The Wisconsin Alliance of Cities, the Wisconsin Counties Association, the League of Wisconsin Municipalities, the Wisconsin Towns Association and several of their individual members and affiliates formed Partners in Local Government two years ago because legislators sometimes played cities and villages against towns, and one or both against counties, in the state budget process.

Partners drafted its first set of position papers on the 1999-2001 state budget, picking five issues on which to concentrate discussion. They were shared revenue, transportation aid, youth aids, the state court system and community aids. We were keenly aware that state government’s flagging commitment to the state-local partnership increasingly was shifting the cost of local government from the income tax payer and sales tax payer to the property tax payer.

We analyze the 2001-2003 budget bill in light of the recommendations of the Governor’s Blue-Ribbon Commission on State-Local Partnerships for the 21st Century, chaired by UW Professor Don Kettl. In January, 2001 the Kettl Commission issued 139 recommendations, almost all of which affect cities, towns, villages and counties. The commission realized that it could not make detailed recommendations covering some of the exceedingly complex aspects of the state-local partnership, so instead it provided a blueprint from which to build stronger state-local relations. It was from portions of that blueprint that the budget bill was built.

The commission’s principles were undeniably in the public interest: that citizens must be at the center of everything government does; that citizens deserve efficient, effective government; that governments must collaborate to improve quality of life and spur economic growth; and that local governments must have flexibility in pursuing statewide goals.

We looked at the state budget and found six major areas in which we believe the Kettl Commission principles, its recommendations or the general philosophy of the state-local partnership are not respected as well as they could be.

They are:

• municipal and county shared revenue and growth sharing
• transportation
• youth aids
• community aids;
• recycling; and
• the state court system

We want to work together with the governor and Legislature on these issues and others to improve the partnership. We believe, like the Kettl Commission, that citizens will benefit, both as consumers of government services and as taxpayers.

The state shared revenue program was created in 1911. In the early 1970s, the program was revised 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. In January 2001, the Governor’s Blue-Ribbon Commission on State-Local Partnerships for the 21^st Century haired by UW political scientist Don Kettl made a series of recommendations involving shared revenue, including:

• That the equalization component of shared revenue now calculated based on local taxes, fees and state aids, be transformed into a program focused on basic services: general government, public safety, and human services (dubbed Badger Basics).
• That the per-capita component of shared revenue be transformed into a per-capita regional growth-sharing payment equivalent to the revenue produced by one-quarter cent of the state sales tax collected in each region of the state.
• That the state provide 2% annual increases to the shared revenue program if the Legislature rejects or delays the commission’s recommended changes in shared revenue.

The Kettl Commission’s recommendations were fashioned to eliminate incentives to spend, to reward performance and to encourage governmental efficiency though collaboration.

Under the proposed budget, as the state implemented growth-sharing payments , it would reduce its commitment to equalization. An improved state shared revenue program should grow with inflation, reduce burdens on local government, reward efficiencies through cooperation, be stable and predictable and recognize that citizens should pay about the same for similar levels of service. Communities with the same level and type of services should have the same tax burden. Funding growth-sharing payments by reducing equalization money was not a recommendation of the Kettl Commission, and creates major winners and losers by making some communities appear "richer" on paper, and some appear "poorer."

Although the governor’s budget does not provide any shared revenue increases, it does dictate how county shared revenues are to be spent. Strings should not be attached to shared revenue money that has been frozen since 1995.

Finally, the Kettl Commission was unable to define Badger Basics, for good reason. A one-size-fits-all definition does not serve the citizens of all communities. For example, streets and roads are a major expense for the property taxpayer in many communities. Yet expenses for streets and roads would not be included in Badger Basics. The budget bill’s recommendations on state shared revenue and area-wide growth sharing must be reworked to preserve the Kettl Commission’s goals without punishing some communities.

