Mequon-Thiensville School District

School Finance & Budget Crisis Resources

Despite what was described as a “historic” year in funding for public school districts across the state of Wisconsin after Governor Evers signed the biennial budget in July 2023, MTSD does not stand to benefit substantially from state funding as a lower-spending, property-rich community. Instead, we are projecting historic budget shortfalls upwards of $6 million beginning in the 2024-25 school year and into the foreseeable future. To address this financial crisis, MTSD must find ways to increase revenue streams while reducing operating expenses.

Text on a dark blue background reads: 'What is the budget crisis?'

We are projecting deficits upwards of $6 million beginning in the 2024-2025 school year. This budget crisis is the result of decades of inadequate funding from the state of Wisconsin, the lingering effects of historic inflation and rising costs of goods and services, implementation of unfunded mandates, and a low percentage of reimbursements on costs associated with providing required special education services to students who qualify.

Text on a dark blue background reads: 'How are public schools funded?'

Wisconsin’s public schools are funded using a combination of state aid and revenue from the local tax base. MTSD receives approximately 2.6% of revenue limit authority from state aid, and 97.4% from local taxes. This is because MTSD is considered “property-rich,” which means that the state sees our school district as having a greater-than-average ability to access funding from the local tax base.

Text reads: What has MTSD done to balance previous budgets?

The Mequon-Thiensville School District has a long history of maintaining financial prudence and responsibility, even in challenging times. We are proud of our ability to budget conservatively, spend wisely, and ensure that we are getting the most out of every dollar. This status has been reaffirmed for more than a decade through our consistent Aaa bond rating from Moody’s. Most recently, MTSD has taken several steps to balance our budget and close the gap created by increasing costs. (See the "Managing Budget Deficits" image below)

Text on a dark blue background reads: 'Is this just an MTSD problem?'

No. Financial challenges are increasingly common among Wisconsin’s public school districts. Since revenue limits were established by the state of Wisconsin in 1994, public school districts have been funded primarily with a combination of state aid and local property taxes. Unfortunately, revenue limits have not kept pace with inflation and since then, 80% of public school districts across the state of Wisconsin have approved operating referenda to maintain adequate programming.

Text on a dark blue background asks: 'How does the budget crisis affect YOU?'

If the MTSD Board of Education and administration fail to secure an adequate and sustainable source of funding to meet our budgetary needs going forward, the District will be forced to make extremely challenging decisions regarding ways to cut operating expenses. Some of those options include cutting co-curriculars or programming, increasing class sizes, reducing or eliminating administrative/other staff positions, and more.

It is our goal to equip our school community and stakeholders with the knowledge and information necessary to address this critical situation and find a solution through shared understanding.

To learn more about the budget crisis and how it is affecting MTSD, please click on the images below.

What is the budget crisis?

MTSD is experiencing a budget crisis. We are projecting deficits upwards of $6 million beginning in the 2024-2025 school year. This budget crisis is the result of decades of inadequate funding from the state of Wisconsin, the lingering effects of historic inflation and rising costs of goods and services, the implementation of unfunded mandates, and a low percentage of reimbursements on costs associated with providing required special education services to students who qualify.
Wisconsin’s public schools are funded using a combination of state aid and revenue from the local tax base. MTSD receives approximately 2.6% of revenue limit authority from state aid, and 97.4% from local taxes. This is because MTSD is considered “property-rich,” which means that the state sees our school district as having a greater-than-average ability to access funding from the local tax base.
The amount of funding that public schools receive from the state has been lagging behind inflation since 2009, resulting in a gap of more than $3,000 per pupil for the 2024-2025 school year.
Projected deficits in the MTSD for the 2024-25 and 2025-26 school years are nearly $5 million. These projected deficits take into account the state-level funding that was granted to public school districts as part of the Wisconsin state biennial budget process for 2023-25.
This budget crisis is the result of record-high costs of goods and services, lagging state funding compared to inflation, and an inadequate reimbursement rate of just 33% for costs associated with providing mandated special education services to students who need them. The district receives an additional 5.5% in revenue from state and federal grants, but 61.5% of costs for special education are funded using the general education budget, which serves all students.

Why is it happening now?

