Shared Revenues are an integral component of the state-local partnership with municipal governments. The total appropriation for the shared revenue program has been frozen since 1995. Wisconsin communities need an inflationary adjustment while the Legislature is considering recommendations to retool the state-local partnership.
Background
The state shared revenue program was created in 1911 with passage of the state income tax. The first income tax law provided that 70% of the proceeds be returned to each taxpayer's home community, 20% go to the county, and 10% to the state.
By the late 1960s, this return-to-origin system was creating serious inequities between richer and poorer communities. In the early 1970s, the existing system was created to provide property tax relief, equalize the ability of local governments to fund services for their citizens and compensate communities for utility property within their borders.
The Problem
Growth in the shared revenue program slowed in the 1980s and 1990s, and total appropriations have been frozen since 1995. That created problems because more communities are subject to the "minimum/maximum" portion of the formula, and fewer receive the benefits of tax-base equalization the formula provides. As a result, the bipartisan Shared Revenue Task Force recommended in 1999 that funding for the $950.6 million program be increased by 3.5% per year or the inflation rate, whichever is less.
The stress that a frozen shared revenue program produced in the state-local partnership was part of the reason Gov. Tommy Thompson named a blue ribbon commission in April 2000 to rework the partnership. But communities remain subject to the distribution whims of the formula that governs a frozen shared revenue program unless the Legislature provides interim relief.
The Solution
Provide increases in shared revenue payments for all communities by running the shared revenue formula at existing appropriation levels, then increase each community's share by the rate of inflation, then putting the increase into the formula for the following year.
The following year, the increase would be built into the shared revenue base — divided proportionately among per-capita payments, aidable revenues and utility payments — the formula would run and the resulting payments would again increase by the rate of inflation.