The governor’s budget proposal recommends increases of 5.4% in calendar year 2002 and 0.7% in calendar year 2003 for county general transportation aids, and 5.0% and 0.1% respectively for municipalities. The mileage aid rate would be set at 5.0% above current levels for 2002. The Local Roads Improvement Program would increase 3.8% in 2002 and 4.2% in 2003. The governor proposes a new approach to mass transit operating assistance. A "basic" 2.5% increase is provided for 2002 and "supplemental" aid is provided for meeting certain costs —limitations that equal 3.4% of the basic 2001 levels. The Governor does return the formula for operating costs to projected expense basis as in earlier years. However, the governor recommends a 2.9% increase in 2001-02 and a 6.5% increase in 2002-03 for the major highway program. That’s $8.9 million above the level of inflation for the biennium. In addition, the governor recommends $10.5 million for the Transportation Economic Assistance Program (primarily for state highways), money the Department of Transportation did not request.

Although local governments support efforts to rein in the troubling growth in the state’s debt service for major highway projects—53.9% of major highway program costs are to be met with borrowed money in the budget bill, and the debt service increases by 11.4% — this burden should not be borne by local programs. Borrowing costs should be charged to the state highway program.

The DOT says it must spend an additional $5.1 billion, or $242 million per year above current levels, if it is to meet the goals of its state highway plan. No comparable analysis, estimated funding gap, or long range plan has been developed for other important transportation programs, including local roads, local transit, and various rail transit and passenger rail initiatives.

The lack of planning for local needs in the past has produced major shifts in state transportation funding toward state highways at the expense of local programs.

Rather than move ahead with efforts to unilaterally increase revenues or generate new revenues to fund state highways alone, local governments call for a multi-program, multimodal 6- to 20-year local transportation investment plan.

One key to this plan is the development of long range plans and cost estimates for local programs that are comparable to the 2020 state highway plan. The state should complete its program to inventory local road needs as well as complete a state transit plan. In cooperation with the governor, the Legislature should also establish in this budget a process and a representative structure to develop an integrated multi-program transportation investment plan. The planning process should ensure that all programs receive equal analytical emphasis. The structure should consist of a high-level task force appointed by and involving the participation of key leadership, including the governor, Legislature, and the representatives of local governments and pertinent public interests. The charge of the task force would be to estimate the needs and costs associated with local, state, and regional transportation programs and projects over the long range and recommend a way to fund them.

The youth aids program provides each county with an annual allocation of state and federal funds from which a county may pay for juvenile delinquency-related services. Base funding for youth aids is approximately $86 million in fiscal year 2001. State youth aids dollars are inadequate to fund the juvenile justice system. According the Legislative Audit Bureau, in calendar year 1997, the youth aids program funded 45.4% of the $181.4 million that counties spent on juvenile delinquency-related services.

Over the last several years, counties have successfully developed programs to serve juveniles in the community. However, few funding sources exist to assist counties in providing services at the local level. This is due, in part, to the high cost of out-of-home placements. According to the Legislative Audit Bureau, from 1992 to 1997, out-of-home disposition costs increased from $89 million to $129.5 million. That represented 71.4% of all costs in 1997 but only 18% of juveniles served. The governor’s budget proposes increasing juvenile correctional institution rates by more than 14% over the biennium, but recommends no increases in youth aids.

The effect on county budgets has been dramatic. According to the Legislative Audit Bureau, in 1992, 42 counties were able to cover all out-of-home placement costs exclusively with youth aids funds. In 1997, only 18 counties were able to cover these costs with youth aids dollars, leaving few dollars available for early intervention/community-based services.

The state provides counties with $3.75 million annually in the community intervention program. This program was designed to fund county programs targeted at first offenders and serious chronic offenders. However, a number of counties receive so few dollars from the appropriation that they are unable to operate effective intervention programs.

Reinvest resources now dedicated to out-of-home placement services in cost-effective, community-based early intervention programs that have proven successful in addressing delinquency.

Counties request state general purpose revenue funding of 20% of a county’s annual out-of-home placement costs. In turn, the county would be required to reinvest the 20% savings into community juvenile justice programs. Counties would be required to share program results with the state and share best practices as well.

COMMUNITY AIDS

County governments receive community aids, a combination of state and federal money, to offset the costs associated with carrying out its human service mandates. Counties are required to match their community aids funds at the rate of 9.89%. State funding for programs for the elderly, developmentally disabled and mentally disabled is insufficient to meet demand for services. As a result, property taxpayers contribute more than $200 million for services to these populations. Yet waiting lists for services still exist in many, if not all, counties.

