You may have seen this headline in the Milwaukee Journal-Sentinel this morning.
That sounds like a lot of money. And it is.
Since last year, Congress has passed five major spending bills to address COVID-19 and its toll. The two biggest ones cost more than $4 trillion, deepening the federal deficit but softening the economic blow of the pandemic.
The spending packages have given Gov. Tony Evers wide latitude to spend more than $5 billion. They have also provided more than $4 billion in assistance for Wisconsin workers who were laid off and they have infused about $3.7 billion into schools, colleges and universities, according to the report from the nonpartisan Wisconsin Policy Forum.
"This influx of federal aid turns the dour fiscal outlook of last year into a far brighter one in which communities in the state may be able to address some of their most longstanding needs," the report concluded.
So let's dig into that WPF report, and I wanted to start by including this graph from the Policy Forum that shows where all of these billions come from, and what they are intended for.
The first bundle of cash dropped from DC was in last Spring's CARES Act, in the form of the Coronavirus Relief Fund. The Policy Forum goes into the choices Evers made in using that money, most of which was spent out last year.
The Coronavirus Relief Fund money could be used for necessary and previously unbudgeted spending in response to the public health emergency, but not to offset state revenue losses due to the economic impact of the pandemic. The funds initially had to be used by December 30, 2020, though the deadline was later moved back to December 31, 2021. Evers had the discretion to use the money as his administration thought best, and Figure 3 shows how the $2 billion was allocated to areas such as public health and healthcare, support to the economy and for child care, and local government and education aid.
The next group of billions came with Biden's stimulus bill that became law in March (aka ARPA). The Policy Forum indicates that the first set of dollars should be getting to Evers' office in the next month or so, and that while there are limitations on what Evers can use the money for, he has given some indications of where the money will be going.
The U.S. Department of Treasury has the authority to make a payment to the state for its ARPA allocation within 60 days of the state certifying it needs the funds and will use them lawfully. If the entire amount is not paid right away, a second payment with the remainder of the funds could be made up to 12 months later. That second payment could be reduced if the state is required to return some of the initial round of funding because of failure to follow the federal rules, such as the prohibition on tax cuts.
Evers has said he would use ARPA recovery funds for priorities such as $500 million for pandemic response, $600 million to support affected businesses, $50 million for the tourism industry, and $200 million for broadband and other infrastructure. It is unclear if the infrastructure spending would be in addition to $204 million in state funds for broadband being sought by Evers in the state budget.
We got an idea about how $420 million of that support for businesses yesterday, as Evers said he would give $5,000 grants to up to 84,000 local businesses.
There are additional billions directly designated for K-12 schools, a number that has gone up with each successive stimulus bill.
The Policy Forum notes that a provision in the K-12 aid is that this is
additional money, and cannot be used as an excuse to reduce the state's commitment to K-12 education and special needs.
To receive the ESSER funds, the state must keep the share of state funding going to K-12 schools and higher education for the next two years at or above the average levels from 2017 to 2019. The state will also receive $54.6 million of additional funding under the Individuals with Disabilities Education Act (IDEA).
It's worth remembering that
Gov Evers has asked to add nearly $613 million in state aid to schools next year, and another $291 million in the year after that, so in theory those increases could be taken out along with the bump in state aids that happened in 2019-21, and the federal money can make up the difference. Or some/all of those state aid increases could stay, but property taxes going to schools would be reduced due to state-mandated revenue limits. So lots of choices to be made here.
There also is a sizable amount of local aids in the stimulus packages, particularly for the state's largest cities and metro counties.
These funds can be used for the same purposes as state relief funds and, like the state funds, cannot be used for unfunded pension liabilities. In one notable difference from the state funds, however, there is no restriction on using local funds to offset a tax cut.
Which can prove useful if communities want to reducetheir reliance on the property tax, and it also is big in Wisconsin, as the local funding streams have been hit hard in the COVID World.
A good example of this comes from a story that Channel 12 in Milwaukee had yesterday, which documents
just how much the state's largest city and attractor of tourism dollars lost in 2020 as the pandemic shut down travel and many events.
Factoring in the virtual DNC, cancelations of the Ryder Cup, USA Triathlon and Summerfest, plus over one hundred meetings, conventions and small sporting events, the economic impact Milwaukee lost out on is just under $608 million.
That does not include the $3 million each Bucks playoff game was expected to bring in.
The city also lost 20,400 hospitality and leisure jobs in the last year, hotel occupancy dropped 45% and passenger traffic at Mitchell International Airport is down more than 63%.
Room taxes and fees related to traffic at Mitchell Field are all sources that local governments rely on, and those shrunk to near-zero during the first several months of the pandemic, and tourism-related sales taxes (particularly on event tickets and bars/restaurants) also dried up. This helps explain why Milwaukee County Executive David Crowley traveled Up North this week to ask the Legislature's Joint Finance Committee to include more flexibility in the 2021-23 budget.
No question that there is an unprecedented amount of federal funding heading into Wisconsin that can fill in the budget gaps that were caused by the COVID World and its related recession. And some of that money can also be used to conserve state and local tax dollars that might otherwise have to be used up, improving a financial situation that might otherwise have fallen into crisis. But it also provides an opportunity to restructure how we fund our state and local governments. If we conserve the state tax dollars we have in 2021-23, we can maintain the elevated level of support for services that we are currently seeing, and repair the damage done to our state's capacity for support during the Age of Fitzwalkerstan. We also can stop having an outdated local government finance system that relies on property taxes, and instead can either raise shared revenues permanently, or allow the locals the ability to raise sales taxes or tap other sources to fix streets and provide services that their communities need.
That's the larger conversation that is going to be where the huge amount of stimulus from DC collides with deliberations for the state budget in the coming months. There are a lot of those federal billions that are already spoken for and aren't allowed to be used for other purposes, but some of those billions aren't, and how the state and the locals handle those dollars (and what they are allowed to do) is going to be where the differences are/aren't made.
I do know one thing -
don't let GOPs tell you we can't afford to take care of our huge amount of needs. There is plenty of money at the state and federal levels that is likely to be available in the next few years to rebuild and reimagine how our state can operate and help its residents. It's just a matter of what we choose to use the money for, or who to give it away to.
