Here & Now

Rob Henken on Proposals to Boost Shared Revenue in Wisconsin

Frederica Freyberg:

Republicans this week released the details of their plan to increase shared revenue, which would increase funding for local governments by at least 10%. It would also ask Milwaukee voters whether to increase the local sales tax by 2% in order to pay off debts to the county’s pension system. However, the plan also has non-monetary strings attached, like a minimum number of police officers return to schools in the Milwaukee School District or prohibiting a local government from putting an advisory referendum question on a ballot. Governor Tony Evers said he would veto the plan as it is now in its entirety. For more on the shared revenue plan, we turn to Rob Henken, president of the research group Wisconsin Policy Forum. Rob, thank you for being with us.

Rob Henken:

Thanks so much for having me.

Frederica Freyberg:

So just when local governments could taste the relief in their shared revenue and in their budgets, a possible impasse with the governor’s threat of a veto. How far apart are Republicans and the governor now on this plan?

Rob Henken:

So I obviously don’t have any inside knowledge, but i will say that unfortunately this is sausage making. Sausage making is not pretty. I don’t think anybody could have reasonably expected that this was going to go completely smoothly. I think from the perspective of local governments, the important thing is that there is solid agreement among leaders of both parties that not only boosting the amount of shared revenue, but tying it permanently to a percentage, in this case, one-fifth of the state sales tax is something that they agree on, and that will be very important for the local governments, both in the immediate funding increase it would provide over the next two-year budget, but also in terms of ensuring that there is some growth in that critical revenue source as state revenue collections grow.

Frederica Freyberg:

How usual is it to have restrictions like where the money can be spent or not allowing local referendums?

Rob Henken:

It’s an interesting question. Obviously, state government has a great deal of authority in terms of the restrictions it can place on local governments, the parameters it can set for local governments. In the case of counties in particular, counties are really arms of state government. However, you can look at it the other way, too, and that is that shared revenue is different. This was a commitment made by state leaders more than a hundred years ago when the state was the first in the nation to adopt an income tax and there was this principle that as the state collected both sales and income taxes and the ability of local governments to do likewise was either eliminated or significantly restricted, that there would be some commitment to sharing those revenues so putting further restrictions on it, arguably does make this a different animal.

Frederica Freyberg:

How hamstrung is the city of Milwaukee like potentially facing bankruptcy without new money or the ability to raise it?

Rob Henken:

I wouldn’t go so far as to say bankruptcy, but I would certainly go so far as to say draconian service cuts would have to be adopted in order to fill a budget hole as deep as the one that the city of Milwaukee would face when these federal pandemic relief dollars are exhausted after 2024. It’s roughly $120 to $150 million budget hole in a general purpose budget that is about $650 million and given the fact that police and fire are more than half of the city of Milwaukee’s budget, not only is there no way to avoid position cuts in general, but there is very specifically no way to avoid very deep public safety position and service cuts and, really, I think that’s the factor that’s bringing everybody to the table here.

Frederica Freyberg:

Are the “politics of resentment” as the book title described still at played for Republican legislators from rural districts whereby outside voters believe that Milwaukee gets too much money?

Rob Henken:

You know, the argument can go both ways. I mean there’s no question, when you look at the amount of shared revenue that the city of Milwaukee receives, about $230 million per year, that’s a lot of money. The problem is that we have set up a structure in this state where our game plan is to be very restrictive on local governments in terms of the variety of taxes that they can levy on their own in return for committing to give them appropriate state aids and property tax levy authority to allow them to provide critical local services, and so while voters outside of Milwaukee can look at that amount of money and say, boy, that’s a lot and why should we add to that, you can also look at it as that this appropriation has not grown for 25 years in nominal terms and I think the entire state would suffer if the city of Milwaukee is unable to provide the types of core services on which not only its residents but also the millions of people from outside of the city and the county who visit Milwaukee attractions and so forth every year.

Frederica Freyberg:

With only about a half a minute left, how divergent do you expect the two budgets to be when it comes to big ticket items like K-12 funding?

Rob Henken:

You know, K-12 funding is a huge issue in terms of the dollar amount. I do think, I’m detecting that there’s some fundamental agreement that more money needs to be available, particularly for special ed. The question is whether they’ll meet in the middle or, as you say, it will remain divergent and this will be one of the issues that potentially drags down everything and delays the adoption of a budget.

Frederica Freyberg:

All right. Well, Rob Henken, thank you very much for your expertise. Appreciate it.

Rob Henken:

Thanks for having me.