The budget crisis being experienced by MTSD, along with many other public school districts in the state, has developed as the result of several factors: lack of sustainable funding from the state, the lingering impact of historic inflation, rising costs of transportation, fuel, utilities, staff compensation, insurance and benefits increases, technology costs, and implementation of unfunded mandates related to special education, curriculum changes (financial literacy requirement, Act 20 early literacy requirement), and the required implementation of systems related to academic and career planning and social and emotional supports.

Wisconsin public school districts derive their revenue through four major sources:
- State aid
- Property tax
- Federal aid
- Other local non-property tax revenues (such as fees and interest earnings).
Under current law, there is a limit (a Revenue Limit) on the annual amount of revenue that each school district can raise through the combination of state aid and property taxes.
To understand the basics of how public schools are funded, we will focus on three areas:
1. Revenue Limits: A district’s revenue limit authority is the maximum amount of revenue that may be raised through state general aid and property tax.
2. Equalization Aid: Equalization Aid is intended to lessen the impact on the local tax base - An increase in equalization aid does not create more spendable dollars for a district.
3. Tax Levy and Mill Rate: Tax levy distribution is based upon equalized value, which is the estimated value of all taxable real and personal property in a taxation district. The value represents market value, or, the most probable selling price. A mill rate is a figure many municipalities use to calculate property taxes. One mill is 0.1 cents or one-thousandth of a dollar.
4. An individual taxpayer’s school levy impact can change year to year due to changes in assessed value, and assessment ratio.
The state funding formula is inequitable. The school funding formula in Wisconsin is based on what districts were spending in the 1993-94 school year when revenue limits were enacted. At the time these limits were put into place, spending across districts varied by 250%, due to construction projects vs reduction in spending. Every school district in the state receives a different dollar amount per student, creating different funding levels between districts.
Federal funding increases have not been predictable over time. A school district’s funding is determined every two years through the state of Wisconsin’s budget process, and funding mechanisms through the state budget have a different impact depending on your district.
The amount of funding that public schools receive from the state has been lagging behind inflation since 2009, resulting in a gap of more than $3,000 per pupil for the 2024-2025 school year.
Special education reimbursement factors heavily into our budget deficits. MTSD is currently reimbursed for just 33% of special education costs, which we are required by state law to provide to qualifying students, creating a sizable deficit. This low reimbursement rate impacts all students, as schools must use general education funds to fill the gap. In MTSD, this results in the spending of at least $5 million annually from the general education fund to support the required services provided to students receiving special education programming.

The Mequon-Thiensville School District has a long history of maintaining financial prudence and responsibility, even in challenging times. We are proud of our ability to budget conservatively, spend wisely, and ensure that we are getting the most out of every dollar. This status has been reaffirmed for more than a decade through our consistent Aaa bond rating from Moody’s. Most recently, MTSD has taken the following steps to balance our budget and close the gap created by increasing costs:
1. Implemented a leadership reorganization where MTSD transitioned from six executive director positions across seven departments to three executive director positions across four departments and with it, realized a savings of over $200,000.
2. Opened up additional open enrollment seats to increase student enrollment and generate additional per-pupil revenue without creating additional expenses.
3. With guidance from the MTSD Board of Education’s legislative platform position on public school funding, the District engaged in legislative advocacy efforts in support of increased school funding.
4. Introduced the use of debt defeasance, or pre-paying on the District’s debts to keep future costs down, for the 2017-18 school year budget.
5. Used a combination of Fund Balance and Fund 46 to manage a $1.5 million deficit for the 2023-24 school year budget. This means the District has used our “cash on hand” to balance the budget, and it is not considered a sustainable or recommended practice in balancing future budgets.
6. With direction from the MTSD Board of Education, MTSD engaged district stakeholders in a Community Task Force process to develop recommendations for increasing revenue streams into the district to offset the budget crisis.
7. Implemented a Zero-Based Budgeting process, which helps an organization consider what expenditures are no longer required.
What options is the District considering to manage finances long-term?
- After the 2023 Community Task Force process, the task force recommended a “bundled approach” to addressing the budget crisis. This approach consisted of a possible operating referendum, the launch of a philanthropic giving campaign, and the use of Fund 46/Fund Balance (the district’s “rainy day fund”). These recommendations have guided further discussion on the budget crisis by the Board of Education and MTSD administration.