Property Tax Effect – Madison School District

As the cost of running the district continues to rise, and as Madison homeowners and families find it increasingly difficult to make ends meet, it is easy to think that our property taxes are also ever rising. But that’s not the case, at least as regards the portion that goes toward our schools. Over the past 15 years, the schools’ portion of Madison property taxes has declined 6%, on average. The decrease is 9% if you adjust for today’s higher enrollment figures (1993 = 23,600; 2007 = 24,200). And it plunges to a 36% decrease if you adjust for inflation; (a dollar today is worth 30% less than it was 15 years ago).
The chart below, based on local funding of MMSD and data from the city assessor’s office, shows the recent history of school mill rates, the rate that is applied to your assessed property value to determine how much you contribute towards Madison schools (10 mills = 1.0% of the assessed property value). The reported rate has dropped from 20 mills to 10, but property values have doubled thanks to the general rise in home prices (termed “revaluations” by the assessor’s office), so the rate is more appropriately captured below by the “Net of Revaluations” line. That line is then adjusted for school enrollment (the red line), and inflation (the heavier blue line).

There are three important caveats to the above statements: 1.) school taxes are lower on average, but if your home has increased in value by more than about 110% since 1993, then you will be paying more for schools; 2.) it is the schools portion of property taxes that is lower on average; the remaining portion of property taxes that pays for the city, Dane County, Wisconsin, and MATC, has risen; 3.) other sources of Madison school funding (state and federal funds, and grants and fees) have also gone up; (I have not done the much more complicated calculation of real increase in funding there).
That the infamous schools’ portion of property taxes has declined over these past 15 years is quite a surprising result, and certainly counterintuitive to what one might expect. How is this possible? First, the school finance structure put in place by the state years ago has worked, at least as far as holding down property taxes. The current structure allows about a 2% increase in expense each year, consistent with the CPI (Consumer Price Index) at the state level. (In fact, local funding of the MMSD has increased from $150 million in 1993 to $209 million in 2007, equivalent to about a 2.4% increase each year.) Of course, the problem is that same structure allows for a 3.8% wage hike for teachers if districts wish to avoid arbitration, an aspect that has essentially set an effective floor on salary increases (with salaries & benefits representing 84% of the district budget). The difference between the revenue increases and the pay increases, about 1-2% annually, is why we face these annual painful budget quandaries that can only be met by cuts in school services, or by a referendum permitting higher school costs, and taxes.
The second reason today’s property taxes are lower than they have been historically is growth, in the form of new construction (i.e. new homes & buildings, as well as remodelings). What we each pay in school property taxes is the result of a simple fraction: the numerator is the portion of school expenses that is paid through local property taxes, while the denominator is the tax base for the entire city (actually the portion of Madison and neighboring communities where kids live within the MMSD). The more the tax base grows, the larger the denominator, and the more people and places to share the property taxes with. Since 1993, new construction in Madison has consistently grown at about 3% per year. Indeed, since 1980 no year has ever seen new construction less than 2.3% nor more than 3.9%. So every year, your property taxes are reduced about 3% thanks to all the new construction in town. I leave it to the reader to speculate how much the pace of new construction and revaluations will decline if the schools here should decline in quality.
FYI, the figure below shows how new construction and revaluations have behaved in Madison since 1984, as well as total valuations (which is the sum of the two).

21 thoughts on “Property Tax Effect – Madison School District”

  1. Interesting statistics and I agree with some of your points, but I have some questions, too.
    You have included only local revenues in the figures you have given for MMSD’s budget. Why is that? MMSD’s total budget is quite a bit larger than reflected in local revenue.
    Total MMSD budget figures show about 50% increase since 1995. If 36% of that is inflation, then you have just about enough left over to cover the 1-2% difference between QEO and revenue cap without the need for cuts and referenda.

