This post originally appeared at https://reforminggovernment.org/public-records-reveal-how-supt-underlys-dpi-set-stage-for-mps-finance-crisis/

Delafield, Wis. – New public records released Thursday by the Institute for Reforming Government’s (IRG) Center for Investigative Oversight reveal how the Department of Public Instruction’s lenient enforcement of Milwaukee Public Schools’ 2024 finance deadlines set up different, more destructive outcomes than DPI’s stricter enforcement in previous years.

Superintendent Underly’s DPI released the records March 5, 2025, 8 months after IRG’s June 17, 2024, request. DPI fulfilled the complete records request only after IRG, represented by the Wisconsin Institute for Law and Liberty, threatened legal action.

WHY IT MATTERS

DPI took a gentler approach with MPS than other school districts in years past, despite accurate financial documents being essential to determining state aid for all Wisconsin school districts. DPI has the ability to withhold funding if districts miss deadlines.

DPI said withholding funds due to missing finance deadlines is a rare occurrence, despite enforcing said deadlines in the past. After MPS missed a December 2022 deadline, DPI took threats of withheld aid payments directly to the MPS Board as early as February 2023 following late finance paperwork. DPI previously withheld payments from other districts in March 2020 under former Superintendent Carolyn Stanford Taylor. This is a stark difference from DPI’s gentler approach to MPS in 2024.

As DPI waited far too long to play hardball, former MPS Superintendent Keith Posley mismanaged the district, leading to his resignation, MPS operations reviews, and a Legislative Audit Bureau audit of DPI’s compliance oversight.

THE QUOTE:

“It took 8 months and a legal threat against DPI to uncover what role they played in the Milwaukee Public Schools finance crisis of 2024,” said Chris Reader, IRG Executive Vice President. “Superintendent Underly’s administration treated MPS with kid gloves, which financially hurt districts across Wisconsin. The Department of Public Instruction should have acted, and now it’s clear the inaction hurt Wisconsin students.” 

KEY RECORDS

• DPI well knew how MPS’ inaccurate, time-consuming finance process affected DPI and other school districts. In October 2023, DPI finance staff criticized MPS for using an alternative submission process instead of normal finance software, including a request to delete, correct, and replace 2023 finance data. ARM “has to be for the intended purpose… Not school districts the size of Racine or MPS using it to upload data in small batches.” A July 2023 discussion among DPI finance staff concluded, “We saw what a political mess it was when MPS gives us bad data for the October run……their Oct-Jun adjustment (computed after they clean up their ledger after spring auditing) is huge and politically, we have to explain why this happened.” In March 2024, as DPI met weekly with MPS, DPI received correspondence reading, “…It looks like Milwaukee will be playing havoc with the PY adjustments in the aid formula, similar to how their large shared cost adjustment affected all districts last year.” DPI sent strict, step-by-step compliance recovery directions to MPS March 28, 2024. MPS passed a $252 million referendum April 2. (pages 301, 361, 72, 12)

• Superintendent Underly’s DPI wrote contacting MPS’ Board or threatening to withhold funds was “an extraordinary step” that is “exceedingly rare.” Then-DPI Communications Officer Chris Bucher argued DPI “did not have any reason to doubt [MPS’] assurances” it once again would provide its finance reports late but with sufficient time for DPI to calculate vital state aid reports and estimates. (Districts across Wisconsin rely on accurate estimates to produce stable budgets, and changes in massive Milwaukee can greatly affect their funding.) However, as weeks went by, DPI “eventually went to the board.” DPI waited to enforce deadlines because “every district is different and the DPI uses an individualized approach.” Superintendent Jill Underly also called notifying the MPS Board “an extraordinary step.” (pages 287, 640)

• But in 2023, DPI had directly threatened MPS’ Board in February that it would withhold aid for late compliance, long before missed deadlines could become a crisis. Then-DPI School Finance Services Director Mark Elworthy notified MPS February 6, 2023, by form email it would consider withholding aid payments “should the audited financial statements not be filed by February 15, 2023.” Director Elworthy’s email chain included then-Board President Robert Peterson, the MPS Board, then-Superintendent Posley, audit company Baker Tilly, and his Cabinet-level boss, then-DPI Finance and Management Assistant Superintendent Tricia Collins. (page 52)

• Former Superintendent Carolyn Stanford Taylor did withhold funding to compel district compliance. In early 2020, DPI “withheld AGR and SPED payments…due to non-submission of Budget Report and Audited Financial Statements” from 4 districts, including 2 in Milwaukee County. The withheld payments likely were from February and March. In January 2021, DPI was about to withhold special-needs funding from MPS for keeping highly disabled students virtual, but MPS complied before DPI completed its process. (page 99)

• Correspondence from Superintendent Underly does not appear in the records. Thus, it is not clear when Superintendent Underly realized MPS would affect 420 other traditional school districts. Deputy State Superintendent Thomas McCarthy approximated, “We were meeting [on] at least a weekly basis as things escalated into that May letter…”

KEY QUESTIONS FOR DPI

• When was Superintendent Underly first informed of how MPS’ crisis would affect other districts?

• Why did DPI tell the MPS Board in February 2023 about 2023’s late finances but not inform the Board until May 2024 of their 2024 finance crisis?

• Had Superintendent Underly’s administration withheld funds from districts before it did so for MPS in 2024? If not, was that a policy change from Superintendent Stanford Taylor’s administration, which did withhold funds?

• Despite catching up significantly, MPS likely will miss DPI’s 2024 finance deadlines. Has DPI provided progress updates to Governor Evers, the Legislature, and other districts on MPS meeting its financial obligations?

View the records here.