Will Vos Kill Shared Revenue Hike For City?

Back in August Assembly Speaker Robin Vos and other Republican legislative leaders came to Milwaukee to meet with local politicians and business leaders to discuss the perilous financial state of city and county finances. The meeting was hailed as a positive step forward by all and a chance to “reset” the relationship between Milwaukee’s leaders and state legislators by Tim Sheehy, president and chief executive of the Metropolitan Milwaukee Association of Commerce.

Mayor Cavalier Johnson offered an optimistic take on the city’s chances of getting an increase in state shared revenue and/or a local sales tax. “I’m very optimistic on the issue,” he said. “We really engaged with the legislators.”

But recent comments by Vos at a December 9 discussion sponsored by the nonpartisan Wisconsin Policy Forum raised serious doubts as to whether Vos would approve any changes in state policy to help the city. “Those comments were alarming to the mayor,” says a source closes the budget discussions between Milwaukee and legislators. “He saw that as a significant step backwards in the progress that’s been made.”

Here is what Vos said:

“I think the city is a financial mess.

“I have had discussions with Mayor [Tom] Barrett, I have met with Mayor Johnson and I take it at their word that they have made bad financial decisions for decades. It is nice that they they have finally been admitting they have been making bad financial decisions and something has to be different.

“I have watched the [Milwaukee] budget process this fall and it seems like even though they know this huge fiscal cliff is coming the city council has a hard time cutting spending. They couldn’t even close a library.

“So part of the challenge I have is just giving them more revenue knowing they can’t make hard decisions. So I need to see what the reforms are going to be [by city officials]. More money doesn’t come without a whole lot of reform.”

These comments are remarkable on many levels. First, the idea that city officials take all the blame for their financial problems is misleading and leaves out the state’s outsized role in Milwaukee’s troubles. (More on this later)

Second, Vos appears to following the city budget process very carefully, objecting to saving an inner city library whose cost was a minuscule amount of the $1.7 billion city budget.

Third, his comments sound like someone who is opposed to giving any help to Milwaukee, or only with unspecific but draconian changes in how the city operates.

But Milwaukee County Executive David Crowley takes a different view of the Assembly Speaker’s comments. Crowley, a former state representative who was elected to his current position in April, 2020, has been wooing state officials on the state shared revenue/ local sales tax issue for two years, says his spokesperson Brandon Weathersby.

“We don’t see the comments by Vos as going backwards,” Weathersby says. “For the county executive, as a former legislator, he knows the process and in two years of talks with state officials they haven’t said no yet. I think the county executive has anticipated that there would would some guidelines or guard rails for any funding from the state.”

One proposal that was floated, sources have suggested, is that the state would approve a local sales tax for Milwaukee, but end all shared revenue to local governments. That would still leave Milwaukee in a somewhat better position, but both Johnson and Crowley have argued Milwaukee needs both revenue sources. Moreover, the decline in shared revenue is an issue affecting municipalities and counties across the state, many of whom don’t support a local sales tax as the solution. They want more shared revenue.

The shared revenue program was created after Wisconsin passed the nation’s first income tax in 1911 (two years before a constitutional amendment created the federal income tax). As Urban Milwaukee has reported, state leaders at the time feared “balkanization” of the state — cities competing with each other based on taxes — so the Legislature barred a local sales tax while promising to funnel back most of the state income tax to municipalities in the form of state shared revenue.

As recently as 1995, 53% of Milwaukee’s general purpose budget was paid for by shared revenue. By 2012 that was down to 39% and it has steadily declined in real dollars since then. Over the last decade shared revenue declined by $118 million per year to the city, probably a total loss in excess of $1 billion, Urban Milwaukee reported. As Sheehy noted in that story, “State shared revenue has basically flatlined since 1993, while annual state income tax collections have risen from under $4 billion to over $8 billion.”

All of which provides some context for the “bad financial decisions” Vos claims Barrett and Johnson admitted. City officials believe the Global Pension Settlement of 2000 might have been a mistake, with unforeseen consequences, but this was signed by Mayor John Norquist, a fiscal conservative who opposed any pension sweeteners for employees, at a time when the Legislature approved enhanced benefits for state employees. But the state was able to pay for this with rising income tax revenues even as it began reducing shared revenue in real dollars. Had state shared revenue payments to Milwaukee kept up with inflation, the city could have afforded the unexpected increase in its pension costs.

Milwaukee has also faced the problem of rising benefits for police and fire fighters who were exempted from the Act 10 law reducing public employee benefits and that was used, in part, to justify shared revenue cuts. Probably no city in Wisconsin had a higher percent of its budget going to public safety costs or was more affected by this issue.

In short, the city’s difficulties are largely the fault of state policies, most of it happening under the leadership of Republicans like Vos.