  2. Thanks for your questions Donald. I focused on the local portion for two reasons.
    First, my whole intent was to focus on property taxes, particularly as the referendum is all about increasing only them. And property taxes go completely toward the local portion of the schools’ funding.
    Secondly, whatever increases are going on over time, I want to understand what is driving them. In the instance of property taxes, by gathering the assessor data I was able to determine, and more importantly, understand, why the local portion has behaved the way it has (i.e. it’s essentially held flat because district expense increases have been more than matched by new construction that spreads those extra costs over more people & places).
    As regards the non-locally funded piece, as I mentioned, I did not look at that simply because I knew it would involve a lot more work. Again, I don’t want to just obtain numbers (like 50% increases since 1995), I want to get at what is driving them, and what they ultimately mean to the pocketbook of a Madison school district resident. If time permits, and more importantly, I can easily get my hands on the relevant data (and there’s a lot of data required to understand the state & federal portions), I will happily look at that too. After all, that would obviously provide a more complete picture of how much more we personally are paying for our schools.
    I think your question about inflation covering the CPI-QEO gap confuses what’s going on. Adjusted for inflation, we are not paying what we used to; we’re paying 36% LESS. If we were paying the same today as we did then, ADJUSTED for inflation, then you would be right, we would not need cuts & referenda – precisely the point, and precisely the dilemma that’s haunting virtually every district in this state.
    (Indeed we’d have more than enough as new construction at 3% has outpaced the CPI-QEO gap of about 2%. New construction is enough to cover the gap, or to cover inflation, but not both.)

  3. Good luck in trying to make sense of local revenues while ignoring state revenues. It can’t be done. The whole purpose of the changes in education financing in the 1990s was to take the pressure off the property tax, and to better equalize property tax bases across districts. All that property tax growth means is MMSD gets less state aid. As one cookie jar (local money) gets larger the state cookie jar gets smaller. I believe it works the same way with referenda. The more money you raise by going over the revenue caps, the less money you get from the state. It may not be a dollar for dollar exchange, but the state does take away money.

  4. I have a question on the state portion. It is my understanding that the state originally committed to a bigger percentage of school funding. I may have my numbers wrong but what I remember is that the state was to pay 66% of the costs for schools or for certain programs but year after year has only contributed about 63%. Maybe someone can clarify this for me?

  5. Excellent presentation, Peter.
    Donald’s right about the state formula and the need to raise more money for referendum than you need (because state takes a share), but Peter’s main point is that growth has so far kept school property taxes in Madison (for most homes) about the same level or less than they were when the revenue caps were started. That can’t be refuted.
    The state equity question is complicated. I think it is worthwhile to consider that Madison is a net contributor to the state – most definitely in income tax contributions and lower offsets to local property taxes (state pays a much smaller share of per pupil expenses because of formula). What other communities have in state support (that we are not getting), is still value to the state.
    – Jerry

  6. One comment on the negative aid issue. The Board of Education recently voted to use state provisions to use Fund 41 for maintenance and facility costs.
    Resources allocated to Fund 41 fall under the revenue cap, but the fund has a huge advantage in that those resources are held harmless (do not count) when negative aid is calculated.
    This reduces the amount of money that the district would otherwise lose when it raises funds through referendum. [See pages 4-5 of the August 18 Board Packet document Budget Gap and Recommendations at
    The basic fiscal problems with state funding remain, but taking advantage of Fund 41 is a major and positive step toward minimizing the penalties that the district has been living with for some time.

