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MATC fiscal crisis looms
Report points out growing demand, shrinking resources and high salaries
By Karen Herzog of the Journal Sentinel
Sept. 21, 2010 0
Milwaukee Area Technical College is heading for a financial crisis, according to a new report released Wednesday by a nonpartisan government watchdog group.
Part of the crisis is tied to the economic downturn, which is squeezing the college's finances while increasing demand for its services, according to the report by the Public Policy Forum. MATC is largely dependent on property tax revenues, which make up about 60% of its operating funds, at a time when a lagging real estate market is hitting property values.
At the same time, fringe benefits and salary increases have spiraled to a level that arguably puts MATC at the top of the nation among peer institutions. The report compares MATC's total operating expenses and salary and fringe benefits with 84 other large public two-year technical and community colleges around the country, which MATC self-identifies as peers in its annual submissions to the Integrated Postsecondary Education System.
Fringe benefits and salary increases made up about three-fourths of all expenditure growth in the five years reviewed by the report. Health care expenditures rose by 35% from 2005 to 2008, more than twice as fast as those at Milwaukee County and the City of Milwaukee governments, the report says.
MATC's board of directors next month will have to balance a 2010-'11 budget against actual property tax valuations - a balancing act expected to reveal a property tax revenue shortfall of about $4 million, MATC President Michael Burke said Tuesday when reached for comment on the report.
Burke said staff reductions are not on the table; cuts in operating expenses that he declined to specify are under consideration.
"All the low-hanging fruit, we've already dealt with," Burke said.
The imbalance between ongoing revenues and expenditures potentially could produce an annual structural gap of $11 million to $62 million within the next five years, according to the report.
MATC already sets its property tax rate at the maximum amount allowed, and other revenue options are limited. Tuition represents about 17% of operating revenues and state funding is 14%. Raising tuition and student fees isn't an attractive option, as tuition rate increases of nearly 40% from 2005 to 2011 have raised questions about affordability and access, the report notes. MATC's state funding declined by about $2 million from 2005 to 2009.
Pay structure questioned
The report raises questions about faculty compensation, noting that MATC has the highest average faculty salary and one of the lowest student-to-faculty ratios among the 15 members of the Wisconsin Technical College System, in addition to its top national ranking for expenditures per full-time equivalent student.
Among all Wisconsin public colleges and universities, the average faculty salary in 2008 at MATC ($86,687) was second only to UW-Madison ($90,149) and was 26% higher than the next closest institution, UW-Milwaukee ($68,575), according to the Public Policy Forum report.
Burke defended faculty salaries.
"We compete head to head with the private sector when hiring faculty for technical and professional programs," he said. "There are a number of programs here - creative animation and advanced manufacturing - that are very creative programs unique to MATC."
MATC has higher health insurance costs than the city and county because the faculty skews older, due to the high level of experience they bring to technical and professional programs, said Michael Rosen, a professor of economics at MATC and president of the union that represents the MATC faculty.
The Public Policy Forum did not make recommendations for how to address shortfalls; the report was intended to be an analysis of the college's fiscal condition, said Rob Henken, president of the Public Policy Forum.
He urged caution.
"While cuts in faculty expenditures thus appear practicable, any such cuts must weigh potential impacts on educational quality and graduation rates, as well as the need to keep up with recent double-digit growth in enrollment," Henken said.
The report also addresses state aid.
"Now that property tax revenues are falling, the level of state aid is a more critical issue for the college's financial well-being," the report says.
Rosen agreed the issue of state aid is critical.
"The decline in the state's contribution has put enormous pressure on taxes and tuition . . . and the state has reneged on its commitment to fund technical colleges," Rosen said. "If we want to have a technical college system - and we have a great one to train middle-level employees - the state needs to fulfill its obligation."
MATC has taken on increased importance in light of the economic downturn and community-wide efforts to increase the number of college degree holders in Milwaukee, the report notes. About three-fourths of MATC graduates take jobs in the Milwaukee area, and MATC programs are designed to suit the needs of the local job market.
Wisconsin has a greater proportion of "middle-level jobs" than the rest of the nation, the report notes - the types of jobs predicted to see a higher-than-average rate of growth in the next decade.
"Indeed, MATC often is the forgotten stepchild in discussions surrounding the region's economic future," the report says. "Despite enrolling nearly 50,000 students each fall, and despite the high proportion of Milwaukeeans working at jobs requiring more than a high school diploma but less than a four-year college degree, MATC floats largely under the region's economic development radar screen."
Last year, MATC produced 2,306 associate and technical diploma graduates, Burke said.
The title of the Public Policy Forum's report, "Growing Demand, Shrinking Resources," sums up the challenges MATC is facing, Burke said.
"We have a recession. The community needs us more than ever before and we have shrinking resources."
Rosen noted that the report gives MATC credit for finances that are "in much better shape than the city and county."
The report is the Public Policy Forum's third in an ongoing series of fiscal assessments of local taxpayer-funded governments and institutions. The first report in March 2009 evaluated Milwaukee County's finances; the second report last September looked at Milwaukee's city government.
Full report online See the full Public Policy Forum report and a summary version at www.jsonline.com/education.
About Karen Herzog
Karen Herzog covers higher education. She also has covered public health and was part of a national award-winning team that took on Milwaukee's infant mortality crisis.
@HerzogJS
kherzog@journalsentinel.com
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