How Would $100 Million Expenditure for Property Tax Relief Affect Other Budget Priorities?

Thursday, October 10, 2013 at 4:30 PM by

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.  I hadn’t anticipated that,  because spending down a one-time surplus isn’t a sustainable funding plan.  Although the state announced in August that tax revenue in 2012-13 was $71.5 million more than previously estimated, half of that goes into the Rainy Day Fund – so the better-than-anticipated revenue in the last biennium doesn’t fund much of this new proposal.  Perhaps in the coming days we will learn more about whether there are other dimensions to the financing of the proposal. 

The Channel 3000.com story reports that Republican Senate President Mike Ellis said, “I don’t know why anybody would be opposed to this.”  Although I don’t know whether anyone will oppose it, I can think of quite a few questions that should be raised to help all of us decide for ourselves whether there are any reasons not to support the proposal. 

Here are some of the key questions that I think legislators need to ask and get answers to before a $100 million expenditure for property tax relief is rushed through the legislature:   

  • What is the source of the increased revenue?  Is it from a sustained upturn in revenue projections, or primarily from a one-time surplus?
  • Will this proposal increase the state’s structural deficit?  If it will, would it make more sense to use the revenue for fiscally responsible purposes, such as reducing bonding or increasing the required minimum balance (which lawmakers have promised to do in the statutes, but every two years they postpone for two more years)?  
  • If the larger surplus results in part from reduced spending, do those spending projections take into account the probable $52 million reduction in the federal share of Medicaid spending
  • How does this measure affect the Legislature’s ability to pass other bills that might be more effective in promoting job growth?  For example, by rushing through spending for this particular purpose, is the state foreclosing options to implement some of the measures in the Governor’s workforce training agenda, such as the unfunded transitional jobs proposal (SB 333/ Ab 401)?  
  • Will passage of this bill foreclose action on other important issues now under consideration, such as the recommendations of the Mental Health Task Force, or proposed changes in the area of criminal justice  (such as the tougher OWI penalties)?

As all of us become increasingly frustrated with the gridlock on budget issues in Congress, I suppose some people might look at a fast track budget bill like this as welcome change of pace.  But shouldn’t effective democracy entail an opportunity for meaningful public involvement and careful legislative deliberation?   Shouldn’t we be striving for a middle ground between legislative inertia and a fast-track process that precludes consideration of alternatives?   

Next week I presume we will learn more about how the state is able to finance this proposal, and perhaps also how it will affect the state’s longer term fiscal outlook.  I hope we also have time over more than just a few days to debate whether it’s the best way to spend $100 million.  

Jon Peacock   

Categories: 2013-15 biennial budget, Blog, K-12, property tax, rainy day fund, spending | Comments Off on How Would $100 Million Expenditure for Property Tax Relief Affect Other Budget Priorities?

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