  7. Donald is correct that state support decreases by a factor when we pass a referendum to go over the revenue caps.
    As I remember, for every dollar we raise (through referenda) above the revenue cap, we get to keep 60 cents. The $13 million dollar referendum will net the District $7.8 million.
    Peter’s original post is quite interesting and allows us to see one facet of the MMSD revenue side. Adding additional financial items to the mix will add to that understanding. But I think we are making too much of these numbers if one is trying to argue that they to be determinative of how one should vote on the upcoming referendum.
    Is the money being spent being allocated appropriately? Are houses in certain neighborhoods not being sold to families with children because they don’t want to send their kids to the neighborhood schools with a history of violence, lack of discipline, etc.? Is it the lack of financial resources to curb the violence?, the spending of money for disciplinary programs that look good in theory but do not work in practice?, the mismatch of teacher/principal temperament to the occurring conditions?, the conditions which no school should or can be expected to solve? or the conditions that no amount of money will solve?
    What has been the history of MMSD (not that MMSD is unique in the regard) is not just the lack of budget transparency, but lack of any educational performance details and demographical data allocated to the budget accounts so we can begin to quantify the cost of success and the cost of failure for the kids in our schools.
    Before I sign on for the $13M referendum, MMSD and the Board must have a plan and it’s cost in place, and proof that the staff has the knowledge, is capable rapidly providing such an analyses, and a promise to a complete and thorough analyses before the next budget cycle begins.
    This is not rocket science, but the analyses has forever been avoided.

  8. Larry,
    You raise some good questions about allocations and spending on programs that look good on paper but have not been proven. I think that the accountability questions you ask are very tricky. Quantifying the cost of success vs failure means that there has to be agreement on what constitutes success or failure.
    I think we have an immediate need to provide the kids in school right now with enough money to maintain current class sizes and needed services. This means that to cover teacher salary and benefits (84% of the budget) we need to increase that spending by 3.8% (or go to arbitration which could cost more). We still have debt service that must be paid as well as other structural costs that always increase. But you know all this – probably better than I do.
    The Superintendent and board are willing to compromise by asking us for about 60% of what they think they need while looking for ways to reduce spending. They have already implemented fund 41 decribed above. And they found a one million dollar accounting error. Frankly, I’m impressed by that.
    They have proposed looking at each program to determine which are working as you describe in your post. I don’t know if there is a plan yet but the fact that the board sees the need is very encouraging.
    Finally, while you feel the analyses needed to prove performance are not complicated, it may be that the data do not exist. The district might only collect data as required by DPI and under NCLB. I could be wrong about this but if it is true, evaluation of some programs may have to be based on something else.

  9. Unfortunately, one of the elements of the referendum discussion that gets lost is the piece where the board, administration, and community work together to develop priorities and a long range plan to meet those priorities. The planning process envisioned would include some much needed assessments of district programs to ask whether the investments are paying off.
    There is not adequate time to full carry out those assessments in the time between now and when the board would need to vote on the next budget. That is why I am supporting a two-pronged approach that will ensure the resources necessary for the next academic year and spare the community and the board from trying to assess programs at the same time that we are facing serious budget cuts. It could be done, but would have a high risk of unintended consequences if my past experience holds true.
    This thread also relates to the issue of adding programs – the assessment and review is intended to help make decisions about reallocating resources that are not paying off to critical and underfunded areas of need.

  10. Laura:
    The state, when it re-did the state’s school financing system in the early 1990s, essentially committed to paying “two-thirds” of the cost of public K-12 education in the state. That was an average — under the state’s formula of financing school districts, state aid is distributed proportionately, and tied to a district’s relative property wealth (relative to other districts, that is), so that in the end “wealthier” districts (based on the overall property valuation of the district) get “less” state aid, and “poorer” districts get “more” state aid. Madison, of course, is a wealthier district (relative to other districts) and thus gets less state aid. Overall, it was designed to average out to the state paying for two-thirds of local education costs (some districts to this day get more than 75 percent of their money directly from the state, some less than a third).
    Two-thirds funding sort of got pushed aside during the various state budget squeezes in the past few budget cycles. In effect, maintaining two-thirds funding would’ve required cuts in other parts of the state budget that were viewed as intolerable, so the two-thirds commitment is now somewhat higher than 60 percent, but not 66.7 percent.
    Your other statement caught my eye:
    “Quantifying the cost of success vs failure means that there has to be agreement on what constitutes success or failure.”
    Truer words have never been written on SIS. And it represents maybe the single most compelling challenge facing public education today — establishing a true consensus, shared broadly in the community, about what schools should do, and not do, and what exactly constitutes success (or failure). One of the reasons, I’m convinced, that public schools struggle with this these days is the lack of consensus in our schools communities about that very question.

