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Out Of Service: Milwaukee Budget Cuts Hit Bus Lines -- And Keep Residents From Jobs

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MILWAUKEE, Wis. -- Peggy Schulz was fed up. In March, after being unemployed for nearly two years, she performed an experiment: She went to a job-search website, limited the search to the Milwaukee area and typed in a simple term: "bus line."

The results displayed what had long been plaguing her. Job posting after job posting featured similar caveats: "this is not on a bus line," "need reliable transportation not on bus line," "positions are NOT on a bus line," "our client that is not located on a bus line is interested in having you work ..."

"Here it was in black and white," she later recalled with a bitter laugh. "It's been very frustrating to look through the want ads, look online, think about places I could work and realize, 'Nope, can't get there on the bus.'"

Schulz is 53. She has years of experience as a legal secretary. But she does not own a car.

Over the last decade, as Milwaukee County has inflicted relentless cuts to public transit, she has watched her primary means of transportation decay. After she was laid off in June 2009, a pattern emerged: She'd find what seemed like the perfect job opportunity, only to discover that bus service cuts had rendered it inaccessible.

Working people like Schulz bear the strain of a crisis that has struck municipalities nationwide. As revenues fall and expenses balloon in the wake of the economic downturn, local officials have cut essential services in a frenzied attempt to balance budgets. Communities have closed libraries and schools. Governments have laid off workers and imposed deep pay cuts to those who remain. Some of the nation's statistically most dangerous cities have axed significant portions of their police forces.

Many local officials are pushing an inevitable reckoning further into the future as they delay certain payments. Here in Milwaukee, though, policymakers have been unusually diligent. They have funded pension benefits -- which eventually have to be funded -- almost fully. But with limited dollars, putting money behind those promises has forced the local government not to fund other things, prompting the type of cuts that may loom on other municipalities' horizons. Milwaukee County's day of reckoning, to a large extent, has already arrived.

The pain has spread over a range of departments. Since 2001, the public workforce has shrunk by nearly a third, as security officers have been laid off and nurses, frustrated by anemic compensation, have quit. After years of limited funding, the parks system now needs repairs that would exceed $200 million. Bus service has been reduced by a fifth in the last decade, preventing Milwaukeeans from accessing tens of thousands of potential jobs.

The financial crisis and economic downturn put millions of Americans out of work. Now, those same forces are making the job search even more difficult by weakening a vital link between workers and workplaces -- public transportation. Milwaukee has reached a point at which cuts, necessitated by a weak economy, make the local economy even weaker.

"We're going to start bleeding red ink," county executive Marvin Pratt said while sitting at a heavy wooden table in his stately office on the third floor of the county courthouse. "If you're talking about getting people to jobs and creating jobs, we have to maintain that transit system. We have to make it better."

'UNRAVELED'

Not long ago, the future seemed brighter. Buoyed by the surging stock market and the tight labor dynamics of the late 1990s, Milwaukee County entered the millennium flush. It seemed prosperous days would last -- or, at least, that's what local policymakers were banking on.

Milwaukee County, a metropolitan community of 950,000 on the coast of Lake Michigan, was busy adorning itself with symbols of its success. Miller Park, home of the Brewers baseball team, opened in the spring of 2001. A new addition to the Milwaukee Art Museum, featuring a pair of sail-like wings on top, opened that same year, immediately becoming an international icon of contemporary architecture.

And transit worked. The American Public Transportation Association, a national advocacy group, bestowed its Outstanding Achievement Award on Milwaukee County transit in 1999. Buses carried residents not only throughout the downtown area but also between the city and the suburbs, traversing the entire county and beyond.

"Milwaukee was really coming alive," said Mike Kostiuk, 58. After living in a suburb for two decades, he moved back to the city in 2000, looking forward to taking advantage of the bus system.

And the county government decided to share the wealth. During two sessions, in late 2000 and early 2001, the county Board of Supervisors approved a hike to pension benefits for public workers. The package included an increase in the pension multiplier, which is used to determine the percentage of final average salary that an employee, upon retirement, gets as an annual pension payment. The deal applied to all categories of county employees, including the elected officials who had approved it.

"They rolled out the retirement package to us, which far exceeded anything we had proposed," said Richard Abelson, executive director of District Council 48 of the American Federation of State, County and Municipal Employees, a public sector union that represents more than two-thirds of county workers here. "It was a bad deal. It was a bad deal for taxpayers. It was a bad deal for union members. The impact it would have on the budget in the future was dramatic."

