Senate Mulls Milwaukee’s Financial Peril

Wisconsin State Capitol. Photo by Mariiana Tzotcheva.

Senate lawmakers were cautioned during a Tuesday hearing about what would happen if a deal to fix the state’s system for funding local governments is not reached, including a provision allowing Milwaukee to raise an additional sales tax.

The hearing follows passage of a revised version of the shared revenue bill by Assembly Republicans last week and a split between Wisconsin’s Republican leaders of the Assembly and the Senate over a key element of the bill, which would dictate how Milwaukee and Milwaukee County could get approval for a sales tax that would help address its unfunded pension obligations and public safety costs.

The disagreement has put the entire deal in question as the Senate takes up the bill and negotiations continue.

“What happens if we don’t pass the bill?” Sen. Dan Feyen (R-Fond du Lac) asked the bill’s co-authors during the hearing in the Senate Shared Revenue, Elections and Consumer Protection committee.

Much of the conversation focused on the consequences for Milwaukee and Milwaukee County, which is headed towards a fiscal cliff if it’s not capable of securing additional revenue.

Sen. Mary Felzkowski (R-Irma) said they’ve had some conversations with Milwaukee and Milwaukee County officials about the possibility.

“The city does have some pension reserve money and some [ARPA] money left over, so they might be able to limp through for a year,” Felzkowski told the committee. “But then at some point, cuts are going to start to happen.”

Felzkowski cited estimates that the city would need to cut $25 million in funding for its public library or about 545 police officer positions and 209 firemen positions to offset the pension costs, if there is no increase.

“I don’t think that’s healthy for the city,” Felzkowski said. “If this does not happen, we have a lot of other tough decisions to make and none of those are positive.”

Many have discussed the possibility of Milwaukee going bankrupt, similar to Detroit in 2013, but Felzkowski said the state doesn’t allow cities to declare bankruptcy, so the Legislature would need to take action before that could happen.

The bill, if passed, would allow Milwaukee and Milwaukee County to go to referendum to adopt an additional 2% sales tax in the city and a 0.375% sales tax in the county to address unfunded pension liabilities. However, state leaders and local officials have expressed concern about whether a tax would be approved by voters and have floated the idea of allowing local government officials to approve the taxes.

Despite the concerns, the Assembly passed a revised version of the bill that kept the referendum requirement last week. Assembly Speaker Robin Vos (R-Rochester) said his caucus was “done negotiating” and wouldn’t be making any major changes to the bill.

The following day, however, Senate Majority Leader Devin LeMahieu (R-Oostburg) said the Senate version of the bill would likely remove the referendum requirement because he thought a referendum would fail. Gov. Tony Evers agreed with LeMahieu.

Vos said any change to the requirement could “kill the bill.”

Milwaukee Mayor Cavalier Johnson and others who testified on Tuesday urged the committee to recommend the removal of the referendum requirement, saying they believed the referendum would fail.

“The city strongly requests that the bill be amended to enable the Common Council to enable the sales tax component. Common Council members are close to the residents that they represent and can make informed and timely decisions on behalf of their constituents,” Johnson said. “A referendum, though, has a significant element of uncertainty and next year, none of us want to revisit all of the hard work that has brought us to this point now.”

Sen. Romaine Quinn (R-Cameron) asked Milwaukee County leaders about their confidence in whether the tax would pass the county board.

“I have more constituents living closer to the international falls in Canada than Milwaukee, and none of them care whether the Common Council and the County Board vote to raise your own taxes or if there’s a referendum to vote to raise your own taxes, but clearly there’s been lines drawn between our two houses here,” Quinn said.

“I’ll be succinct,” Marcelia Nicholson, chair of the Milwaukee County Board said. “I think if it came to the body as legislation, and we were required to have a simple to healthy majority, I think it would pass.”

Andrew Wagner, president of the Milwaukee Police Association, Jerry Deschane, executive director of the League of Wisconsin Municipalities and Andrew Davis of the Metropolitan Milwaukee Association of Commerce also provided testimony saying they were supportive of allowing local officials to approve the sales tax.

Apart from the referendum requirement, local officials also asked the committee to reconsider several of the other provisions including one that would prohibit Milwaukee from using money raised by levying taxes to fund positions that promote individuals or groups on the basis of their race, color, ancestry, national origin, or sexual orientation.

Johnson told the committee that historical discrimination is real as Black people and other people of color were denied housing, jobs and overlooked by the government. However, he said current diversity, equity and inclusion initiatives aren’t an attempt to right the wrongs of the past.

“We do however want to ensure that we’re working to establish equitable footing for everybody moving forward,” Johnson said. “The city wants to be competitive and draw on the rich and diverse talent that’s available in our community.”

