A number of MATC’s
financial decisions
warrant review.
Instructor salaries are
higher than at
selected institutions.
MATC has not
effectively managed the
cost of health care
benefits.
MATC agreed to forego
additional health plan
changes until 2007.
Information provided
to the Board has been
incomplete and
inaccurate in some
instances.
Key
Facts and Findings
MATC has both the largest
enrollment and the largest
budget of Wisconsin’s
technical college districts.
In FY 2001-02, operating
expenditures were
$152.0 million.
A “negative outlook” was
attached to MATC’s debt
rating in December 2001
but removed in
December 2002.
MATC receives general state
aid equivalent to $2,149 per
FTE student. The statewide
average is $1,857.
MATC does not comply with
its policy of recovering
100 percent of costs associated
with specialized
training contracts.
Enterprise activities required
nearly $1.4 million in
property tax levy support in
FY 2001-02.
In 2002, 64.4 percent of
MATC instructors earned
more than $76,000, and
12.0 percent earned more
than $100,000.
MATC’s health care costs are
projected to increase
15.7 percent in
FY 2002-03.
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The Milwaukee Area Technical College (MATC) District is the largest district
in Wisconsin’s technical college system. In fiscal year (FY) 2001-02,
MATC enrolled 12,504 full-time equivalent (FTE) students and
employed 1,944 FTE staff. Its FY 2001-02 operating expenditures
totaled $152.0 million.
During FY 2001-02, MATC experienced significant financial
difficulties, including an anticipated deficit of $3.5 million
in its general fund. Moody’s Investors Service attached a
“negative outlook” to MATC’s debt rating in December 2001. As a result, some
legislators and members of MATC’s Board of Directors raised concerns about
MATC’s financial management and governance. Therefore, at the direction of
the Joint Legislative Audit Committee, we analyzed:
-
MATC’s financial status;
-
financial management issues, including management of revenue sources such
as training contracts and enterprise activities, as well as compensation for
administrators and contracting for professional services;
-
employee wages and benefits, including those negotiated during the 2001
collective bargaining process; and
-
MATC’s governance, including adherence to state statutes and the Board’s
policies.
In FY 2001-02, local property taxes provided nearly half
of MATC’s operating revenues, as shown in Figure 1. State grants and aid
were another 19.8 percent, and tuition and fees were
15.7 percent.
Figure 1
Sources of Operating Revenue
(FY 2001-02)
Other revenue sources were enterprise activities such
as the bookstore, food service operations, and child care centers;
specialized training contracts with local businesses, government agencies,
school districts, and nonprofit organizations; and federal grants and aid.
Although its financial status has improved since December 2001, and steps
have been taken to reduce costs, MATC faces challenges over the
long term.
For example, it cannot raise additional operating revenue by
increasing property tax rates because it has been at the statutory mill
rate limit of $1.50 per $1,000 of assessed property value
since FY 1990-91. Therefore, MATC must rely on growth in
property values to gain additional operating revenue from property taxes.
MATC officials have expressed concern about declining general state aid
levels. Aid to the district has declined. However, in FY 2001-02,
MATC was third among the 16 technical college districts in general
state aid as a percentage of operating costs per FTE student. As shown in
Figure 2, the State provided $2,149 per FTE student, which was
15.7 percent more than the statewide average.
Figure 2
General State Aid per FTE Student
(FY 2001-02)
The negative outlook attached to MATC’s debt rating was removed in
December 2002. However, management decisions and policies in several
areas may reduce MATC’s ability to improve its financial status in the
future.
For example, the fees MATC charges for providing specialized
training to businesses and others do not cover its costs. This is a
violation of district policy and has resulted in average annual losses of
$468,196 from FY 1997-98 through FY 2001-02.
We include a recommendation for MATC to comply with its cost
recovery policy related to training contracts.
Enterprise activities such as MATC’s bookstore, food service operations, and
child care centers are generally expected to generate enough aggregate
revenue to cover their costs. However, property tax subsidies have been
required to cover losses in these areas over the past five fiscal years. In
FY 2001-02, subsidies totaled nearly $1.4 million.
We include a recommendation for MATC to eliminate property tax subsidies
for its enterprise activities.
MATC also operates two business incubators to promote economic development
in the Milwaukee area. The Milwaukee Enterprise Centers have lost more than
$257,000 over the past five fiscal years. Complete information
about their financial status has not been provided to MATC’s Board of
Directors. We include recommendations for MATC to evaluate the costs and
benefits of the centers and to track key performance indicators.
MATC continues to contract for legal, public relations, and lobbying
services although it has hired senior administrators at above-market
salaries with responsibilities in these areas. Other contracts for
professional services may have been avoidable considering the availability
of MATC staff. We include a recommendation for MATC to review the continued
use of consultants and ensure these costs are justified in light of
existing staff resources.
Instructor salaries are higher at MATC than at selected Wisconsin
technical college districts. For example, as of January 2003, the maximum
instructor salary at MATC is $78,271. That is 6.7 percent
higher than the maximum instructor salary at Madison Area Technical
College, which had the second-highest instructor salary levels among
selected Wisconsin technical college districts.
MATC’s most recent
collective bargaining agreements included higher salary increases than were
budgeted by the administration. The two-year agreements provide annual
increases of 4.0 percent in both FY 2001-02 and
FY 2002-03.
In an environment of rapidly increasing health care costs, MATC officials
separated health care plan changes from collective bargaining discussions
in November 2001. The 4.0 percent annual salary increases were
predicated on achieving zero percent growth in health care costs in the
two-year agreements covering FYs 2001-02 and 2002-03.
However, MATC was unable to control health care costs to that
degree, and health care costs instead increased by 15.7 percent,
or from $16.9 million in FY 2001-02 to an
estimated $19.5 million in FY 2002-03.
In October 2002, MATC and its unions reached agreements for significant
health plan changes that include deductibles and co-payments. However,
further changes to MATC’s health plans cannot be pursued until July
2007 without the unions’ agreement. This could limit MATC’s ability to
adjust health plans if costs continue to increase rapidly.
In several instances, MATC’s administration has not provided the MATC
Board with complete or accurate information. For example, the Board was
not informed of all health care proposals made by MATC’s insurer in April
2002, nor was it given complete information on the fiscal effects of a
March 2002 administrative restructuring plan. In addition, the Board has
not consistently complied with state statutes and MATC policies, including
the policy requiring probationary periods for new employees and statutory
requirements for closed-session meetings. We include several
recommendations related to MATC’s governance.
Our recommendations address the need for MATC to:
-
comply with district policy requiring aggregate full cost recovery
for training contracts
(p. 36);
-
develop and implement plans to eliminate property tax subsidies for
enterprise activities
(p. 37);
-
evaluate the costs and benefits of the Milwaukee Enterprise Centers
(p. 41);
-
review the use of consultants, especially in light of expanded internal
capacities
(p. 45);
-
clarify the roles and authority of the Board and the president
in personnel matters
(p. 48);
-
ensure that complete and accurate information is provided to the Board
in a timely manner
(p. 61);
-
comply with district policy regarding probationary periods for new
employees
(p. 62);
and
-
seek guidance from the Wisconsin Department of Justice regarding its use
of closed sessions
(p. 63);
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