Wisconsin Counties Association: For 25 years, local governments asked to do more with less

By LeAnn R. Ralph

MENOMONIE —  Over the last 25 years, the percentage of the state budget going to cities, villages, towns and counties has nearly been cut in half.

In 1989, the percentage of the state budget that went to local government was 27 percent, said John Hochkammer, legislative director for the Wisconsin Counties Association, at the Dunn County Board of Supervisors March 20 meeting.

In 2013, the percent of the state budget going to cities, villages, towns and counties is 15 percent, he said.

Wisconsin is unique because the majority of the tax revenues are collected by the state, but the majority of the services are provided locally, Hochkammer said.

For example, in many states, highway department employees are state employees. In Wisconsin, highway department employees are county employees, he said.

Local governments, such as the county, are mandated by the state to provide services but do not receive adequate funding for those state-mandated services, Hochkammer said.

More or less

Why is it important that local governments are being asked to do more with less?

Well, for one thing, local governments are still expected to maintain certain infrastructure, such as roads.

Instead of sharing the general pool of money generated for the state budget, local taxpayers have been asked to pay more, although only up to a certain point, because local governments also have been operating under tax levy limits.

Besides having less money to work with, the cost of paving a mile of road, for example, has gone up astronomically and is between $100,000 and $150,000 now.

Without enough money from one source or the other, roads and bridges have not been as well maintained.

So who cares if we drive around on bumpy roads?

Actually, roads are the first thing that a business looks at when considering a certain area, Hochkammer told the Dunn County Board.

If the roads are not in good shape, that business goes elsewhere, he said.

Schools rank right up there in importance as well, Hochkammer noted.

Flat

According to a chart in Hochkammer’s presentation, local shared revenues for counties have been flat or have declined over the last seven years.

In 2007, Wisconsin’s 72 counties shared in $157.2 million, which was a zero percent increase over the previous year.

In 2008 and 2009, the shared revenue stayed the same.

In 2010, shared revenue decreased by 3.5 percent.

In 2011, shared revenue for the counties stayed the same.

And in 2012, shared revenue for the counties decreased by almost 20 percent.

In 2001, the 72 counties shared $175.3 million.

In 2013, the 72 counties will share $123 million.

Revenue

The individual income tax in Wisconsin generates the most revenue and accounts for 51.9 percent for the state’s general fund, according to Hochkammer’s report.

The sales tax generates 31.8 percent of the state’s general fund.

Unfortunately, legislators keep approving more exemptions to the sales tax so that the revenue generated keeps declining, Hochkammer said.

If all of the sales tax exemptions were removed, the state could still generate the same amount of revenue from sales tax, but everyone would only pay something like three or 3.5 percent in sales tax, he said.

The Wisconsin Counties Association is opposed to any exemptions for the sales tax, Hochkammer said.

Corporations pay 6.6 percent of the state’s general fund.

Smokers, via the tobacco tax on cigarettes, pay almost as much as the corporations do at 5.6 percent of the state’s general fund.

“Other” tax revenue sources generate 4.1 percent.

Out of 30 presentations he has done about the state budget, in only two instances did anyone know that the 5.6 percent excise tax referred to the tobacco tax, Hochkammer noted.

Ranking

Wisconsin ranks as the ninth highest state out of 50 on taxes.

If taxes and fees are added together, Wisconsin ranks 11th out of 50 states.

Wisconsin’s individual income tax also ranks 11th highest out of 50 states.

The sales tax in Wisconsin is on the lower half, ranking 34th out of 50 states.

The property tax in Wisconsin is the 9th highest out of 50 states.

Corporate income taxes rank about in the middle, coming in at 23rd out of 50 states.

Wisconsin’s tobacco tax is the 7th highest out of 50.

Fees and charges rank in the lower half, with Wisconsin coming in 27th out of 50.

Property tax

Only eight other states have a property tax higher than Wisconsin’s property tax.

The problem with property taxes in Wisconsin, Hochkammer said, is — guess who sends out the tax bills in December?

The counties send out tax bills in December.

And guess who people call when they are upset about their property tax bill?

The county.

State legislators do not worry about the property tax rate and how much people are paying in property taxes because the county and other local governments receive the complaints about taxes, Hochkammer said.

Since state legislators are so well-insulated from property tax complaints, it is unlikely the property tax formula will change — unless people start contacting their state legislators about property taxes, he said.

Levy limits

Levy limits in 2007-08 were set at a 3.86 percent increase; levy limits in 2008-09 were set at a 2 percent increase.

In 2009-10 and 2010-11, the limits were set at 3 percent.

Since 2011-2012, the levy increase has been set at a zero percent increase.

Zero percent levy increases means that local governments are expected to do even more on less money, especially at a time when expenses are increasing as well, such as increased fuel costs.

And while local governments are held at a zero percent increase, the state is proposing to increase spending by five percent over the next two years, Hochkammer pointed out.

Deficit

Wisconsin has been operating with a “structural deficit” in the budget for many years, which means that the state would put off making certain payments until the next fiscal year so that the budget would appear balanced in the current year but the deficit for the payment would be added to the following year.

Over the past 15 years, structural deficits have been a reality under Republican controlled legislatures, under Democratically controlled legislatures, and under legislatures where the Republicans control one house and the Democrats control the other house, Hochkammer said.

In the 1997-1999 budget, the structural deficit was $1.5 billion, according to information in Hochkammer’s report.

The structural deficit continued and was at an all-time high of $2.9 billion in 2003-2005.

In the 2011-2013 budget, the structural deficit was $2.5 billion.

In the budget that will go into effect this summer, the state will have a small surplus of $146 million.

In the next budget cycle beginning in 2015, however, the structural deficit returns and is expected to be more than a half a billion dollars ($663 million).

Hochkammer described the proposed budget for the next two years as a “re-election” budget that is designed not to upset anyone so that the governor stands a better chance of being re-elected.

Income tax

Governor Scott Walker has proposed cutting the individual income tax in Wisconsin.

The problem with that is — individual income tax contributes nearly 52 percent of the state’s general fund.

Cutting income taxes will create additional budget problems without additional forms of revenue, Hochkammer said.

The proposal would save the average person about $86 to $88 per year on his or her state income tax, he said.

News reports have indicated that a couple would pay about $120 less, or would save about $10 per month on state income taxes.