But excluding special lump-sum payments, retirees' pensions are not particularly rich. In 2009, the average annual pension payout was less than $19,000, according to county records.

Rather, the pension fund has been victim to the same economic forces that are eroding municipal finances nationwide. When the financial crisis struck, these relatively modest benefits suddenly required an outsized contribution from taxpayers -- money that the government otherwise would spend on things like public transportation.

Like countless other communities, Milwaukee was unprepared for a reversal of fortune. Back in the '90s, when the stock market was multiplying the fund's investments, pension benefits virtually paid for themselves. Boosting pension promises was like giving away IOUs that wouldn't have to be redeemed for decades, if ever. From 1995 to 2000, the county reduced its annual pension contribution by 97 percent, whittling it from over $20 million to just over $600,000, according to county records.

"You increase benefits, and you often will skip your contributions, and say, 'Well, we don't have to make contributions this year, because things are so good,'" Andrew Biggs, a scholar at the American Enterprise Institute for Public Policy Research, said in March to a packed auditorium at the Bloomberg State and Municipal Finance Conference in New York.

But when the stock market crashed in 2001 and continued falling through 2002, a once-overfunded plan was now in the red.

"It's real hard overnight on a local government level to come up with $20 or $30 million to make a pension payment," said John Weishan, a county supervisor who voted for the pension package a decade ago and who says he would have voted against it had he known what he knows now.

"Things kind of got unraveled," he said.

Legacy benefits, once a distant concern, now demanded a significant contribution from the government. Between 2000 and 2002, the value of Milwaukee County pension assets dropped by a fifth. During that time, the county's contribution to the fund more than quadrupled. By 2003, the government was shelling out more than 56 times what it had paid in 2000, a jump from $600,000 to $34 million.

The fund's assets grew over the next few years, but that improvement was short-lived. In 2008, when economies around the globe tanked, the pension fund again got slammed. From 2007 to 2008, the value of pension assets plunged by nearly 30 percent, erasing the previous gains.

In 2009, the county issued $400 million in bonds and then plowed the proceeds into its pension fund. That resolved the immediate shortfall, but it saddled the government with a massive interest payment. This year, the budgeted contribution to the pension fund is $64.7 million. More than half of that is interest on the pension bonds.

Pension promises, once they're made, can't legally be undone. Benefits accrued by current employees are protected by state constitutions as property rights. Often, unions give up a wage increase in exchange for a benefit hike. Revoking those benefits, or requiring employees to cough up a contribution, is tantamount to slashing wages.

But governments' ability to pay for those benefits has shriveled. Nationwide, state and local pension funds lost nearly 30 percent of their value during the financial crisis, from the end of 2007 through the beginning of 2009, according to a study last year by the Milken Institute.

Compared to other public pension funds, Milwaukee County's is doing well. The funded ratio of a pension fund -- the value of assets as a percentage of what's owed -- is difficult to measure precisely, since it depends on future investment returns and the behavior of workers. But according to the estimate of John Maier, chair of the Milwaukee County Pension Board, his fund is sitting at nearly 90 percent.

The pension funds in nearby Chicago, by contrast, were collectively funded at 47 percent as of June 2009. That's using the stated value of liabilities. Using a more conservative measure, the funds were 33 percent funded, according to a study released last year by finance professors Robert Novy-Marx and Joshua Rauh.

Due in part to strict pension contribution rules, Milwaukee hasn't procrastinated as much as its peers. Which means the costs that may seem far-off to other governments are, in Milwaukee, here.

"The legacy costs that are out there for the retirees are definitely the weight that's hanging over the county's head right now," said Anneliese Dickman, research director at the Public Policy Forum, a local nonpartisan think tank. "We can't change those costs. They're fixed costs. There's no way to make them go down."

"You think, if we could spend that money on parks, what would we be doing differently?"

'DARK TIME'

What makes Milwaukee County unusual is that it has actually put money behind what it has promised. To compensate, the government has cut from other services, which is how Develon Diggins found it impossible to get to work.

Diggins had been driving to her electrical assembly job at the Magnetek factory in Menomonee Falls, just outside Milwaukee County. But when her car broke down in late 2007, her paycheck suddenly depended on the public transit system.

At first, she was able to take the bus to work. But after a few months, the route was cut. Starting in January 2008, Diggins, 51, faced a daily struggle. She would take cabs to work, which was usually about $25 each way. Or she would pay a friend or neighbor to give her a ride, which usually cost $20. Her hourly wage was just shy of $13.

