CAPITOL COMMENTARY
By James L. Palmer, II
WPPA Director of Governmental Affairs
Governor Doyle Signs State Budget
Governor Jim Doyle formally signed the 2005-2007 state budget in July. Surprising many, the governor did not veto entirely the Republican property tax freeze, which was a three-year plan limiting local governments from increasing their levies by more than their rate of growth in new construction.
The levy freeze signed into law by the governor is a two-year plan which limits the amount municipalities and counties can increase their property tax collections, or levies, from one year to the next to either 2 percent, or the added value from new construction, whichever is greater. Doyle did not place the new tax caps on technical colleges, which make up 7 percent of the property taxes collected, or entities like sewage districts, which make up 4 percent of statewide collections.
In the immediate aftermath of the budget signing, the Wisconsin Alliance of Cities publicly stated that, because Governor Doyle's limits will make it harder for local governments to provide basic services, the Alliance will press the governor to approve Republican measures to change collective bargaining laws affecting public employees. These proposed changes include eliminating the requirement that arbitrators consider the pay of employees in other communities (external comparables), restricting the ability of arbitrators to award back pay, and allowing local government employers more flexibility to impose unilateral changes in areas such as health insurance.
In addition, local leaders from around the state have already started using the budget’s levy limits to justify departmental budget cuts. In the City of Madison, for example, the mayor has asked his agencies to submit proposed budgets reflecting across-the-board 3 percent cuts. The Madison Police Department has said that in order to comply with the mayor’s request, they would have to eliminate the jobs of 16 officers, 16 civilians and all crossing guards, and delay the opening of a new (and much needed) district station.
While cuts to local law enforcement budgets will likely garner the most public attention, the state-imposed tax caps will result in layoffs and reductions in many other areas as well.
Wisconsin Pension Fund Goes Under the Microscope
Recently, the non-partisan Wisconsin Taxpayers Alliance conducted a study that concluded that public employees in this state receive some of the richest retirement benefits in the country, while making the smallest contribution to their pension system. According to the study, local governments pay 99.6 percent of employee contributions to the Wisconsin Retirement System. Even the state’s research agency, the Legislative Fiscal Bureau, has confirmed that WRS employers have actually assumed the payment of virtually all employee-required contributions in addition to their employer-related contribution amounts. When they retire, Wisconsin public employees also receive a larger average monthly share than in any other state, except Rhode Island.
The report went so far as to suggest that, as the state and local governments struggle to cover costs in tight fiscal times, employee benefit packages should be examined. Legislators and some newspaper editorial boards have already argued that public employees should not have better benefits than private employees. A recent Oshkosh Northwestern editorial, for example, asserted that "this issue shows exactly how the public sector reaps its wealth on the backs of taxpayers who don't have anywhere near the same privileges."
While Governor Doyle vetoed a budget provision that would have required non-union state employees to contribute more to the WRS, the issue is likely to return. Given these recent developments, it is clear that the WPPA and other groups representing public sector employees will have to fight just to protect and maintain the retirement benefits as they currently exist.
Gas Costs Crunch Local Budgets
Soaring gas prices are slamming counties, cities, villages, towns, and school districts all across the United States, forcing local governments to cut spending and increase borrowing just to pay the price at the pump. To make matters even worse, the federal Energy Information Administration recently warned that consumers across the country can expect energy cost increases in the range of 69 to 77 percent. WE Energies has predicted that the winter heating bills for its customers could rise by 40 to 45 percent, or more than $300. “It’s really wreaking havoc,” said Jeff Esser, CEO of the Government Finance Officers Association, in a recent interview with the Gannett News Service. “[Local governments] really have two choices: Raise taxes or cut back on other programs or services.”
In Wisconsin, the problems caused by rising fuel prices will only be exacerbated by the state levy caps recently signed into the budget by Governor Doyle. A cap on local taxes means that local governments must find additional dollars for fuel while balancing other increased costs, such as health care premiums, which are expected to rise more than 9 percent.
Conclusion
Wisconsin is clearly facing significant financial challenges, and the system by which state and local governments approach budgeting is failing. New calculations by the Legislative Fiscal Bureau show that the state faces a $1.2 billion structural deficit as a result of spending more than it collects in tax revenues. Like using a credit card to pay the household bills, the state continues to increase its debt in order to pay for current commitments. The state will pay more in future costs for the services and programs it provides today. While this practice has been around for a while, it is bad budgeting and negatively impacts public employees, as well as the general public at large.
Many local governments are no better. Rather than prioritize spending decisions, local officials often pass the blame for their increased spending onto public employees. Rather than seriously evaluating their spending habits and priorities, they tell the public and state lawmakers that local public employees cost too much. They argue that if they can’t tax more, then the only option left is to cut programs across the board. This system fails to represent taxpayers’ values, and is irrevocably broken.
Alfred Smith, the former governor of New York, used to say “the cure for the evils of democracy is more democracy.” In order for the WPPA to affect change for the benefit of our membership, we must respect the value of legislative and political activity. As the WPPA’s membership continues to grow, as we become more active at the state capitol in Madison, and as we make our voices heard in political campaigns across the state, only then can we truly hope to realize the type of government that makes Wisconsin a great place to live, work, and raise a family.
