the discussion around possible solutions. Finally, the ideas were aggregated, distilled and discussed individually. This process continued over several meetings, ultimately exhausting the discussion around each idea before considering the next one. These discussions enabled us to separate those ideas that are possible and conceivably feasible from those which were deemed to be impossible for reasons of practicality, legal restriction or otherwise. Finally, each member of the Committee was asked to put forth three ideas either from those already discussed or ideas not yet presented which they viewed as the three best ideas for addressing the problem. Conclusions and recognition of our limitations. As we reviewed the top three ideas from each of us, a humbling conclusion began to emerge: given the current funding formula, demographic patterns, collective bargaining and other practical realities, the financial destiny of MTSD is largely influenced by outside sources. The passage of Wisconsin Act 16, which implemented revenue limits on public school districts beginning with the 1993-1994 school year effectively shifted control of Wisconsin school district funding from local boards to state control. Though the recent passage of Act 10 has provided some relief, the funding formula continues to be problematic. In essence, this means that this Committee does not have the ability to solve the fundamental problem. We have, nevertheless, developed a package of recommendations that may reduce the problem for a period of time. Unfortunately, we were unable to offer solutions that will definitively sustain the long- term financial health of MTSD. While radical measures could conceivably be taken that might result in an entirely new operating model for MTSD, the 2
identification and practical implementation of such a model is beyond the reach of this Committee and not something we would suggest without evidence that educational quality and outcomes can be maintained. Moreover, the Committee does not have the resources to provide the kind of detailed cost/benefit analysis of its recommendations as might be provided by professional consultants. Ultimately, the Committee also believes that the School Board should be held accountable to the community to properly and publically evaluate the Committee s recommendations and to provide time tables and benchmarks for implementation of any such approved ideas. A two- part approach Our Committee has identified a two- part approach, designed to both provide some additional revenue and cost cutting suggestions, and to spur action in our community: Part One focuses on the near- term and calls for the implementation of an actionable package of steps that have been designed to create a short- term window of financial sustenance. The School Board s implementation of the Committee s package of recommendations would demonstrate the School Board s commitment to supporting the financial sustainability of MTSD despite lacking full power to address the problem. The package will also encourage the community to be involved in the short- term financial sustainability solution. Although some of the recommendations may lead to longer- term revenue streams, we believe that will still not be enough to ultimately solve the long- term problem. By implementing the package of ideas we have suggested, however, the School Board can tackle Part Two of our recommendations from a moral high ground, with recognition that it and the community have done a significant amount on their own. Part Two focuses on the long- term. As a Committee, we would suggest that the outcome of our work and the presentation of our ideas serve as the kickoff for a call to action to galvanize community support of a simple goal: bringing the financial destiny of MTSD back under local control. This is what the community must do if the long- term quality of MTSD is to be financially sustained. This will require a coordinated effort leveraging the scale and political clout of the community. By implementing all or most of the ideas presented in Part One, MTSD and the community will have a window of time to pursue what we believe is ultimately the only sustainable solution at the end of the day: dramatic change to the state funding formula. Consider all recommendations The Committee has offered certain actionable recommendations in response to its charge, with the understanding that the MTSD School Board should consider all of these ideas. It is essential 3
that the School Board understands that the Committee s recommendations are the result of negotiations among the Committee. Failure to consider any of the items will disturb the consensus that has been reached. SUMMARY OF RECOMMENDED ACTIONS TO MTSD SCHOOL BOARD PART I- IDEAS FOR THE SHORT- TERM 1) Manage costs and outcomes in a more business- like fashion: a) Continue to move teacher compensation away from seniority- based model towards pay systems based on merit, educator effectiveness and productivity. b) Use an interactive financial model to assess cost saving options. c) Explore and develop innovative and economical means of delivering quality educational programming. d) Consider outsourcing, consolidation and public private partnerships for service delivery. 