Legislative Proposals Squeeze Local Governments from Many Directions
In Wisconsin and across the country, most government bodies finance the cost of post-retirement health benefits for their former employees on a pay-as-you-go basis. A number of Republicans in the legislature want to change that and begin requiring local governments, including school districts, to pre-pay those benefits for any public employees hired after 2014.
Evidently, the proponents of the change decided that converting to up-front financing of those benefits is working so well for the U.S. Postal Service that it’s time to do much the same thing for local governments. Okay, that’s probably not their reasoning, and I have to confess that I’m not sure what their primary argument is. However, a good State Journal article by Steven Verburg about the debate over the proposed legislation says that the bill’s proponents contend their intent is to protect workers from being cheated out benefits they have been promised. Read more
Governing.com Article Raises Questions about Who Should Set Property Tax Rates
Schools in Wisconsin are caught in a very difficult position because their budgets get squeezed by rising costs, cuts or freezes in state aid, and state-imposed revenue caps that are increasingly tightening the state’s grip on local property taxes. Governing.com examines the fiscal challenges of Wisconsin schools in a very good article today.
“A 20-year-old cap on how much property tax revenue Wisconsin public school districts can earn has become a thorn in the sides of local officials as shrinking home values and dwindling state funding have put a squeeze on their budgets. As the provision comes under increased scrutiny in that state in the wake of the Great Recession, larger questions are being raised [about] whether limiting local public education revenue is a sustainable policy for the future.”
I’d like to think that the 2013-15 budget will provide some relief for schools, but I’m not very optimistic. Although I think many legislators in both parties understand the need to loosen the current constraints, I suspect that the general framework of the governor’s budget will make it very challenging to make the changes that are needed. Read more
At a press conference in the Capitol on Tuesday, the League of Wisconsin Municipalities urged state policymakers to use the better-than-anticipated tax revenue to restore $48 million in shared revenue that was cut in the last state budget. As we noted in a previous blog post, the Dept. of Revenue announced in early September that fiscal year 2011-12 tax collections surpassed the estimated level by $126 million.
The League’s Executive Director, Dan Thompson, says the additional funding would allow municipalities to invest in the services and infrastructure necessary to grow their economies, and could also help hold down property taxes later this year. (Of course, that would require legislative action in a special session within the next couple of months.)
A resolution approved by League members at their conference last October: “urges the Governor and the Legislature to restore shared revenue funding to 2002 levels when the state’s future tax collections increases as a result of job creation and economic growth in our communities.”
Big Change #6: State Budget Cuts Mean Fewer Crossing Guards, Sheriff’s Deputies, and Snow Plows
In Fond du Lac, the city has reduced the number of crossing guards who help children safely cross the street on the way to school. In LaCrosse, the city is weighing buying less road salt for the coming winter, and waiting to plow until five inches of snow have accumulated, up from three inches. In Kenosha, the city has plans to scrap Saturday bus service altogether – or double fares.
Significant reductions in support for communities included in last year’s state budget mean that scenarios like these are playing out in communities across Wisconsin. Whether it’s deferred road maintenance in Green Bay or four dozen sheriff’s deputies laid off in Milwaukee County, cuts included in last year’s budget are affecting the safety, stability, and livability of many of our communities.
Last year’s state budget reduced investment in communities by at least $128 million over two years, including:
- a $76.8 million reduction in general support for counties and municipalities;
- a $24.2 million cut for local recycling programs;
- a $17.5 million cut for road maintenance in communities;
- a $9.6 million cut for public transportation.
Both the federal government and the state government are reducing spending, in large part by shifting costs to other levels of government. Faced with cascading cuts in spending, local governments have fewer options and are facing the possibility of having to make steep cuts in areas important to keeping our communities safe, well-functioning, and economically viable.
The debt ceiling deal means the federal government is going to be reining in spending, probably in part by sending less money to the states. Earlier this week, the Wisconsin Budget Project described the mechanism by which cuts in federal spending will take place. The cuts of more than $900 billion that the debt deal immediately locks into place come from discretionary spending – and fully one-third of this spending goes to state governments to support education, health care, human services, law enforcement, infrastructure, and other programs, according to the Center on Budget and Policy Priorities (CBPP). Read more
Legislators passed the budget adjustment bill with the intent of severely curtailing collective bargaining rights of public employees at the state and local level. Ironically, their actions may have the unintended short-term effect of making it more difficult for unions to make financial concessions.
The budget repair bill, part of which is currently tied up in court as Act 10, was justified in part as a way to make it easier for local governments to impose significant compensation cuts on local employees without having to bargain with the unions. Removing the ability for public employees to bargain on benefits and limiting their ability to bargain on wages would (in theory) make up for the steep cuts in local aid in the Governor’s 2011-13 budget. Local governments have pointed that the governor’s cuts exceed the amount that can be recouped in compensation cuts to local employees by a significant amount. We explored this topic in an April 13th blog post. Read more
To help balance the biennial state budget, Governor Walker is proposing drastic cuts in aid to local governments, including counties, municipalities, and school districts. Cuts proposed by the Governor over the biennium include:
• $834 million GPR to public K-12 schools;
• $100 million GPR in shared revenue to counties and municipalities;
• $64 million in segregated fund state support for local recycling programs;
• $48 million in segregated fund state support for local transportation aid;
• $10 million GPR for mass transit aid; and
• $8 million GPR for juvenile justice at the local level.
In both the biennial budget bill and the 2011 budget adjustment bill, the Governor has proposed a number of policy changes that he says will allow local governments to reduce costs by an amount that will more than make up for reductions in state aid. The bulk of these “tools,” as the Governor refers to the policy changes, hinge on implementing restrictions on collective bargaining rights, which would allow local governments to unilaterally require public employees to pay more for their retirement and health insurance benefits. Read more
The cornerstone of Governor Scott Walker’s proposed budget is a steep cut in aid to local governments, including counties, municipalities, and school districts. Wisconsin is among several states taking this approach to balancing the budget, according to an article in this week’s New York Times. Governors or Legislatures in Ohio, Nebraska, Michigan, New York, and Massachusetts, and Minnesota are also looking to make ends meet by reducing support for local governments.
The article likens reducing local aid to “squeezing a balloon,” with states able to reduce their spending by passing the brunt of the budget cuts down to cities and other localities, which may have to raise property taxes to make up for aid cuts. Governor Walker’s budget, however, would prohibit increases in property taxes by limiting municipal and county levy limits to be increased only to allow for new construction. Schools would be required to reduce their revenue limits by 5.5% in fiscal year 2012 compared to 2011. Read more
The Institute for Wisconsin’s Future has released a new report that describes loopholes in Wisconsin’s property tax system worth hundreds of millions of dollars. The report noted that there are more than a hundred property tax exemptions currently in law. If all properties were taxed at their market value, it would generate up to an additional $700 million.
The majority of property tax-exempt property, according to the report, is owned by nonprofit organizations that are categorized as “benevolent.” IWF points to nonprofit hospitals and high-end retirement housing as two types of “benevolent” organizations that operate similarly to their for-profit counterparts, except for the fact that they do not have to pay property taxes. IWF’s analysis estimated that at least $128 million in property taxes was shifted from hospitals to other property owners in 2008 alone.
The report recommends limiting the definition of “benevolent,” as well as requiring full market assessment of properties allowed by law to be undervalued. Read more