Saturday, June 22, 2013

Budget bunko- less shared revs = higher property taxes

Between all the talk about vouchers and Koo-Koo tax cuts and ballooning deficits is an issue that deals with the bread-and-butter of government- local services like roads, police and fire protection. And this is an area where the Walker/ WisGOP budget falls way short, as illustrated by a great breakdown by the Wisconsin Budget Project. As you'll see here, state aid to local governments and agencies have little to no increase for the next 2 years after having been slashed in Walker's first budget in 2011.

And many of those increases only appear in year 2 of the budget, which means that local Wisconsin communities will somehow have to find a place to make up the difference in 2014. This is especially a problem when you realize that cuts in shared revenues have been on a downward trend for the last 6 years, so the 2013-2015 years will add to the troubles these communities have had in trying to make ends meet without the state's help.

In addition, most places have already used the "tools" from Act 10 as a one-time savings, so there's not another shell to turn over going forward that'll cut expenses without cuts in services. So that leaves higher taxes and further service cuts as the obvious solutions to the lack of state support in the 2013-15 Walker/WisGOP budget, as Wisconsin law gives few to no ways for local governments to get revenues other than property taxes. Local sales taxes are generally only allowed at the county level, and are limited to 0.5% (in contrast to places like Illinois and many states in the South, which allow cities and counties to have much higher local sales taxes), and Wisconsin law forbids a local income tax.

Interestingly, the WisGOP legislature (with Walker's approval) has increasingly forced the burdens for local funding onto the property tax, and not just through their cuts in shared revenues. The best example of this comes from May 2011, when the GOPs on the Joint Finance Committee agreed to abolish the state's Regional Transit authorities, with current Assembly Speaker Robin "Boss" Vos calling them "abominations." And sure enough, the Legislative Fiscal Bureau estimates that property taxes are headed up around the state for the next 2 years.
As a result of the preceding changes, gross property tax levies are estimated to increase on a statewide basis by 1.7% in 2013(14) and 1.5% in 2014(15), and net tax levies would increase by an estimated 1.7% in 2013(14) and 1.9% in 2014(15). These tax changes would translate into tax bills for a median-valued home estimated at $2,973 in 2013(14) and $3,002 in 2014(15). These represent increases of $29 (0.99%) in 2013(14) and $29 (0.98%) in 2014(15).
The only reason these numbers aren't even higher is because the GOPs have chosen to impose strict limits on how much local communities can raise in property taxes (so much for being the "party of local control"), which the Wisconsin Budget Project points out in their article.
This budget continues strict controls on the amount of property taxes that local governments are able to raise. Under this proposal, counties, municipalities, and technical colleges must limit any increase in their levy to the growth in property values due to new construction. Unutilized levy capacity may be used with a two-thirds vote of the local governing board.

The budget bill proposes streamlining property tax controls, with the effect that counties, municipalities, and technical colleges will all be governed by the same basic restrictions on local property tax levies.
Which means that places with growing/ sprawling property values will be the ones able to see the largest increases in property tax levies, in order to keep up with the needs of their community. In Wisconsin, these places are generally a few select suburbs of Milwaukee, suburban Dane County, and the exurbs of Minnesota's Twin Cities in western Wisconsin. That Western Wisconsin area is particularly interesting to note, because it's the fastest-growing area of the state by percentage of population, and the most recent state Realtors report shows that home sales prices are up 20% in 2013 for St. Croix County, and 17% in Pierce County, both reflecting the growing economy in the Twin Cities.

So guess what happens to Western Wisconsin's tax bills for 2014? They will go WAY up, and all of a sudden, it doesn't seem like such a great idea to live in Wisconsin when you're working in the Twin Cities. Especially when Minnesota's Governor and Dem Legislature are promoting measures that could lead to $400 million in property tax relief. And yet the GOP representatives for the area- Erik Severson, John Murtha, Dean Knudson, and Sheila Harsdorf - all voted for a budget that will hike the hell out of property taxes for their constituents, and stop the area's growth. Good luck explaining that one to your middle-class constituents - if they even choose to stay.

This could have easily been prevented, either by choosing to use some of the state's one-time surplus to help out local communities and school districts (which would reduce the need to increase property taxes), or by giving the local communities the options to raise revenues as they see fit. But no, apparently those "tools" aren't allowed in right-wing Bubbleworld, and the GOPs have chosen Koo-Koo tax cuts and continuing this policy of hamstringing local governments - which is especially stupid after you realize that the heavy rains and snows from this year are going to eat up any carryover surpluses these places might be able to have.

With a structural deficit estimated at between $505 million and $545 million in the next budget (BEFORE accounting for the stock market and housing bubbles popping), don't bet on the local communities being able to get much help from the state unless the faces in the Legislature are drastically changed. The key is for local officials and citizens to point the attention of casual bystanders in the right direction once these inevitable tax hikes happen- to the dingbat GOP legislators in Madison who cling to failed trickle-down philosophies in economics and tax-shifting.


  1. Not to do with local aid, but I have noticed this about structural deficits:

    Structural balance is defined legally in 20.003(4m) of the statutes:

    > (4m) Required general fund structural balance. No bill may be adopted by the legislature if the bill would cause in the 2nd year of any fiscal biennium the amount of moneys designated as "Total Expenditures" in the summary under s. 20.005 (1) for that fiscal year, less any amounts transferred to the budget stabilization fund in that fiscal year, to exceed the sum of the amount of moneys designated as "Taxes" and "Departmental Revenues" in the summary under s. 20.005 (1) for that fiscal year.

    That's what the WisGOP took care to exempt the Budget from obeying.

    If you look at the Budget bill, on page 95 you can see table 20.005(1) and calculate that the structural deficit for FY14 will be $199,102,100 and for FY15 will be $296,246,700. These are 1.3% and 1.9% of GPR expenditures respectively.

    There's also this little statute you may have heard of that says that if there's a shortfall of more than, um, 0.5%, the Governor needs to introduce this thing commonly called a, er "Budget Repair Bill". Seems they forgot to exempt themselves from that one.

    Also, the Budget has a problem with this part of the Constitution:

    > The legislature shall provide for an annual tax sufficient to defray the estimated expenses of the state for each year; and whenever the expenses of any year shall exceed the income, the legislature shall provide for levying a tax for the ensuing year, sufficient, with other sources of income, to pay the deficiency as well as the estimated expenses of such ensuing year.

    They're really begging for an injunction on the whole thing and a suit to force the introduction of a Budget Repair Bill.

  2. Depends if carryover funds count as "revenues." The current budget lists it as such, and therefore, they wouldn't have a need for a budget repair bill. But it's an interesting loophole if done on a one-year basis, since it takes about a $75 million deficit to require a budget repair bill, as it stands right now.

    Bigger story to me is that the Koo-Koo tax cuts are blowing the one-time surplus, and it'll mean a lot higher taxes and more service cuts in Wisconsin in the future, when it's completely unnecessary.