2007-2008 Issues

EXPAND THE EXPENDITURE RESTRAINT PROGRAM
AS AN ALTERNATIVE TO LEVY LIMITS

The Expenditure Restraint Program has worked well, and the Wisconsin Alliance of Cities advocates its expansion.

Levy limits don’t work, and they should be eliminated. There’s no way to craft a property tax limit that fairly meets the needs of the residents of Wisconsin’s 1,922 municipalities.

Electric rates are up 49% over the last decade, and natural gas rates are up 74%. The cost of health care is expected to double again in the next 10 years. As a result, any reasonable levy limit imposed on local government would contain so many exceptions as to be meaningless.

But there is a proven tool to encourage communities to stretch their property-tax dollars. It is Wisconsin’s Expenditure Restraint Program.

For more than a decade, it has provided a huge incentive that has kept general fund spending increases in participating communities to inflation plus a percentage of new growth.

Initially, the ERP payment was targeted to high-tax rate communities that restrain spending growth.

But today, many communities that have restrained spending risk falling off the formula due to declining tax rates, and the formula needs to be retooled to keep ERP incentives alive for them.

Municipalities qualify for a payment by holding their general-fund spending growth to no more than inflation plus a portion of growth attributed to new construction.

Since 2003, the program's annual distribution has been $58.1 million a year, and despite five increases in its appropriation over the years, if ERP had increased with inflation, it would have an additional $6.7 million today.

The program is increasingly popular, with the number of participants growing by nearly a third since 1994.