'We could've pushed harder': State superintendent discusses MPS fiscal mess, changes state will make in response

MILWAUKEE (CBS 58) -- Wisconsin's top education official said in an interview Friday the state Department of Public Instruction (DPI) is considering changes to how it handles districts falling behind on their financial reporting. 

The policy revisions would largely be in response to a fiscal crisis Milwaukee Public Schools (MPS) is now facing. The state's biggest district is now nine months late on turning in audited versions of last year's finances.

Beyond that, MPS' data from the previous year was inaccurate, leading to overpayments to the district. To make up for those dollars, DPI officials estimate they'll end up deducting between $35 million and $50 million from MPS' general state aid for the 2024-25 school year.

State Superintendent Jill Underly said she first was alerted to MPS' financial mess in late April. She said, at that time, DPI officials were not alarmed by that seven-month delay.

"[In 2023], MPS was late with different reports. They released one in the end of March, and then two in mid-April," Underly said. "So, by mid-April [of this year], we were still not concerned."

Because MPS still has not provided that necessary data, and won't until September, according to its corrective action plan, DPI officials are now working closely with district to get as accurate a number as possible.

That information is essential for the state's aid formula, which determines what every public school district in Wisconsin receives. The state gives early estimates to districts on July 1.

"By that point, I feel we will be in good shape with numbers," Underly said. "The official aid release, or the certified aid, is October 15, and we have time and I feel we're in good shape."

Underly acknowledged Milwaukee's financial reporting can have an outsized impact on the rest of the state. Because of that, she said the DPI is having internal discussions about how it will approach districts' delayed reporting going forward.

"In hindsight, yes, we could be doing things differently. Perhaps there's different communication we could be using," she said. "Clearly, we could've pushed harder in different ways, but moving forward, we certainly want to improve our practices."

Underly said those changes could include sharing publicly which districts are late on reporting their finances and which specific reports they've yet to turn in. DPI officials said about 20 districts statewide, about five percent of Wisconsin's public districts, had not reported last year's finances by this past February.

When asked who at MPS was ultimately responsible for the board being left in the dark, as board leaders have said was the case until a DPI letter in late May, Underly said top district administrators should have spoken up sooner. 

"It's really the business office," she said. "And you have to rely on those conversations between the superintendent and those who report to the superintendent."

It's still not clear what exactly some officials at the state and district level knew before the April referendum, where Milwaukee voters narrowly approved a $252 million property tax increase for MPS. Milwaukee was one of 84 Wisconsin districts that went to referendum last spring.

Underly said she hoped the frustrations over MPS' fiscal reporting mishaps wouldn't lead to voters in other communities rejecting their district's referendums this fall.

"Passing a referendum is what we need to do in order to teach kids how to read and hire teachers and make sure that they have art and music," she said. "And not passing a referendum is therefore suggesting that we're gonna punish kids for problems that adults created."

A trickle-down effect on the district

So far, the MPS financial scandal has cost the jobs Superintendent Keith Posley, Chief Financial Officer Martha Kreitzman and Comptroller Alfredo Balmaseda. 

The district has hired former Waukesha Superintendent Todd Gray to help lead the district through at least July 31 as MPS seeks an interim superintendent and a new CFO. Gray has said the district's use of outdated financial software and a shortage of well-informed staff largely caused the crisis.

While MPS leaders focus much of their energy on getting the district's finances back on track, MPS's fourth grade reading and math scores rank near the very bottom among American big city districts. 

Underly said she was optimistic the district's finances could still turn around, and she added the state should be more involved with that effort.

"When I look at MPS, I don't see anything insurmountable," she said. "There are lots of examples of school districts throughout the nation that are MPS' size or larger that are entirely functional, and kids are successful."

Poverty explains a large part of MPS' struggles. Only five urban districts in the U.S. have a greater share of students in poverty than Milwaukee. Underly cited Houston and Baltimore as large urban districts with comparable poverty rates but more encouraging results. She said the goal for the state and MPS is finding aspects of those districts that could translate to Milwaukee.

"They're gonna have features that might work at MPS and other features that wouldn't," she said. 

Special concerns 

Underly said when the state Legislature returns to session next year, a priority for DPI will be convincing lawmakers to increase funding for special education.

Currently, Wisconsin reimburses districts for 33% of their special education costs. Underly said the agency's target is nearly doubling that rate to 60%.

"If we were to increase our special education reimbursement costs, our school districts would be doing a lot better financially," Underly said.

With dozens of districts likely to seek additional funding through referendums either this fall or next spring, Underly said greater special education support could relieve pressure on districts in other areas, which would make them less inclined to seek additional aid via property tax hikes.

"You will see districts being able to use that money to fix the roof, to upgrade their facilities, to provide additional pay for teachers' salaries," she said. "To make sure they're able to hire an extra teacher for reading coach or math coaching."