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Numerous factors contributed to Janesville school budget crisis

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FRANK J. SCHULTZ
April 17, 2011
— Why is the Janesville School District facing the biggest cut in teaching staff in its history?

Why aren’t most other school districts suffering nearly so much?


Other districts are working with a decrease in state aid. Other districts are facing a virtual freeze on property taxes next year.


But Janesville’s predicament seems especially harsh.


The answer is not simple.


A variety of factors have combined to create a perfect storm crisis in the local school budget, leading to a projected $13.4 million budget shortfall next school year—11 percent of its budget.


Teachers contract

One factor is bad timing, notes Joe Quick, lobbyist for the Wisconsin School Board Association.


“There are currently two types of districts in the state: those with settled contracts beyond 30 June 2011, and those who do NOT have a settlement,” Quick wrote in an email.


Districts that don’t have settlements will be able to require unionized employees to start paying more for their retirement and health insurance. Meanwhile Janesville, which settled a four-year teacher contract last September, can’t do that until July 2013.


Two other district unions have the same timeline, but the teachers account for the lion’s share of the costs.


If all employees had to pay the retirement and health costs as Gov. Scott Walker has proposed, the district would save $5.8 million in the coming year, Janesville School Board President Bill Sodemann noted. Union contracts keep that from happening.


The authority to impose these costs on employees is part of Walker’s budget repair bill, which still faces court challenges.


Compare Janesville’s situation with Milton and Edgerton, whose old contracts were set to expire July 1. Both those districts sewed up contracts quickly with the budget repair bill hanging over their heads, with significant concessions from the unions.


The Milton and Edgerton school budgets appear to be in good shape for the coming year, officials have indicated.


But even before Walker was elected, the Janesville School Board knew teacher pay hikes would haunt them. The board approved the teachers contract on the narrowest of margins, 5-4, on Sept. 22.


Sodemann predicted at the time that the board would have to cut 80 or more jobs as a result of the contract. Indeed, the administration was projecting a $10 million deficit before Walker turned Wisconsin school finances on their head.


“We all knew this year would be devastating,” board member Lori Stottler agreed.


“If we knew that Walker was going to make this happen, I don’t think there’s any way this contract would have passed,” even though the teachers deserved a raise, board member Peggy Sheridan said.


The increase in salaries and benefits for all employees next year is $3.86 million. Health insurance is expected to increase another $2.6 million.


Diminishing choices

Stottler said the board has been cutting for years, but it stayed away from cutting teachers , even when teachers could have been cut for enrollment reasons.


The budget-cutting mantra has been “as far away from the classroom as possible.”


Now, there’s not much choice.


“We’ve been in declining enrollment for three, four, five years, and we’ve been trying to stave off doing any staff adjustments,” said board member Peter D. Severson.


“We’ve been cutting other things, and now we’re stuck where we have to get into (cutting) the staff.”


“In hindsight, we probably should have been cutting some staff all along,” Sheridan agreed.


Taxing freeze

The board probably was going to raise taxes and was counting on no increase in state aid as part of its solution for 2011-12. But Walker’s state budget cuts school funding and freezes property taxes, leaving Janesville with about $3 million less that it otherwise could have used.


Walker said he was giving schools the tools to deal with his cuts, but Janesville didn’t get those tools. The unions could have re-opened their contracts to make concessions, but they wouldn’t. The teachers union said its lawyers told it that re-opening the contract could have endangered the entire contract.


Declining enrollment

Beyond the drama at the state level, Janesville had problems. One was the loss of students.


Wisconsin school funding is tied to enrollment—more kids, more money. Enrollment is tied to families, and families are tied to jobs, and jobs that support families have gotten scarce since General Motors and related companies shut down in 2008.


Enrollment dropped by 175 over the past two years, resulting in a loss of state aid of $2.8 million next year.


Below the max

The school board, citing the poor local economy, took pains to keep tax increases to a minimum . The state imposes a cap that holds taxes down, but the board went even lower.


“I think we were looking more at the present than out toward the future,” Severson said. “... We were trying to stave off some hardship for the people of the district.”


When a district taxes less than the maximum and then spends less, the state reduces aid in subsequent years, essentially penalizing schools for being frugal.


Most districts tax to the max as a matter of course.


No one has analyzed exactly what the district’s finances would be today if Janesville had taxed to the max.


“It’s my feeling that if we had been taxing to the max all along, first of all, the community would have strung us up by our toenails, and we’d still be in the position of having layoffs,” Sheridan said.


Two more

Two other items helped the board hold the line on taxes this year: district reserves and federal stimulus money that was targeted at preserving teacher jobs. Those combined for $4.1 million in this year’s budget, but that money is not available for the coming year.


Difficult future

Sodemann warned that 2012-13 could be even more difficult, albeit without as many layoffs. The problem is that the union contracts call for more pay increases.


“So, two years of very, very, very challenging times,” Sodemann said.


Relief could come in 2013-14, when the union contracts run out and employees would have to pay more for their benefits, Sodemann said.


“I don’t really want to blame anyone in this,” Severson said. “We’re where we are at, and we’re dealing with it. …”


“I’m trying to stay optimistic,” Severson continued. “This year is going to be a little tough. Next year is going to be tough adjusting services to the staffing level we have. … We’re going to be a better district for this.”


One way to get better, Severson and Stottler suggested, is to establish a long-range financial plan so the board can anticipate rather than constantly react to changes in the financial landscape.



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