Over the last several years, federal funding, in the form of the social services block grant, has cut the amount counties receive in community aids. In addition, the state of Wisconsin has reduced its general-purpose-revenue commitment to community aids by replacing general purpose revenue with temporary assistance for needy families (TANF) funds.

Every year, counties pay more to provide services as personnel costs increase. Without even inflationary increases, more and more citizens are waiting for services. the number of individuals on waiting lists continues to grow. In the alternative, county property taxes increase to continue a consistent service level.

The governor, in his 2001-2003 budget proposal, passes the Social Security Block Grant cut directly to counties. While general purpose revenue is placed in the community aids appropriation in the second year of the biennium to replace TANF funding the state is no longer able to use, no additional general purpose revenue is appropriated for the program. As a result, counties will see a $1.2 million cut in their community aids allocation in each year of the biennium.

Recycling became the law in Wisconsin in 1990. The mandate took the form of landfill "bans" prohibiting certain materials from being dumped in landfills. The list of banned materials grew until 1995. Recycling was one of the largest mandates on local government in state history, but it was partially funded. The state’s contribution toward the operation of local recycling programs rose from $15.5 million a year to almost $30 million in 1994. For the last four years, it has ranged from $24 million to $24.5 million.

The cost of recycling programs has always been far more than the state grants, and the gap has increased. In 1992 local governments and counties incurred $35.6 million in recycling costs. By 2000 their costs were more than $80.2 million.

In its 2001-2003 budget request, the Department of Natural Resources sought a $1.55 per ton increase in the "tipping fee" on solid waste to provide nearly $9.5 million annually toward recycling. Such an increase is a start toward equalizing the cost of dumping garbage in Wisconsin with the cost of neighboring states. Those states fill up twice as much landfill space in Wisconsin with their garbage each year as the state saves through recycling.

Instead of embracing increased tipping fees, the budget bill submitted to the Legislature would reduce recycling grants to $14 million in 2002 and $13.5 million in 2003.

Grants of $14 million or less a year would force communities to reduce their commitment to recycling.

Communities have made significant capital investments in their recycling program in the expectation that state government would continue to be a partner in recycling. In addition, local governments have long-term contracts with waste haulers. If their solid waste and recycling programs are upset by dramatically reduced funding of recycling grants, the result could be turmoil in their local budgets.

For small communities that operate recycling programs but do not collect solid waste, the disruption would be especially severe.

Finally, a significantly reduced level of recycling grants sends a message that the state is no longer serious about recycling. The long-term costs in terms of additional air and water pollution and landfill costs could be profound.

Since 1978, the state has paid the salaries and fringe benefits of circuit court judges and court reporters, and per diem payments and travel expenses for reserve judges and court reporters. In 1990, the state assumed the cost of district attorneys’ salaries. Counties are responsible for other circuit court operational costs, including salaries of clerks of court, court commissioners, courtroom security, clerical staff, office supplies, law libraries, and jury costs and other operating costs. According to reports filed with the Director of State Courts office, in 1999, counties spent over $100 million on items eligible for reimbursement under the Circuit Court Support Grant and Guardian ad Litem Reimbursement programs.

The state of Wisconsin, in the 1993-95 state biennial budget bill, began to reimburse counties for a portion of their costs associated with the operation of the state court system. Currently, counties receive $23.4 million annually in the form of circuit court support grants and guardian ad litem reimbursements. The state generates revenue to fund the circuit court support grant program, the guardian ad litem reimbursement program and public defender transcripts through a $40 court fee. In state fiscal year 1999-2000, $26,911,606 was collected while $24,877,700 was expended ($2 million remained in the state’s general fund and not distributed to counties).

The Blue-Ribbon Commission on State-Local Partnerships for the 21^st Century recognized justice as a state function and recommended full state funding of the justice system. The Commission further stated that the state ought to purchase outcomes from counties through performance contracts. The Commission recommended that the first phase of the transition to state funding for the justice system ought to be funded by state expenditures for the shared revenue program and by existing state aids for these programs.

Counties would continue their partnership role with the state in the administration of the state court system by: 1) retaining financial responsibility for the physical structures, upkeep and external security (not to include bailiffs and other courtroom security initiatives); and 2) entering into contracts with the state to provide court-related services (administration). Work on the transition could begin immediately with implementation scheduled for January 1, 2003.