2) Develop a long- range facilities plan. a) Aggressively seek to sell or lease excess MTSD assets, such as land and existing facilities. b) Seek MT Community Referendum to maintain a maintenance schedule and cover cost of capital improvements and life cycle replacements over a ten year period. c) Consider consolidation of facilities. 3) Increase Enrollment a) Commence a viable 4K program. b) Recruit resident and non- resident students comparably to private schools. 4) Develop and implement fund development strategies beyond MTEF to reach alumni, businesses and others interested in sponsorships, naming rights and donations. PART II- IDEAS FOR THE LONG- TERM 1) Inform MT Community about (i) how State revenue limits cause MTSD s budgetary shortfalls and (ii) how MTSD has and will be doing everything reasonably within its control to meet its financial obligations. 2) Galvanize the community around efforts to change the state revenue limits and funding formula to provide greater local control of school tax revenues. 4
DETAIL/BACKGROUND ON - PART I 1) MOVE TOWARDS A MORE BUSINESS- LIKE CULTURE REGARDING COST CONTROL AND MEASURING OUTCOMES Although many efforts of the MTSD reflect movement in this direction, a continued cultural shift in the thinking of administration and educators to recognize the value of business principles in managing public education is needed. Success in business is typically measured in profits to shareholders, but the community owners of MTSD want MTSD to produce well educated and prepared young citizens for society, not products for sale. Moreover, unlike a for- profit business, due to the funding formula and revenue limits MTSD does not have the option to balance its budget by charging more for its products when costs increase. Nevertheless, recognizing the differences between what schools and businesses are intended to produce, and the many constraints noted in this document, the Committee believes that applying lessons from business models is critical to attain financial sustainability. The following specific ideas should be included: a) The teacher compensation model needs to move away from a seniority- based model to one in which merit, educator effectiveness, educational productivity and labor market forces are the primary measures of compensation. Also, health insurance and retirement benefits need to continue to be managed so as to keep them competitive, but economical. Since teacher and other staff compensation and benefits account for roughly 80% of annual costs, finding a way to financially align all staff members with the financial goals of the MTSD would be a plus. Efforts already underway and under consideration by the MTSD should be detailed and publicized to demonstrate the MTSD s efforts in this regard. b) Use an interactive financial model to assess the financial impact of proposed or possible budget changes and to analyze the potential improvement to productivity and costs reduction. The model should include items such as: i. Annual Revenue by source ii. Annual enrollment by student type (resident, open enrollment, on line, etc.) iii. Expense spending by category iv. Inflation factors by revenue source and expense category v. Annual Student/Teacher ratios vi. Annual Student/Staff ratios 5
c) Explore the development of innovative, economical means of delivering quality educational programming. As technology and educational methodologies continue to evolve, the MTSD should continually explore the costs and benefits of more economical and efficient teaching delivery methods such as online courses or adjustments to class size. Such changes may impact staffing needs, which may be especially important if student enrollment continues to decline. Evaluation of such ideas should consider (i) the effectiveness of any new methodologies against the MTSD s standards for quality, (ii) long- and short- term financial cost savings, as well as (iii) possible revenue increases or declines due to the MTSD s customer/parent current expectations and desire for in person delivery methods. MTSD administration should examine opportunities for new and efficient quality delivery methods regularly and report to the Board every year on its evaluation and implementation or rejection of plans for any new and cost effective educational service delivery methods. d) Explore Outsourcing and Partnerships. Businesses frequently outsource functions or look for opportunities to work with others to save overhead and administrative costs and to focus on core objectives. As it has done with the outsourcing of custodial functions, MTSD should seek cost effective opportunities to outsource or consolidate service delivery with other school districts and to purchase services with other governmental units to obtain scale efficiencies. Consolidation of MTSD internal administrative functions should also be explored. Additionally, MTSD should continue to seek partnerships with local businesses to deliver educational opportunities. Administration shall examine outsourcing and consolidation opportunities regularly and report to the Board every year on its evaluation and implementation or rejection of plans for any consolidation of positions, facilities or service delivery and purchases. 2) DEVELOP A LONG- RANGE FACILITIES PLAN The MTSD School Board should annually evaluate a long range facilities plan recognizing the educational needs of the district along with development and demographic changes and potential impact of efforts to increase enrollment. The facilities plan should include the following: a) Land and Real Estate Sale or Lease. The MTSD should aggressively seek opportunities to sell and/or lease excess real estate assets such as the vacant land on Swan Road and existing facilities. Costs to rent or use the MTSD s facilities should be at market rate unless there are other benefits to the MTSD or communities from the uses. The proceeds of sales and/or leases should not be used for the MTSD s operating costs, but 6
