Evers’ Budget Will Include More Shared Revenue, Sales Tax

Gov. Tony Evers signs the 2021-23 budget at Cumberland Elementary School in Whitefish Bay on July 8, 2021, after making 50 partial vetoes. (Screenshot | Gov. Evers Facebook video)

Governor Tony Evers has a local government funding proposal that would substantially address the City of Milwaukee and Milwaukee County’s structural fiscal issues.

Evers, through the state’s biennial budget, is proposing to annually send 20% of the state’s revenue from its 5% sales tax, approximately $575 million, back to municipalities through the shared revenue program. The century-old system was originally designed as a way to rebate income taxes to municipalities, but the amount of aid Milwaukee receives has been frozen for more than two decades.

Evers is also proposing to allow a 1% sales tax in Milwaukee County, with 50% going to the City of Milwaukee. The tax, long sought by local officials, given caps on property tax revenue and frozen state aid, is estimated to provide each government unit with $90 million annually.

“For a decade now, our local municipalities have been forced to do more with less. They’ve had to make impossible decisions about what essential services to fund in our communities, having to choose between paying for first responders, addressing PFAS, fixing the roads, and other critical priorities,” said Evers in a press release announcing the proposal. “The state must fulfill our obligation to ensure our local partners can meet basic and unique community needs alike, and this historic investment will ensure that we do.”

Evers committed Tuesday to put the proposal in his budget, but Republican leaders in the Wisconsin State Legislature have already committed to striking Evers’ entire budget proposal.

There is hope that some version of Evers’ proposal could survive.

Assembly Speaker Robin Vos (R-Rochester) and Senate Majority Leader Devin LeMahieu (R-Oostburg) have signaled support for using 20% of the sales tax proceeds for a shared revenue increase. The state has a projected budget surplus of $7 billion.

Vos has also said he could potentially support a sales tax.

“I think it’s possible,” Vos said in a recent appearance on UpFront. “As I look at the real problem, the mistakes that have been made are so gargantuan, it’s almost impossible to solve without some new revenue.”

Milwaukee Mayor Cavalier Johnson and County Executive David Crowley have been working for several months now with the legislative leaders in an attempt to find a solution to their government’s fiscal woes.

Vos has publicly asked the Milwaukee leaders to explore reforms or privatizing services in exchange for new revenue without identifying what he believes the mistakes or waste are.

Multiple reports from the nonpartisan Wisconsin Policy Forum identify the city’s fiscal issues as driven by state-imposed revenue restrictions and higher service level requirements because of higher poverty levels. WPF, with city support, is now studying potential opportunities where the city and county could save money or improve efficiency by merging operations.

The City of Milwaukee’s budget team estimates the city, adjusted for inflation, receives $155 million less annually from shared revenue and the much smaller expenditure restraint program than it did in 2000. Inflation is a key component of that, as the amount has been fixed for years. Milwaukee received approximately $230 million in 2022, down from $245 million in 2000.

The shared revenue program awards local governments approximately $900 million annually.

The city faces a looming need in 2025 to begin laying off one in four workers, including police and firefighters, as it will need to increase its annual pension payment to fully fund its system. The city and county have their own pension systems and are not part of the state pension system in which all other Wisconsin counties and municipalities participate.

Republican leaders are likely to ask for protections to avoid layoffs to Milwaukee’s public safety employees as part of any proposal giving the city and county more revenue. Evers’ proposal also includes necessary public safety spending. Any entity receiving the increased shared revenue payment would be required to dedicate 43.4% of it to public-safety-related expenses.

A referendum would be required to enable the joint city-county sales tax. The other 71 counties would be able to impose a 0.5% sales tax in addition to the 0.5% tax currently allowed by the state. Municipalities other than Milwaukee with more than 30,000 residents could institute a 0.5% sales tax.

Evers will present his official budget proposal later this month. Specific details on how much each municipality and county would receive are to be released at that time. The Legislature will debate the budget this spring, passing a two-year budget that runs from July 2023 through June 2025.