Governor Walker proposed a $100 million property tax cut at a hastily-called press conference today. The tax relief would be delivered through the school aid formula – by adding $40 million this year and $60 million next year. Because the school spending caps aren’t being raised, schools will have to reduce property taxes to offset the increased state aid. The Governor is calling a special session for next week to expedite legislative action on the plan.
According to a story on Channel 3000.com, Assembly Speaker Robin Vos said the bill will be introduced tomorrow, and he would like the legislature to pass it by the end of next week. The Governor is pushing for fast action on the proposal so the tax cut would be in effect when property tax bills are being calculated later this year.
Walker said that the funding for the property tax cut would come from the state budget surplus. Read more
By including only token increases in local aid, the state budget could lead to cutbacks in local services or further reductions in employee compensation, according to a new budget summary from the Wisconsin Budget Project.
Under the budget, state support for aid to local governments would be frozen or nearly so, according to the summary. This freeze comes after several years of steady decreases in state spending for local assistance.
The budget, which is on the verge of final approval today, makes the following changes to local aid amounts over the two-year budget period:
- Wisconsin Technical College System: +1.6%;
- General transportation aid: +0.5%;
- Mass transit: +0.5%;
- Direct aid to counties and municipalities: +0.4%;
- Funding for juvenile justice services provided by counties: no change;
- Children and Family Aids to counties for services related to child abuse: -1.0%
- Community Aids for counties: no change in the state share.
This budget continues strict controls on the amount of property taxes that local governments are able to raise. 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. Read more
What Sorts of Tax Changes Does Wisconsin Need?
In his State of the State message this evening, Governor Walker reiterated his intent to cut the state income tax for “middle class” Wisconsinites. We won’t learn any details until the Governor’s 2013-15 budget is introduced next month, so it’s hard to critique the plan now. However, it’s not too soon to raise the sorts of questions and concerns that state policymakers should be considering in the months ahead, as they debate the budget bill.
Can the state afford a significant cut in the income tax?
Policymakers need to carefully consider whether cutting income tax revenue would undermine the state’s ability to maintain support for state investments that are critically important to the state’s workforce, quality of life, and economic competitiveness – such as support for K-12 and higher education. They will need to take into account that new or phased-in tax cuts already on the books are going to reduce state General Fund revenue by $262 million in the 2013-15 budget, and even more in the following biennium. Read more
State School Superintendent Tony Evers has unveiled a budget proposal called “Fair Funding for our Future,” which would fix a number of shortcomings of the current school finance system. The plan would significantly improve the distribution of school aids by making two fundamental changes.
The Legislative Fiscal Bureau has released an estimate of property tax levels and tax bills as affected by the budget proposed by the Governor, and as approved by the Legislature.
Under the Governor’s budget, gross statewide property tax levels were estimated to increase by 1.2% in tax year 2011and 1.3% in 2012. Due to changes in values of homes and other properties, the actual tax bill for a median-valued home taxed at statewide average tax rates was expected to increase by 0.8% (or $23) in 2011 and 0.4% ($13) in 2012, compared to the previous year.
The Legislature made some changes to the Governor’s budget that had an effect on property tax levels. These changes include adjustments to school revenue limits and the Milwaukee/Racine charter school program, as well as limits on the ability of technical college districts to levy. In addition, a re-estimate of the lottery fund meant there was additional money for property tax relief. Read more
The Governor used his veto pen to prevent a slight loosening of the restrictions on levy limits for counties and municipalities.
In his executive budget, the Governor proposed extending the time frame for levy limits for counties and municipalities through 2012 (with the taxes payable in 2013). He also proposed holding municipal or county tax levies to a zero percent increase, or to take into account the value of new construction, whichever is greater. Local governments would be able to exceed the levy increase limit by going to referendum.
When the budget moved to Joint Finance, that committee made some modifications to the ability of local governments to raise revenue from the property tax. Joint Finance allowed for municipalities and counties to carry forward a small amount of their unused levy capacity, under specific circumstances. Joint Finance also made the levy limit permanent, and allowed local governments to increase their levies by at least 1.5% in 2013(14) and thereafter. Read more
Yesterday, we highlighted a new paper by UW Professor Andrew Reschovsky (link updated 7/26/11 — see note at end of post) that described how and why the proposed state budget would both cut state aid to schools sharply and force most districts to reduce property taxes.
You can read yesterday’s post for a more thorough explanation, but here’s a quick summary, expressed in an equation:
Revenue limits = General state aid + Property Taxes
The biennial budget proposes decreasing revenue limits by 5.5 percent between fiscal year 2011 and 2012. The budget also reduces general aid to schools by $390.5 million in FY 2012 and $358.8 million in FY 2013. For many schools, the reduction in aid is less than the decrease in the revenue limit. This means most districts – more than 75 percent – will have to cut property taxes to stay under the revenue limits.
Professor Reschovsky’s paper includes interesting information about how schools will fare under the proposed budget. Read more
We already know that Governor Walker’s proposed budget would result in deep cuts to state aid to public schools. A new study by University of Wisconsin professor Andrew Reschovsky (link updated as of July 2011; see note at end of this post) gives a more complete picture about how school funding will change if the Governor’s recommendations are enacted. Not only will schools receive less in aid from the state, but more than three-quarters of school districts will have to reduce the amount of revenue they raise at the local level as well, unless the voters approve a referendum increasing the revenue limit.
In addition to a decrease in state aid, the proposed budget calls for reducing each school district’s revenue limit, which restricts the amount of money schools can raise from the sum of general school aids and property taxes. The average per-student reduction in state general aid is $455, which is less than the average revenue limit reduction of $541. Read more
The Joint Finance Committee will next be meeting on Thursday, May 12th at 11 AM. That executive session will begin at 11:00 a.m., in the JFC meeting room (412 East, State Capitol).
On the JFC agenda are 28 budget papers, 12 of which are related to the Justice Information System Surcharge. The remaining papers include items related to the Child Abuse and Neglect Prevention Board, Department of Financial Institutions, Secretary of State, Department of Veterans Affairs, levy limits, and property tax relief. Also being considered are papers related to the Government Accountability Board and the Office of Commissioner of Insurance, which were held over from previous sessions.
From our perspective, the most interesting of these issues are the First Dollar Credit (Paper #606), the levy limit for counties and municipalities (Paper #610), and the repeal of indexing for the Homestead Credit (Paper # 605).