Special Public Hearing Scheduled On County Sales Tax Increase

Milwaukee County Courthouse. Photo by Graham Kilmer.

The Milwaukee County Board is holding a public hearing to gather public input on a potential increase to the county sales tax.

The meeting is scheduled for July 11 at 12 p.m. at the Milwaukee County Courthouse. The board is seeking community feedback on a proposed 0.4% addition to the 0.5% county sales tax.

This authority for this tax increase was recently granted to the board as part of wide-ranging state legislation that reshaped the state’s system for local government. The legislation was signed by Gov. Tony Evers June 20, and also came with a raft of policy restrictions constraining the ability of both the City of Milwaukee and Milwaukee County to govern themselves.

The board is moving slower toward a decision on the sales tax than the City of Milwaukee Common Council. An important council committee recently gave the first approval for a 2% city sales tax also enabled by the bill.

The bill was, in part, the end result of a years-long public campaign and lobbying effort by Milwaukee-area political and business leaders. The City of Milwaukee and Milwaukee County both face massive, unprecedented budget deficits in the coming years and have been seeking increased shared revenue from the state and new sales tax authority.

Without new revenue, the county faces a perilous financial future, with a yawning structural deficit that will soon eclipse the county’s ability to pay for anything except the services it must provide per state law. That would mean massive cuts to county departments, with parks and transit being particularly vulnerable.

While county leaders and supervisors have been advocating for more shared revenue and the authority for a sales tax increase, the idea was always that they would receive more shared revenue than the modest bump received in the bill, more of a sales tax increase and also that the increase would go to referendum for voters to decide.

Now the decision is squarely on the shoulders of the board. And enacting a sales tax increase will require a two-thirds vote from the board.

The county is also only allowed a narrow use for the new sales tax revenue: paying down unfunded pension costs and public safety. A county sales tax increase has long been discussed as a tool for investing in county parks and providing property tax relief to residents. While the sales tax authority explicitly does not allow the revenue to be used this way, it’s possible that it will free up some money that was previously dedicated to paying down the county’s pension liabilities for these uses.

Milwaukee County Comptroller Scott Manske recently told Urban Milwaukee that his office was still in the process of calculating the fiscal effects of the legislation and a potential sales tax increase.

“We are awaiting numbers from the actuary to verify previous estimates by them, and to also update our five-year fiscal projection,” he said. “Actuarial estimates become very important in the analysis, since the new sales tax is dedicated to funding the unfunded actuarial accrued liability:  The difference between actuarial assets and actuarial liabilities.”

The latest five-year fiscal projection for the county showed a $110 million budget shortfall over the next five years, but that was before the local government funding bill was passed. A part of that massive budget deficit is created by increased spending on the county pension plan.

“The new Sales Tax bill will provide contributions to cover the County’s pension contributions for the unfunded liability,” Manske said. “This will allow the County to use funds previously dedicated to these costs for other purposes.”

But the financial details matter here, as they could sway supervisors currently on the fence one way or another. So far, there are not 12 supervisors publicly supporting a sales tax increase. Only two have come out against it: Ryan Clancy and Juan Miguel Martinez. Most have been quiet and a few have said they are awaiting financial analysis and input from their constituents.s.