This unpredictable schedule meant she was often late. Eventually, the demerits accumulated, and in October, she was fired.

She is still out of work. The local unemployment office wouldn't grant her benefits because, officially, her tardiness was seen as her own fault. When her $650 a month rent became too much to bear, she moved in with her daughter. For a few months last year, Diggins worked part-time at Burlington Coat Factory, she said, but part-time wages weren't enough to live on. Last fall, she got a temp job working at GE Medical, but that position ended in January.

Now, she's in the same situation as Schulz, the legal secretary.

"A lot of the jobs would call me, but they would be so far out, where the transportation don't go," Diggins said quietly, sitting at a table in a local monastery. "Not having a vehicle, I can't get there."

County bus service, measured in hours, has dropped by 20 percent since 2001, according to the Milwaukee County Transit System. During that same time, the daily cash fare has increased by 50 percent, to $2.25 a trip. Among peer bus systems, Milwaukee County's fare stands out as the most expensive, according to county records.

The weak economy has put millions of Americans out of work, and two and a half years after the financial crisis, job growth remains slow. But not only are the jobs gone -- with cuts to public transportation, workers' ability to get to those jobs has diminished. Even as the economy added 216,000 jobs last month, many workers remain unable to commute to where the jobs are being created.

In Milwaukee, bus service cuts have rendered more than 40,500 jobs inaccessible to people dependent on the bus, according to a study from the University of Wisconsin Milwaukee, released in 2009.

With less service and higher fares, the bus system carried 10.3 million fewer riders in 2007 than it had seven years earlier, ranking it first for lost riders among a group of peer systems, according to a 2008 study.

And these riders are mostly lower-income residents. More than half live in households that make less than $28,000 a year, according to MCTS.

"It certainly does create a vicious cycle. There's no doubt about it," said former MCTS president and managing director Anita Gulotta-Connelly, who retired at the end of March. "Once you get into the cycle of raising fares and cutting services, then you're reducing your revenues, as the service becomes less attractive."

The transit system relies on a variety of funding sources, from county, state and federal governments. But the county source is particularly crucial, serving each year as a stopgap. As state and federal governments keep their contributions level, it's up to the county to pay for the inevitable increases in the cost of operating a fleet of buses.

But as that cost has risen, the county's contribution, over the past decade, has remained virtually flat.

From the government's point of view, transit, parks and cultural programs aren't considered "mandated" services. When the county is hurting for cash, it funds the programs it legally has to fund -- pensions, health care, sheriffs and courts -- and wrings savings from the programs deemed discretionary.

"We can't close down the courthouse. We can't not patrol the highways," said Joe Sanfelippo, a county supervisor. "This is where all the pressure boils down to."

In 2008, the Public Policy Forum released a study that warned of disaster for Milwaukee transit, a scenario in which service could be restricted to just the city's core. Contending with rising operating costs and little ability to pay for them, the bus system had done two things: it slashed service and stopped replacing old buses. It took its capital funds, typically used to buy new buses, and moved that money into its operating budget, using it to pay for the day-to-day costs of running the system.

And it drew down its reserves. Between 2001 and 2008, the rainy-day fund shrunk from over $43 million to just shy of $9 million, a decline of nearly 80 percent.

Stimulus dollars offered temporary relief. With nearly $25 million in federal assistance, and other one-time aid, MCTS was able to purchase new buses, and is currently working on replacing its 23-year-old fare boxes.

But that money will run out next year. When all the new buses arrive, they will comprise less than a third of the fleet. The old buses will continue to get older, and Gulotta-Connelly estimated the county will need to order another round of replacements as early as 2013.

A crisis could come even sooner. Wisconsin Gov. Scott Walker's current budget proposal calls for a 10 percent reduction in the state's annual contribution to Milwaukee County transit.

"What he's proposing is monumental," said Tamara Grigsby, a Democratic state representative whose district is in Milwaukee. "I can't think of enough dramatic words to say that the cuts he's proposing are going to devastate communities, and people are going to feel it in a very real way. Because they're unprecedented."

Walker, who in recent months has championed a high-profile effort to strip unions of collective bargaining rights, was Milwaukee county executive before becoming governor. Elected in 2002 and serving until the end of last year, he presided over the bulk of the transit cuts.

