Act 10, budget cuts have lasting effect 10 years after controversial legislation

In 2011, Wisconsin spent around $1,100 more per student on public schools than the United States average. In the years since Act 10, that amount has been dramatically sliced, to $327 lower than the national average per student.

That drop is a product of decisions throughout former Gov. Scott Walker’s tenure, but it can, in part, be traced back to the significant budget cut adopted in the 2011-13 biennial budget, as he and the Republican-controlled Legislature faced a deficit when entering office. 

That cut alone brought Wisconsin down to just over $400 above the national average per pupil spending, according to a recent Wisconsin Policy Forum report citing U.S. Census Bureau figures.

To give school districts “tools in the toolbox,” as Walker often put it at the time, the “Budget Repair Bill” — later known as Act 10 — was an attempt to offset that one-time cut by giving school districts flexibility in how much they paid for benefits and health insurance.

A decade after the historically controversial legislation’s enactment, along with the $452.1 million less in school spending that year, the WPF report illustrates the long-term effect. The national average first surpassed Wisconsin’s per-student spending in 2015 and the divide has grown since then through 2018, the last year the Census Bureau figures are available.

Decisions on school spending throughout Walker’s tenure compounded that initial cut in what remains by a wide margin the largest spending category in the state budget. The conservative governor focused his 2018 re-election campaign on education and included an increase in K-12 funding in his final budget proposal.

School spending does not always guarantee better student outcomes, but if spent in the right areas it can have an effect. More money can allow for more staffing and regular building maintenance, for example, which can ensure suitable learning environments and help save on long-term renovation costs.

'Never enough money'

Schools are funded through a complex financing system that includes a mix of local funds from property taxes and state aids. Revenue limits, created in the mid-1990s in what the Wisconsin Taxpayers Alliance (which combined with the Public Policy Forum to form the Wisconsin Policy Forum) called “a major overhaul of school finance,” put a cap on how much districts can raise between those two combined sources.

“This formula we have, the technical term would be ‘completely wacky,’” said University of Wisconsin-Madison law and education professor Julie Underwood.

[A decade of fallout: Divisions sparked by Act 10 endure in Wisconsin politics]

Decisions over the last decade have created a “pitiful” school finance situation in Wisconsin, Underwood said, adding that the increase in spending for private school vouchers and independent charter schools mean “we’re basically funding two systems” of education.

She was among the experts to serve on a Blue Ribbon Commission for School Funding in 2018, and recalled experts using that same term during their testimony. Many of the commission’s recommendations, including things like funding full-day 4-year-old kindergarten, remain without action from state legislators.

“The challenges of education and the challenges of our state have increased during the time that the state Legislature has divested funds for public education,” Underwood said.

Former Republican state Sen. Luther Olsen, who co-chaired that commission, said its most significant work was focused on how to help districts with declining enrollment avoid a sudden loss in funds, a challenge many districts face around the state. Olsen also suggested that expansion of choice programs was not as harmful to public schools as some critics say.

“I think we gave schools what they would’ve gotten, percent increase per student, whether there was choice kids or not,” he said. “Choice was extra money and schools got, I think, what they were going to get no matter what.”

He agreed with Underwood that schools could use more funding, “but being realistic, how much more can you spend?”

“There’s never enough, but there’s never enough for anything,” Olsen said. “People will say, ‘the state needs to spend more money on schools.’ Yeah, I agree.

“But it’s just like everything else in life, there’s never enough money, there’s always more needs and wants than there is dollars available.”

Did Act 10 balance cuts?

In the 2011-13 budget, the state reduced school aid by 8% and lowered state limits on school revenues by 5.5%, according to a WTA report.

To help districts handle the cut came Act 10, along with its historic protests. The 2012 WTA report measured its impact, finding that savings generated from lower benefit costs “covered about four in every five dollars school districts lost” because of the revenue cuts.

“The short answer to the ‘big’ question — did the tools adequately protect school districts from lost revenues — is yes and no,” the report states.

[Cap Times kicks off Act 10 anniversary series]

Some districts did not take “full advantage” of the benefit changes newly allowed, the report notes, but those that did use them most broadly generally experienced fewer staffing cuts. One-hundred-and-thirty districts generated more in benefit savings than they lost in revenue.

Over the long term, conservative supporters of Act 10 point to total budgetary savings of $13.9 billion in the first nine years after its enactment, according to a conservative Maciver Institute report published earlier this month. That report found those savings were largely due to lower public employee pension and health care costs covered by taxpayers.

The 2020 WPF report noted that in 2002, Wisconsin spent the most per pupil on school employee benefits at just over $2,000, and remained above the national average through 2012, when there was a “sharp 15% drop.” As of 2018, Wisconsin ranked 28th in the nation in per pupil spending on school employee benefits.

For employees, however, putting more toward their own benefits has not been balanced by salary increases. The WPF report notes Wisconsin average salaries per pupil increased by 7.2% from 2011-18, well below the national average of 13.1%.

History of school funding

In the mid-1990s, the state’s major overhaul of school finance included what’s known as an “equalization formula.”

UW’s Underwood described that measure as “a formula that makes sure that school districts that have low property values get a chance to spend as much money as necessary for an adequate education for their kids.” The change also created a revenue limit, a maximum amount districts could raise through the combination of state aid and local property taxes.

Over the decade following the changes in the 1990s, the state regularly raised the revenue limit each budget in a fashion that Underwood called predictable. But during much of Walker’s tenure, revenue limits were frozen, instead offering some increases in per-pupil aid in the state budgets.

“So they would give a school district state money, but not allow them to spend it because the revenue limit wasn’t increased,” Underwood said. “It’s a real sleight of hand. The functional effect of that was to just cut property taxes.”

[Madison School Board begins early planning, prioritizing for 2021-22 budget]

It also meant they were paying the same amount for a student whether they lived in a “property-rich” district, where “you can garner lots of money by taxing even modest amounts, or “property-poor” district, which “can tax themselves silly and not get what a high property value district can get,” Underwood noted.

Olsen said “the thought was, ‘Let’s give every student more money,’” and it was a way to get support from other legislators even as it “worked in direct opposite effect of equalized aid formula.”

“It’s hard to pass a budget when you have legislators that say, ‘Well my schools aren’t going to get any more money and they have to raise property taxes,’” Olsen said.

That method led Wisconsin to rank 49th in the nation in terms of percentage change in per-pupil spending increase between 2011 and 2018, according to the WPF report. Wisconsin’s per-pupil spending increased by 4.3% in that time compared to a national per-pupil increase by 18.9%.

Voters in many places around the state have counteracted the eight years of limited growth for revenue caps by approving plans for their district to surpass the limit. This past November, despite the many unknowns surrounding the COVID-19 economy, voters approved 43 out of 51 school referenda, including 25 of 30 to allow school districts to surpass those limits.

“One of the things that we have in how we fund schools is we have that relief valve that says you can go to referendum,” Olsen said. “That’s a pain to do that, but we say if your community wants to raise their taxes ... as voters, you can do it.”