He urged lawmakers to allow Milwaukee, not Madison, to make decisions related to local governing.

Lawmakers consider the new aid formula

Rep. Tony Kurtz (R-Wonewoc) told the committee that if a bill isn’t passed, communities across Wisconsin won’t see an increase and funding will stay frozen in the upcoming biennial.

Under the current Senate version of the bill which doesn’t include the changes adopted by the Assembly last week, $227 million would be dedicated to increasing payments to local governments.

“Senate bill 301 would close the gap in the disparities that currently exist in the old shared revenue formula, while ensuring that every community receives a significant inflationary increase,” Felzkowski told the committee. “Along with these major inflationary increases, local government funding would increase at the same rate as the state sales tax revenue.”

The money, which could be used for law enforcement, fire protection, emergency medical services, emergency response communications, public works and transportation costs, would be distributed under a new formula.

Despite the stakes for all local governments, lawmakers questioned the formula proposed by Republicans that would dictate how new funds would be allocated.

Kurtz, the lead Assembly author, said the new formula aimed to send more funding to smaller municipalities, since the old shared revenue formula directed money at larger municipalities. He also emphasized that all municipalities would likely see increases year to year since the payments would be tied to the growth of sales tax revenue.

Sen. Mark Spreitzer (D-Janesville) said the formula still doesn’t close the gap for all Wisconsin local governments, however, asking the authors to consider additional increases in funding.

“I represent the city of Janesville and unfortunately the old shared revenue formula left them behind, and because they’re a larger city, the new one kind of does as well,” Spreitzer said.

Spreitzer said bumping the increases for cities that are between 30,000 to 50,000 in population could help other places like Eau Claire, Oshkosh, Appleton and Waukesha. According to a Legislative Fiscal Bureau memo, Eau Claire would receive an additional $966,551 — or a 15.9% increase, Oshkosh would receive an additional $960,961 — or a 10% increase, Appleton would receive $1,027,142 — or a 10.7% increase and Waukesha would receive $973,343 — or a 67.3% increase.

Spreitzer said bumping the increases for cities that are between 30,000 to 50,000 in population could help other places like Eau Claire, Oshkosh, Appleton and Waukesha. According to a Legislative Fiscal Bureau memo, Eau Claire would receive an additional $966,551 — or a 15.9% increase, Oshkosh would receive an additional $960,961 — or a 10% increase, Appleton would receive $1,027,142 — or a 10.7% increase and Waukesha would receive $973,343 — or a 67.3% increase.

While the city of Waukesha would get an increase larger than the minimum, officials from the area have said the increase will not be enough to meet public safety needs. Three Republican representatives who represent parts of Waukesha County — Chuck Wichgers (R-Muskego), Janel Brandtjen (R-Menomonee Falls) and Scott Allen (R-Waukesha) — voted against the Assembly bill last week. Allen explained his “no” vote in a statement, saying shared revenue was a broken formula and the bill would did not address inequities. “While the additional revenue will help, the extra funding to be provided to the City and County of Waukesha is small in comparison to the needs of the community,” Allen said.

The amendment to the Assembly bill raised the additional payments to a minimum of 15% increase for all local governments except for Milwaukee, which would still receive the 10% increase.

Spreitzer said they should even look at increasing the minimum to 20% or 25% since many communities will be getting much more than that.

“I like the Assembly’s beginning approach, but I think we do have an opportunity here in the Senate to maybe go even farther and I hope you’ll both consider doing that,” Spreitzer said.

Quinn asked the authors about how they came up with the new formula and how it compared to Gov. Tony Evers’ proposal. He said Evers’ plan would potentially not be a “gamechanger” for the area he represents.

Compared to the Republican proposal, Evers’ plan would dedicate twice the amount of money — around $576 million — to local governments for public safety aid and general aid. Rather than providing general aid to local governments, the Republican proposal would instead use $300 million to create an “innovation fund,” which would allow local governments looking to consolidate services to apply for grants.

According to an analysis by the Recombobulation Area, only six of Wisconsin’s 72 counties would fare better under the bill passed by the Assembly than under Evers’ proposal.

Felzkowski said she could not speak to Evers’ proposal.

“I’m going to just say, I did not read the governor’s proposal,” Felzkowski said. “I was pretty much immersed in this.”

Instead, Felzkowski told lawmakers that the League of Wisconsin Municipalities, the Wisconsin Counties Association and the Wisconsin Towns Association helped make the decisions about how the money would be distributed in the GOP proposal.

The bill will next be considered by the committee in an executive session. Sen. Jeff Smith (D-Brunswick) called for an in-person executive session on the bill, so there can be public discussion among the committee members.

Senate lawmakers consider the potential consequences of no shared revenue deal was originally published by the Wisconsin Examiner.