by Ruth Conniff, Wisconsin Examiner
July 13, 2023
Wisconsin’s biennial budget battle effectively ended Tuesday when the Milwaukee Common Council voted to raise the city’s sales tax. Getting permission from the state to hike the tax to 2% without going to referendum was the cornerstone of the shared revenue deal struck by Democratic Gov. Tony Evers, Republican legislative leaders and local officials in Milwaukee.
The $193 million the new tax will yield is a lifesaver for the city, allowing it to avoid calamitous cuts in city services and emerge from “the cloud of fiscal uncertainty that’s been hanging over the city for so many years,” says Rep. Evan Goyke (D-Milwaukee), who voted against the shared revenue deal, but who ultimately supported the council’s vote to raise the sales tax.
Goyke says he hopes Milwaukee County follows suit with its own sales tax increase at the end of the month, steering away from the fiscal cliff the state’s largest urban area has been facing.
“Having this cliff loom and the kind of scarcity that it brings impacts every single decision at City Hall and the Milwaukee County Courthouse,” Goyke says. He’s adds that, while the budget as a whole doesn’t remedy long-term inequities, he’s excited to see a new crop of local leaders pursue their vision without the threat of financial ruin hanging over them.
And even beyond the injection of needed funds, the deal itself is a surprisingly hopeful advance, says Goyke. For the first time in more than 20 years, the Legislature is increasing shared revenue to local governments. And the payments are pegged to increases in the sales tax, which effectively ties the funding to inflation.
Goyke still sees a lot of problems under the current shared revenue formula. But, he says, cobbling together a plan to address the needs of 1,800 municipalities and 72 counties that are often at odds with each other was no small feat. “There were a lot of opportunities for it to fall apart and it didn’t,” he says. “Even though I was a no vote, … I’m happy that it went through.”
Goyke’s tempered optimism seems like a pretty upbeat response after the brutal budget rollercoaster ride. It started with the news that Wisconsin had a record-breaking $7 billion surplus. Evers announced his ambitious plan to use a lot of that money to make transformational change, including reversing two decades of underfunding of our K-12 school system and helping working parents afford child care, not to mention a health care expansion that would have covered 90,000 uninsured Wisconsinites at a cost savings of $1.9 billion.
The Legislature threw all that in the trash and then they took Milwaukee hostage, threatening to let the city go bankrupt if local officials didn’t accept some pretty awful conditions — including a referendum on raising the sales tax that was almost certainly doomed to fail, leaving the city facing fiscal ruin.
Evers met with Republican legislative leaders behind closed doors and emerged with a compromise deal that dropped the referendum in favor of a massive private school choice expansion that school choice advocates project will lead to about a 40% increase in publicly funded private schools, furthering the financial downward spiral of public schools.
Then the Republicans rammed through their budget on a straight party-line vote. Not a single Democrat voted for it. When Evers got out his veto pen and made some changes, it provoked howls of protest from Republicans and threats of lawsuits.
And yet, Goyke is philosophical. Reflecting on the budget session, he saw some wins, including a historic $525 million investment in affordable housing — the most the state has ever spent, as well as the shared revenue deal he himself voted against.
“We’re a divided state. We’re purple. The balance of power could shift in one election,” Goyke says. “Both sides are sometimes inching closer to the middle and consensus and then other times, veering away.”
It was fascinating sitting on the floor of the Assembly as Republicans passed their budget, he adds. “You listen to the majority party, and you might not be able to tell they were Republicans if you didn’t know, because they were listing all of these new spending programs and new initiatives.” In the end, they crafted a budget with a double-digit increase in overall spending — much bigger than the two previous budgets.
Still, with a record surplus, they left a lot of money on the table. Even the biggest headline-grabber of the whole budget process — Evers’ line-item veto extending school revenue increases for the next 400 years — doesn’t bring school spending up to the level of an inflationary increase, something Republicans and Democrats alike used to view as a baseline obligation. And our 33% state funding for special ed leaves us at the bottom of the heap nationally.
Winners and losers
In the shared revenue deal, there are also definite winners and losers. Mike Koles, executive director of the Wisconsin Towns Association, is quite happy. Some small towns around Wisconsin will see their revenue go up by more than 1,000%. Koles trumpeted the change in a column for the Towns Association magazine, writing that the Legislature’s “purposeful focus on investing in smaller communities results from a desire to move .. toward a more equitable distribution system.”
It’s wrong and misleading, Koles added, to focus on the yawning differences in percentage increases, say, between the Town of Cedar Rapids, which gets a 5,753% increase in shared revenue, compared to Racine, which gets 10%. The complaint that this is unfair can be debunked by “third-grade math,” according to Koles, who notes that Racine started from a $25 million base, while Cedar Rapids started with only $532 — so the town’s large percentage increase is actually only about $30,000, whereas Racine is getting a whopping $2.5 million.