  11. Phil M,
    Your statement: “establishing a true consensus, shared broadly in the community, about what schools should do, and not do, and what exactly constitutes success (or failure)”
    really points out how important Lucy’s point about priorities being discussed by the Board, Administration and Community is. I think that in supporting and passing the referendum, we will allow the board to do that.

  12. Can someone explain to me why a school like Edgewood can function well on half as much as MMSD? I know a few different families with kids that have gone to Edgewood, including some with special ed needs (one child with an expressive disorder, another with a reading disorder and ADHD, and another with TAG needs). With all of these kids the parents felt their children’s educational needs were met better than at MMSD. And on half the price per student – what is going on?

  13. Nihil:
    Is Edgewood required, by law, to do any of the following:
    — Provide transportation to its students? Or, in the alternative, make payments to families for transporting children to other schools, regardless of those families’ socio-economic status?
    — Provide free and appropriate educational services to anyone who walks through its doors?
    — Negotiate the terms of employment and wages with any of its employee groups, and follow the byzantine-like state regulations that guide such negotiations that — effectively — require annual pay increases of nearly 4 percent, regardless of market and/or inflationary considerations?

  14. Edgewood relys on fund raising to pay for school costs. Tuition only contributes a small part and alumni and parents the rest. This is the only way they can keep tuition down and offer scholarships to desirable students who couldn’t otherwise afford Edgewood.

  15. I’m not sure if the Edgewood question pertains to the high school or the K-8 campus school. For the high school, the fee chart(see )shows that tuition covers about 85%($8500) of total cost and fund-raising the other 15%($1500.) Parents are expected to raise that extra $1500 either by direct donation or through fund-raising efforts.
    At the campus school, where we have a child enrolled for the 3rd year, there is fund-raising, but it is specifically for the capital campaign, which is raising money for an upgrade/expansion of the facilities. This broke ground last year, but more money is needed to complete the expansion, so fund-raising is ongoing. I have not seen any fund-raising for support of day-to-day operations during our time there.

  16. Thanks for sharing those numbers Celeste. From the Edgewood website it says that tuition is $10,300 per year total. Their Sustainable Business model further reveals that each student is subsidised to the tune of $2800. This money is raised through endowments and alumni donations. Total cost is really more than $13,100 per child. Not too different from MMSD. I guess it is a myth that private schools do it cheaper. As to private schools doing it better I refer you to the recent report by the Legislative audit bureau on vouchers:
    I am not being critical of parents who decide to educate their children at private schools. I just don’t think they are better or cheaper as Nihil has written above.

  17. “There is not adequate time to full[y] (sic) carry out those assessments in the time between now and when the board would need to vote on the next budget.” — Lucy
    There is plenty of time to perform significant analyses to glean a sense of what is working and what is not working and for whom within the alotted time — just not “fully”. Perhaps I should rephase: “There is plenty of time to perform significant analyses to glean a sense of where students fall along the “workingness” continuum.” I read with both amusement and consternation a statement from Kurt Kiefer to the Math Task Force committee that the MMSD data cannot be used to perform a controlled study — so the Math group got little MMSD information — and didn’t seem to demand much if any data.
    “The best is the enemy of the good.” — Voltaire
    There is plenty of time to explore the data and relationships among the data elements MMSD currently has — not a controlled study. It is good enough to sift through the data trying to understand the relationships — it’s about policy. It is analogous to estimation vs calculation: 523 divided by 25 is about 20.
    “You raise some good questions about allocations and spending on programs that look good on paper but have not been proven.” — Laura
    “Proof” is too much to ask and I didn’t ask for proof.
    “I think that the accountability questions you ask are very tricky. Quantifying the cost of success vs failure means that there has to be agreement on what constitutes success or failure.” — Laura
    It is my mistake for using the terms “cost of failure” “cost of success”, for that is not what policy making needs. “Quantifying”, “success”, and “failure” says hard facts, an agreed upon demarcation somewhere between “failure” and “success” (which has to be defined), specific numbers, accuracy to 3 decimal points.
    Not at all. It’s just exploratory data analysis, like what we used to do back some 30+ years ago when I worked at WERC (when the institution was called Research and Development for Education). Back then, I don’t believe the process had a name –we did it anyway. The name came from a John Tukey book that was published sometime in the 1970s. Before we even considered anything else, we looked a the data from many angles for clues on the data’s character: we looked for linearity, we looked for normality, we looked for skewness, we looked for outliers, we unskewed it if necessary, we spread the data out mathematically in case the numbers were “bunched” together (like taking a mathematical microscope to it) to see patterns that might be hidden. We plotted the relationship. We looked for patterns. We looked for linearity, and for nonlinearity, linearized it if necessary. We looked at residuals and the patterns they showed.
    We strove to understand the data. Not rocket science. And never was it “fully” analyzed, and we quantified nothing.

