Deficit Spending: Declining Madison School District Equity Fund Balance

Fund Balance as Percent of General Fund Expenditures FY 2000 Thru FY 2006 Source: Wisconsin Taxpayers Alliance
	FY 00	FY 01	FY 02	FY 03*	FY 04	FY 05	FY 06*
K-8 AVERAGE	22.4%	15.7%	20.3%	18.0%	20.2%	20.0%	18.6%
UHS AVERAGE	24.1%	22.3%	23.6%	21.2%	25.8%	25.4%	22.6%
K-12 AVERAGE	15.2%	23.9%	15.1%	13.8%	14.5%	14.7%	13.4%
MMSD ACTUAL	18.9%	16.4%	12.1%	12.2%	7.7%	7.1%	7.1%
MMSD Budget	$252M						$333M
Equity Fund (M)	$48M						$24M

Related:

• Lawrie Kobza publicly discussed the MMSD's $6M Structural Deficit with Superintendent Rainwater during a November, 2006 board meeting:

  "Why did our equity go down this past year since we, the board, passed a balanced budget in 2005/2006? Why did it go down by $2.8M (about a 1% variance in last year's $319M+ budget)?
  
  Answer: "Negative expenditure of $6M in salaries (tuition income was down, special ed high incidence aid was down) $5.9M "structural deficit in place"."

• Structural Deficit will increase MMSD revenue shortfall.
• 2007 / 2008 MMSD Budget Outlook: Half Empty or Half Full?
• 2007 / 2008 Budget Discussions Begin
• Property Tax Levies in Wisconsin #1 As a % of Home Values

The Administration used a "salary savings" account to "balance" the budget. When such savings did not materialize, the MMSD's equity (the difference between an organization's assets and liabilities) declined.

Interestingly, Madison School Board members Beth Moss, Carol Carstensen and Maya Cole have advocated the continued reduction in the District's equity as a means to help balance the 2007 / 2008 $339M+ budget. Beth proposed budgeting an additional $2.133M in "salary savings" above the planned $1M while Carol sought $2M and Maya asked for an additional $500K. [Board member proposed 2007/2008 budget amendments 540K PDF]

Finally, several years ago, I received an email from a person very concerned about the "dramatic" decline in the MMSD's "reserves", which according to this person were, at one time over $50M. I asked for additional data on this matter, but never heard from that person again.

The equity fund's decline gives the MMSD less wiggle room over time, and means that we, as a community face decisions related to facilities, staffing and services. Hopefully, the MMSD board and administration can start to consider and implement new approaches, including virtual learning tools and expanded collaboration with community assets like the UW, MATC and others. I hope that we can move beyond the annual "same service approach" and begin to think differently. Peter Gascoyne's 5 year approach to budgeting is a good place to start

"[Ask] what is the best quality of education that can be purchased for our district for $280 million a year. Start with a completely clean slate. Identify your primary goals and values and priorities. Determine how best to achieve those goals to the highest possible level, given a budget that happens to be $40 million smaller than today’s. Consider everything – school-based budgeting, class sizes, after-school sports, everything."

A definition of "equity". 2007 / 2008 $339M+ MMSD Citizen's Budget Posted by Jim Zellmer at April 25, 2007 5:26 PM
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