If a proposed $640 million referendum for Milwaukee Public Schools (MPS) passes, local taxpayers won’t be the only ones on the hook. A referendum of this size would result in as much as $200 million additional dollars in state money to MPS.
How does a local decision to raise their own taxes affect state finances? Because shared costs between state and local governments work differently depending on the property wealth of a district.
When a district with substantial property wealth votes for a referendum, the effect is some reduction in state aid, with local taxpayers shouldering more of the burden. But when a low-property wealth district like Milwaukee passes a referendum, a portion of that cost is born by the state. This aid comes through what is known as Equalization Aid — funding designed to create spending equality across all of Wisconsin’s more than 420 school districts.
To estimate the impact on Equalization Aid, I used the Department of Public Instruction’s Equalization Aid worksheet, and altered the amount of shared cost for Milwaukee by the proposed amount of the referendum.
A few cautionary notes are worth mentioning here. First, this worksheet simplifies the process, so the figures presented here are estimates. It should also be noted that if the referendum amount varies substantially from the amount in news reports, or if the time frame for the funding changes, these estimates would be further off. Finally, if other districts implement referenda at the same time, this calculation would change.
I include both MPS’s $640 million proposal, as well as the smaller “Plan B” proposal estimated at $319 million.
In the event that a referendum succeeds, Milwaukee taxpayers will bear a substantially larger share for the cost of educating Milwaukee students than they do currently — about $403 million. But the state would also be on the hook for sending as much as an additional $227 million dollars to MPS (on top of the more than half billion dollars the state sends to MPS each year). Even under the more modest Plan B, the state would provide an estimated $103 million in additional funding to the district.
Exactly how an MPS referendum and the additional state spending would affect other districts in is difficult to determine, but the most likely outcome is across-the-board Equalization Aid cuts. Because the Equalization Aid formula is a sum-certain appropriation from the legislature, a substantial increase in the amount of funding that would go to Milwaukee would negatively impact the aid to all of the other districts in the state.
The proposed $640 million referendum for Milwaukee Public Schools would dwarf any other referenda considered in the history of the state. And typically, a reasonable response would be to leave it to Milwaukee taxpayers as to whether they want to increase their own taxes to further support a district with many schools with proficiency rates of less than 10% in reading and math.
But this analysis poses difficult questions about the wisdom of Wisconsin’s referendum system, particularly when it comes to large referendums. Why, after all, should taxpayers in one part of the state be able to vote to take away school funding from another? Far from a local control issue, taxpayers throughout Wisconsin would be justified in making their voices heard on this outlandish Milwaukee proposal.
Dr. Will Flanders is the Research Director for the Wisconsin Institute for Law & Liberty.