  18. As a parent of Edgewood HS students, Celeste is correct with the dollar figures, the cost of tuition 10,000 and then take away the subsidized amount from that gives the amount of tuition each child/family needs to pay which is just under $8500 (unless they receive financial aid which approximately is about 40% of the families). Laura, your figure was not tuition but the cost for a senior which includes graduation costs, and what was subsidized for this year. The $2800 figure for subsidzed amount was from a few years and not current year.
    The cost per student is cheaper, but there is also a price to this. A private school doesn’t take on the large educational needs that a public school does. They will gear to certain educational needs whether the above average – average student, the stuggling student, or kids with specific needs, but not all groups. There is no special education program for children who need special modifications unless it is something like more time to take a test. There are no SEAs, no translators, OT, PT, reading teachers, S/L. No social workers, the psychologist is the guidance counselors, fewer course alternatives, but also less safety issues to deal with. Certain courses have additional fees. Private schools can pick and choose their students and get rid of students if they violate certain situations – but that also means that there is more cookie cutter students. The staff also do not have the benefit/wage package that MTI staff has – which does require staff to love their jobs, not just the paycheck/benefits. I am not saying all MTI staff are this way, but we all know a few who are in MMSD only because of the benefits to their own financial pocketbook and give the rest a bad name. Class sizes can be 10-26 depending on the course. Class disruptions are so much less than what is seen in MMSD, and police calls are due to parking problems vs. student disturbances. At Edgewood, kids are encouraged to do well academically and rewarded more than the academically talented students are. Everyone needs to weigh what the needs of their families are before choosing an alternative to public schools.
    Truly the cost per student is more in the public school system but that is because of mandates that the federal government has put into place, and not helping the systems pay for those costs. Private school is not for everyone, on the other hand, for our family it was a better alternative.
    Phil, costs of transportation for MMSD is elementary schools (k-5) not middle school/high school costs. Families in MMSD are required to pay this cost for the older kids (except for areas that do not offer Madison Metro option). If you talk to certain groups, I don’t think they will say that certain groups are getting appropriate education.
    Celeste, parents are not expected to fundraise or pay the additional costs at the high school – this is only an option that parents can donate more than the required tuition, alumni and endowments do most of the subsidizing. There are families who do pay more because they support the education EHS gives to students. The Campus School and High school are separate entities and the campus school has in the past used fundraising like gift wrap sales to pay for it’s day to day operations, I am assuming they just are not saying that is what the money is going for today (in addition to the capital campaign). At the high school level, their fundraising is not gift wrapping etc., but parents, alumni and endowments, who have donated to help keeps costs down – including large donations similar to what colleges receive.
    Laura, costs are cheaper because of the limited type of student private schools enroll, and “better” is in each individual families view. For us, Edgewood has been a much better alternative than West/Cherokee were going to be, and our friends in the public schools have commented how Edgewood has been a good thing for our kids.
    It would be interesting to ask an admissions person at the UW which student they would rather have and is more prepared for college. Students from West, Memorial, LaFollette, East or from Edgewood – I don’t have a clue what they would say. But I do know that UW took approximately 10% from EHS last year, and not all the top students went to Madison.