they should be clearly identified and used in a way which also demonstrates the MTSD s efforts in the short- term to minimize the need for additional revenues. b) Referendum. A medium- term facilities referendum, such as one to pay over a period of ten years, should be sought to enable MTSD to deal with its aging and outdated facilities and maintenance issues. The proceeds of such a referendum should be used to adhere to a maintenance schedule which allows it to replace assets which have reached their life cycle end, and support its current maintenance needs, long- term capital improvements, and technology enhancements necessary to have facilities that meet the needs of education today and in the future. The underlying principles are that a successful referendum must be (1) carefully focused and clear that it is not being used for general operational costs, (2) supported with a well communicated rationale that fully explains why it is necessary, and (3) accompanied by measures that demonstrate the MTSD s dedication to sustaining high quality education in a cost- conscious, tax- sensitive manner. The referendum should specify the work that will be done with the generated monies and provide a short- and medium- term cushion to budget shortfalls created by unanticipated repairs and maintenance projects that would otherwise come out of annual operating funds, while maintaining a sufficient fund balance. c) Consolidation. MTSD should regularly explore the costs and benefits of physically consolidating and/or reconfiguring its schools to achieve efficiencies. Administration shall examine such consolidation opportunities regularly and report to the Board every year on its evaluation and implementation or rejection of plans for any consolidation of facilities. 3) INCREASE ENROLLMENT Since the state funding formula is directly tied to enrollment, MTSD should undertake efforts to increase enrollment including the following strategies: a) 4K Program. Consistent with the research that has been done by MTSD demonstrating long term financial benefit, MTSD should institute a 4K in- house program as a long- term revenue generating strategy. Although it is anticipated that the fund balance may need to be used initially for the start- up costs, it is anticipated that within a period of approximately three years, the program will generate funds for the MTSD. Such programs will allow for more overall student enrollment and will also allow for enhanced educational programming and quality, while attracting and retaining more young families and students who become invested in the MTSD s schools. 7
b) Recruit Students. MTSD should, to the fullest extent it can improve its financial picture while maintaining the quality of its outcomes, aggressively seek to recruit (i) resident students otherwise inclined to attend private schools and (ii) non- resident students. The MTSD should increase open enrollment seats and aggressively solicit students, especially for the earlier grades. The MTSD should also work with the City of Mequon and the Village of Thiensville to encourage residential development in order to attract families with school- aged children, while also encouraging an increase in commercial development to help equalize the tax base distribution and reduce the tax burden on homeowners. 4) FUND DEVELOPMENT Much as private schools do, MTSD should develop a fund development strategy beyond the largely parent- focused nature of MTEF. This group of ideas includes an alumni association, endowed teacher chairs, advertising, corporate or memorial naming rights, area business partnerships and sponsorships, and the like. This may need to be generated through a dedicated development individual or third party professional service. It is understood that some of these fundraising ideas could be instituted faster and at less expense than others. - PART II 1) COMMUNITY INFORMATION CAMPAIGN. The MTSD should engage in an organized and multi- faceted information campaign to enlighten the community about the impact of state mandated revenue caps on the MTSD s budget. The information campaign should seek to adjust or manage the community s expectations as to the MTSD s ability to provide, in the future, a top quality education as a result of the revenue caps. Part of the campaign should include detailed information highlighting the efforts of MTSD to maintain fiscal responsibility to date and the likely impact of continued budget shortfalls on MTSD s educational offerings and outcomes in the future. 2) GALVANIZE THE COMMUNITY. MTSD should take the lead and encourage community initiatives to change the state revenue limits and funding formula to provide greater local control of school tax revenues. Community members should be encouraged to talk with their legislators about possible changes to the State s revenue formula to reassert local control over money available for local schools. 8