by Baylor Spears, Wisconsin Examiner

Assembly Republicans released the general points of their plan to overhaul Wisconsin’s system of sharing money with local governments on Thursday. Lawmakers declined to release draft legislation, saying an official proposal will come next week.

The plan described at several press conferences throughout the day includes proposals to dedicate a portion of the state sales tax to local government funding and options for Milwaukee and Milwaukee County to adopt a temporary local sales tax meant to help address their pension obligations.

Rep. Tony Kurtz (R-Wonewoc) said at a morning press conference in the state Capitol that all local governments would see a minimum of a 10% increase in their current funding from the state. 

Under the plan, an additional $176 million would be allocated to Wisconsin’s towns, villages and cities, and an additional $50 million would go to county governments. Kurtz said the money would be limited to support for specific areas including law enforcement, fire protection, emergency medical services, public works and transportation. 

The new money for Wisconsin’s shared revenue system would come from dedicating 1-cent — or 20% — of the state’s 5-cent sales tax to a separate fund for local governments called the “Local Government Segregated Account.” By tying funding to the sales tax, local governments would be more likely to see some increase in their funding each year since sales tax revenue tends to increase every year. 

Gov. Tony Evers also proposed reserving this portion of the sales tax for local governments in his executive budget released in February. 

Local governments will keep their current levels of funding, and the additional money will be distributed using a new formula, though the details of the formula haven’t been released. Kurtz said that under the new formula “those communities that were, in my humble opinion, kind of left behind with [the previous] formula, they’re going to see a bigger bump, and the goal is to try to equalize those levels out.”

Assembly Speaker Robin Vos (R-Rochester) said during a later press conference that the current formula has an “outdated notion that only cities deliver services.” He said the formula that will be used for the new funds will guarantee that there are “winners in every part of the state.” 

The current formula, which has remained unchanged for several decades, determined allocations on a per capita basis. Under that formula, Milwaukee and Milwaukee County have received the largest portion of state aid.

Kurtz said another $300 million will be used to start a three-year pilot program called the “Innovation Fund,” which is meant to incentivize communities to share services and work together. 

How the proposal would affect Milwaukee and Milwaukee County

Lawmakers held a separate afternoon press conference in Milwaukee where they revealed details of how their plan would affect the city and Milwaukee County.

Milwaukee Mayor Cavalier Johnson said the city would be allowed to adopt a temporary 2% sales tax and Milwaukee County, which already has a 0.5% sales tax, would also be allowed to adopt an additional 0.375%. Both taxes would need to be approved by voters in a referendum. Vos said they could go to referendum at any time this year. 

Johnson said the money collected from the additional tax would be used to address the city’s unfunded pension liabilities and for investments in public safety. He said the money invested toward the unfunded pension liabilities would be around $120 million. 

“This legislation starts to diversify revenue sources for the city of Milwaukee. It starts to increase the amount of shared revenue that goes to the city of Milwaukee and other units of government across the state, and it puts Milwaukee on a path to resolve its onerous pension obligations,” Johnson said. 

The state’s largest city is quickly approaching a financial crisis as it faces challenges like the increasing cost of the city’s pension system, an unhealthy mix of revenue and diminished capacity to sustain core services, according to a Wisconsin Policy Forum report. 

The pension system takes up a large chunk of the city’s budget, and as the cost has increased the city has had to divert funds away from other services that it provides — like police and fire — to keep up with the obligation. The city, which has relied on stagnant state payments, is limited in its ability to raise revenue as it can’t levy an additional sales tax without the approval from the state government. 

Johnson said the goal would be to help the city begin to “soft close” its pension system and that the city would move all future employees into the state’s pension system. 

The money collected through the sales tax would come with several restrictions, including a mandated minimum number of school resource officers in Milwaukee Public Schools and the stipulation that none of the money could be used to expand the city’s streetcar. 

Johnson said there are still details to work out, but “it’s my goal to get money in the door as quickly as possible, and I think there’s a mechanism to do that.”

The proposal is different from the one proposed by Evers, which would give Milwaukee County the option of adopting an additional 1% sales tax. If approved through referendum, half of the revenue from that sales tax would go to the city of Milwaukee. That was the solution advocated for by local leaders like County Executive David Crowley, who also spoke in support of the Republicans’ proposed plans on Thursday. 

Legislative leaders react to Assembly Republicans’ proposal

Senate Majority Leader Devin LeMahieu (R-Oostburg) said in a statement that the Assembly announcement is the product of “substantive, good-faith negotiations between both houses of the legislature and local government stakeholders,” but “the final details are still being worked out.”

Republicans emphasized throughout the day that the plan is bipartisan, however no Democratic state lawmakers were present at the Thursday morning press conference or on stage during the afternoon event. Democratic leaders were also critical of Republicans’ plan in part due to the lack of concrete details. 

“We still haven’t seen a bill draft from the GOP, and there is a lot more work to be done to ensure that we have a solution that works for the people of Wisconsin,” Minority Leader Greta Neubauer (D-Racine) said in a statement. “We look forward to continuing these conversations to give our communities the support they need to be successful.”

Senate Minority Leader Melissa Agard (D-Madison) said Republicans should be “embarrassed” by their announcement, saying that Evers has already proposed a plan that Democrats are united behind. 

“It is clear that [Republicans] have no consensus on a plan to adequately fund our communities,” Agard said. “Our local governments deserve better than the games Republicans are playing.” 

Evers’ plan would split additional money between public safety and general fund aid, giving local governments more leeway for how they decide to spend the money. 

While Democrats and Republicans have agreed shared revenue is an issue that needs to be addressed in the upcoming state budget, they’ll need to agree on an exact plan for passage.

This story was written by Baylor Spears, a reporter for the Wisconsin Examiner, where this story first appeared.

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