  19. “It would be interesting to ask an admissions person at the UW which student they would rather have and is more prepared for college. Students from West, Memorial, LaFollette, East or from Edgewood – I don’t have a clue what they would say. But I do know that UW took approximately 10% from EHS last year, and not all the top students went to Madison.”
    I wouldn’t be so quick to suggest that Madison’s public high schools are not preparing students who compete at UW-Madison. Not all of our top students choose Madison, but here are the numbers for students who were admitted AND attended Madison in Fall 2007:
    Madison East 49
    Abundant Life 1
    LaFollette 39
    West 51
    Edgewood 27
    Home School 8
    Memorial 77
    (Shabazz is not represented this year but has sent students to UW-Madison in the past)
    [Office of the Registrar, Page 53, ]
    The number of students from each high school going to Madison varies from year to year; the school sending the largest number also varies. Many of these students bring with them significant numbers of AP credits and credits taken at UW-Madison before they enter. They also stand among the significant number of National Merit semifinalists+ that come out of Madison’s schools each year.
    Anecdotally, I typically recognize many of the Madison public high school students that I have known when I work with our college’s Dean’s List each fall (our college enrolls c. 80% of the first and second year students at UW-Madison).
    As for the costs of private education, my four years at Eagle school cost c. $10,000 per year plus mandatory fund raising activities plus transportation (which was minimally offset by state mandated parent contracts for transportation costs).

  20. Laura, I read the sustainable business model info on Edgewood’s website and would like to point out a couple of things.
    First of all, the report is for 2006, so figures used are for that year, not current year.
    Secondly, the $2806 figure is some kind of typo. I thought so immediately while reading it, since the report seems to be implying that 7400 + 2806 = 9511, which can’t be right. Later in the report, the correct figure of $2111 is used in the same context.
    The $2111 subsidy in 2006 corresponds to the $1532 subsidy in the 2008-2009 school year. It is not extra on top of that subsidy.
    So according to this report, in 2006, the full cost of educating an EHS student was $9511.
    Tuition charged was $7400. Subsidy which needed to be made up through contributions, fund-raising, etc., was $2111.
    There was about $500,000 in financial aid distributed among 40% of student body. So those 250 or so students paid on average about $2000 less than the $7400. Financial aid money comes partly from endowment earnings, and partly from alumni contributions and other fund-raising.
    Everyone is right about the variety of reasons the private schools can charge less than MMSD. No security guards in halls or bus monitors needed to prevent violence. No special ed. teachers. Etc.
    There are private schools in big cities like DC, New York, etc. which cost much more to operate than public schools. But the market here doesn’t support that sort of school and even the couple of Madison schools which may seem pricey, like EAGLE, are in fact economizing and scrimping so that they can keep tuition low enough to attract and keep students.
    The tuition this year at EAGLE is $9450, including ‘building fee’ and field trip fee. Families can buy their way out of fund-raising. It costs $50 to buy out of gift-wrap sale. Parents are required to work at the annual auction, but can buy out of the fund-raising part of it for $200. Parents are also required to volunteer 9 hours a year total at the school including auction work hours. After-school sports have nominal fee ($30.) EAGLE bus, which runs through our neighborhood is $1200 a year (minus a reimbursement from MMSD of about $600.) So it’s $9700 plus driving or bus costs plus volunteer hours.
    Total enrollment in area private schools isn’t a huge number of kids. There just aren’t that many area private schools and most families are fervent supporters of public schools. I don’t think the private schools will shut down MMSD anytime soon. I don’t think that one is better than the other in general. But for some children and their families, private is a better choice and it is good that this choice is available.

  21. Thanks Lucy for the info on # of students attending UW. I was only going on hearsay by parents in MMSD, so it is great to see that MMSD schools DO have a large number of students attending UW. This just wasn’t numbers I was ever aware of.

Comments are closed.