The idea that Racine is making out OK with a $2.5 million increase, however, is questionable.
Goyke notes that Racine and other mid-sized cities, including Beloit, Janesville and Kenosha, fall through a large doughnut hole in the shared revenue formula: They have massive expenses for city-sized transportation and emergency services, but they get neither a big percentage bump in state aid like small towns nor the power under the shared revenue deal to raise their sales tax like Milwaukee.
Racine Mayor Cory Mason agrees. “We started the conversation about shared revenue in the midst of the largest surplus in Wisconsin’s history and because communities don’t have adequate resources to fund police, fire, and other essential services,” he told the Examiner in an email. “At the end of the day, Republicans in the state legislature left some of the biggest cities (including Racine) underfunded. That hurts police, fire, and other local services that are meant to keep us safe.”
To put the size of a 10% shared revenue bump in perspective, look at Milwaukee, which will receive an additional $21.7 million in shared revenue from the state. That amount is completely overshadowed by the $193 million projected to come in via the 2% sales tax.
Even that $193 million has to go to cover basic costs. “This is not a blank check,” says Goyke. “The money has to go to long-term liabilities. We have to spend new money on police and fire. So I don’t think I’m going to wake up tomorrow in a brand new community.” Overall, “the winners keep winning and the losers keep losing,” he adds.
The state of our state: divided
That’s a pretty good reflection of where we are as a state — deeply divided, stuck, at odds with each other. The problem is not financial. We have more money than we’ve ever had in Wisconsin history. The problem is a curdling of community spirit.
Take the inexplicable animus of legislative leaders toward the University of Wisconsin, which made out particularly poorly in the budget. There was the $32 million cut to punish the UW for having diversity, equity and inclusion programs. There was the rejection of UW-Madison’s biggest capital budget priority, a new engineering building. And then there was Assembly Speaker Robin Vos’ declaration that he is “embarrassed” to be a UW System grad, and his promise to eliminate all minority scholarships in the Legislature’s next session. The Republicans’ anti-Bucky Badger tone has gotten so bad, they’re getting ready to show up at tailgates in the fall with a load of rotten eggs.
In making his partial vetoes of the budget, restoring millions by canceling GOP tax cuts, mostly for the very rich, Evers announced he was giving the Legislature a “second chance” to fund important priorities.
But so far, there’s no indication they’re planning to take him up on that offer.
Republicans spent the last week crying crocodile tears over the way Evers betrayed the “middle class” by eliminating a big chunk of their proposed tax cuts with his line-item vetoes. GOP legislators and right-wing think-tankers generated a cascade of outraged press releases, talk radio appearances and social media posts about Evers’ cruel treatment of the people at the bottom of the second tier of their new tax brackets — those who make about $28,000 per year.
To put their outrage in perspective, take a look at the Legislative Fiscal Bureau memo comparing the Republicans’ tax cut proposal to the one that emerged from Evers’ veto pen. True, those earning $25,000 to $30,000 will only get a $9 tax break under the budget Evers signed. Under the Republican proposal, they would have received $15.
That’s the difference Republicans are making the biggest fuss about: $6 per year.
The biggest losers from Evers’ line item vetoes are not the people on the low end of a ridiculously huge tax bracket that includes those earning less than 30,000 and those who make more than 300,000. It’s the people at the very top.10 WILeg BL NA
Instead of receiving $3,103 under the GOP plan, people who make $300,000 to $500,000 will have to settle for $50. In fact, everyone making between $50,000 and $1 million is getting a tax cut worth between $40 and $50. That’s smaller than the $165 tax cut the Republicans wanted to give people earning $50,000 to $60,000, or the $335 they wanted to give you if you make $70,000 to $80,000. But those amounts are peanuts compared to what Republicans wanted to give those who make more than $1 million — an average of $30,286 each. Evers cut that back to 44 bucks.
In exchange, the state will have about $150 million more to tack onto a $4 billion surplus by the end of the two-year budget cycle. And Evers has said he’s open to more targeted tax cuts for middle income earners.
But don’t be fooled by all the talk about looking out for the middle class with tax cuts. For the huge majority of us, trading in high quality schools and well maintained infrastructure, fast emergency responders, a clean environment and a great university system for the price of a movie ticket — or, if you’re at the upper end of upper middle class, a round-trip plane ticket — is not a good deal.
Republicans have spent years promoting the go-it-alone theory that paying taxes is an assault on individual freedom, and that tax cuts are the answer to everything.
As Wisconsin Watch reported this week, a coordinated campaign by dark money groups is seeking to ax social services and stick it to the unemployed and new mothers on Medicaid, all in the name of “freedom” from taxes.
We don’t need to live in a Hunger Games society. We can afford to do better. There was some halting progress in that direction in this budget. But not nearly enough.
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