What Strings Are Attached to Sales Tax Law?

Milwaukee County Courthouse. Photo by Graham Kilmer.

As the Milwaukee County Board deliberates over whether to increase the sales tax, in the background loom a number of new policy changes that have already taken effect or will do so if the tax hike is approved.

These new laws and policies are included in 2023 Wisconsin Act 12, the legislation signed by Gov. Tony Evers in late June that reshaped local government funding across the state. Milwaukee was particularly targeted with a number of policy impositions ranging from new procedural rules for the county board to a dismantling of authority for the City of Milwaukee’s Fire and Police Commission.

When it comes to some of these policy changes, however, they either don’t apply to Milwaukee County or won’t have much impact.

New Pension Plan

In order to increase the countywide sales tax, the county board must also vote to have all new county employees join the state’s pension system, called the Wisconsin Retirement System (WRS). The coupling of these two changes is a policy recommendation that came out of a 2017 county task force studying its pension troubles.

Joe Lamers, director of the county’s Officer of Strategy, Budget and Performance told supervisors that the WRS is regularly referenced as “one of the top managed pension systems in the country.” The county’s own pension plan would be slow-walked to closure, as all new county employees would become part of the state’s pension plan.

The county’s pension system has been a mess since 2000, when the county board passed the infamous pension backdrop providing some county employees with massive lump-sum payments upon retirement. This is “a significant factor in what is causing a significant structural deficit in our budget,” Lamers said.

The county has made a number of pension reforms since then, including getting rid of the backdrop in stages, from 2002 to 2007, for all new employees. But the county currently has a $760 million unfunded pension liability, and “that would require substantial payments over the next several decades, including year over year increases to the pension system,” Lamers said.

“Just think of the unfunded liability similar to a mortgage,” Milwaukee County Comptroller Scott Manske told supervisors. “It’s a debt that is owed, which means there is interest accruing on that each year.”

Over the next five years, pension costs are expected to increase by approximately $27 million, Lamers said.

There is an additional cost to the county budget to begin transitioning new employees to WRS. Lamers said it will be approximately $700,000 to $1 million a year. But, in 2024, the proposed sales tax increase would free up $39 to $49 million in property tax revenue that could be used to cover this new expense.

Diversity Hiring Practices

Act 12 included language prohibiting, “discrimination or preferences on the basis of race, color, ancestry, national origin, or sexual orientation in government contracting and hiring” by all municipal and county governments in the state.

However, Corporation Counsel Margaret Daun told supervisors that the recent ruling by the U.S. Supreme Court striking down Affirmative Action effectively “subsumed, rendered a nullity, irrelevant the provision in Act 12 addressing DEI, contracting and hiring.”

“It is my sad opinion, as your corporation counsel, that whatever language was used in Act 12 to constrain this county or our sister cities efforts to undo the history of racial discrimination, racial hatred and racial oppression in this country, that also extended itself to women and the LGBTQIA community has been completely subsumed… when the Supreme Court struck down affirmative action,” Daun said.

Daun read a passage from the court’s majority opinion, and said, “That’s it, from the Supreme Court of your United States, has decided that we will be deniers of history and doom us to repeat it.”

Public Safety Staffing Requirements

One aspect of Act 12 was a new requirement, called a “maintenance of effort”, that applies to firefighters, EMS personnel and law enforcement for local governments.

These stipulations require that local governments maintain one of the following for those agencies: prior year spending levels, prior year’s staffing, the prior year’s level of training and licensure, or response times adjusted for all location.

These required staffing levels for local governments, if not met, would be penalized with reductions in state aid.

But, for the county, the law enforcement requirement does not apply.

Act 12 states that law enforcement spending requirements only pertain to cities, villages or towns. As counties are not specifically enumerated, “it is expected that the law enforcement [requirement] does not apply to the County,” according to a memo from the county administration.

As far as fire and EMS personnel are concerned, “The Administration does not anticipate any issues in fulfilling at least one of those requirements.”

Advisory Referendums

The legislation also included a provision eliminating the ability of the county to hold advisory ballot referendums.

These referendums are non-binding and do not have the ability to affect or enact public policy; rather, they have historically been used by policymakers to gauge the opinion of voters on specific policy issues or proposals. In 2022 and this year, the county board put three advisory referendums on the ballot, asking voters opinions on assault weapons, marijuana and abortion rights.

Supermajority Voting Requirement

One policy change directly targets the procedural rules of the county board. Under Act 12, the county board can only pass spending for a new county program if two-thirds of the board votes in favor. This same supermajority threshold is required to increase the total number of employees at the county.

Cultural and Entertainment Spending

Once signed by the governor, Act 12 prohibits the county from allocating more than 5% of its annual budget to cultural or entertainment spending. Lamers told supervisors Tuesday that this is not likely to be an issue as the county already budgets less than 1% of its annual $1.3 billion budget on items that would be considered cultural or entertainment spending by the state law.

New State Reporting Requirements

Finally, the legislation requires that the county generate several new reports and audits for the state covering such things as the performance of its pension system and the pay offered to the county’s corrections officers.

If the county policymakers enact a 0.4% sales tax increase, the county will be required to submit an annual report to the state detailing how it spent the money collected through this new taxing authority. Act 12 narrowly limits what the county can spend these funds on: to pay down its unfunded pension liability and for public safety and emergency medical services. Additionally, the county’s pension system, as it is slow-walked to closure, will be audited annually by the state’s Legislative Audit Bureau.

One new report required is described in a memo to the county board as “purely academic in exercise.” This is a report, due annually to the state, that will detail what exactly a 5% budget cut for each county department would look like. Another report also requires the county to engage in hypothetical reductions, this time to its building portfolio. The county will have to annually identify all buildings it has the authority to sell and also a plan for selling them. However, this report is not required to be acted upon by the county.

The county will also have to produce a report detailing changes to compensation for county correctional officers to make their pay competitive with nearby counties. The administration’s memo to the board stated, “There is no requirement that this report be delivered to any particular body, or acted upon in any way, though the Administration agrees with the need to ensure that Milwaukee County is providing competitive benefits for these necessary County employees.”