Wisconsin Not the Only State “Squeezing the Balloon”
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.
As in Wisconsin, some Governors in other states have coupled cuts in local aid with a set of “tools” to help local governments make up for the loss. (In Wisconsin, representatives from some local governments have objected that they will not be able to use the tools cited by Governor Walker – requiring public employees to pay more of their health insurance and retirement costs – to fully make up for the cuts in state aid.) In Michigan, communities that meet “best practice” criteria laid out by the Governor would be eligible to earn higher local aid payments. Included among these standards would be the creation of a two-tier employment system that places new hires in a defined contribution plan, with caps on employer contributions. He is also encouraging consolidation among local governments and an end to unfunded mandates for localities.
Based on budget negotiations in Wisconsin and in other states, it looks like one effect of the recession may be significant and lasting changes in the relationship between state and local governments, and between local governments and their employees.