"Any time transit services are discontinued it impacts passengers such as you who depend on the Milwaukee County Transit System to meet their transportation needs. Oftentimes, these passengers include the elderly, disabled and students," reads an email signed by Walker, sent in 2004 from the county executive's office. He notes that transit aid from the state remained flat that year: "The county was unable to increase its financial support for transit service in 2004."

That email was in response to a message from Kostiuk, the Milwaukee resident who moved back to the city from the suburbs in 2000. One of the city's main draws, Kostiuk said, was a convenient transportation system.

Back then, there was a bus stop half a block from his house. The bus took him to work at Johnson Controls every day, dropping him off right outside that building.

In Kostiuk's Valley Park neighborhood today, there's just a red stop sign where the route 13 bus once stopped. The route was cut in 2004. Still affixed to the stop sign pole are two metal strips designed to hold a bus sign.

"It's a very dark time for Milwaukee," Kostiuk said, sitting at a table in his living room, surrounded by local sports memorabilia. "For the first time in my life, I'm thinking about moving."

'OPEN ARMS'

On a Thursday in March, Schulz rode the route 15 bus to a job interview. She doesn't own a business suit, but she had dressed in her best professional attire. For luck, she wore an angel charm pinned to her green plaid overcoat, and the pearl necklace her father had bought in Japan after World War II.

In the nearly two years since she had been laid off, this interview was her first real shot at landing a job. She would be working at a law firm, doing transcription, just as she had done previously. Although the wage was less than the wage at her former job, the hours would be ideal. Best of all, it was located right on the bus line.

Her unemployment benefits had run out in February. She had used the final check to pay back a friend who had fronted her for February's rent, and to pay rent for March. She would be able to make it through April, she reckoned. After that? "By then I'll have a job."

Schulz, who calls herself a "permanent pedestrian," had grown accustomed to disappointment. In February, she saw a posting for a hotel night auditor job. Everything about it seemed fine, until she realized that, due to a reduction in bus service hours, she'd have to take an early bus to work every night, and wait for hours for the job to begin.

Something similar had happened in the fall. That time, she'd actually gone to an interview, for a job making invoices for a trucking company. But she then learned that the hours were variable, sometimes extending beyond midnight -- at which point she would have missed the last bus.

The biggest disappointment came last summer. A job had opened up at the Milwaukee County Transit System, working in public relations. Schulz loves Milwaukee buses the way a car collector loves cars. She's been riding them ever since she was a child, when her father taught her all the rules of bus etiquette. She has written columns in the Milwaukee Journal Sentinel, lamenting the bus system's decay. Often, she'll actually ride the bus for fun, just to ride.

But when she spoke to an MCTS employee about the job, she learned there was a hitch.

"She said you have to be able to drive," Schulz recalled. "I was just so dumbfounded. This was, like, the job I was meant to have."

Stories like Schulz's are common. Brenda Neumann, an occupational therapist, lives in a far-flung suburb. For years, a bus would take her to work at a hospital in downtown Milwaukee. But then her workplace moved farther from the city center. Suddenly, she faced a two-hour commute. And so, eventually, she left her job.

"I cried for weeks when I had to leave," Neumann, 43, recalled. "But my quality of life was suffering so much from the commute, and the lack of public transportation."

Hector Perez, 52, is a dishwasher who earns $10 an hour at a restaurant just outside the city. Service on his bus route was reduced at the beginning of this year. Most days, he's fine. But when he needs to work at night, which happens about three times a month, he has to pay for a cab. That can cost up to $35.

"That's a lot of money for me," he said.

Across Milwaukee County, workers want jobs, and businesses want workers. Eric Isbister is the chief executive of GenMet, a metal fabricator located one block north of Milwaukee county. He needs new employees -- the expansion of his business depends on it -- but he can't get them.

The nearest bus stop is more than two miles from his factory. He advertises in newspapers, and regularly interviews prospective employees, but he continually runs up against the same problem. Often, he said, he'll see an interviewee's friends or family waiting in a car outside, ready to give the person a ride home. When he sees that, he knows he won't be able to hire the worker.

Isbister said he'd hire a dozen new employees on the spot, if only he could.

"I would welcome them with open arms," he said. "And we can train. We're well known for being the place that trains. You don't have to be a metal fabricator, you don't have to be a welder. We can teach you.

"But you have to be able to drive."

Schulz, for her part, got the job. But it didn't turn out to be all she had hoped. Now, she wants to look around for other work, but she dreads diving back into that process. That's assuming she stays in Milwaukee.

"I might have to go to, I don't know, Chicago, maybe? Canada?" she said in an email. "Any suggestions?"

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