As the city of Janesville continues this month to deliberate over its 2023 budget, and the Janesville School District moves forward under its annual budget adopted in October, it’s important to know what’s driving those budgets, and what’s complicating them.
For many years, municipalities and school districts across Wisconsin have been operating under strict state rules about how much they can levy—or tax—each year. When they were put into place, it was argued that levy caps curtailed the ability of local government to spend unchecked.
But there have, for a while now, been calls to loosen those state reins, and to reinstate more local control over local budgets. The assumption is that local boards and councils best know what their residents can afford and the level of services they expect, and should be trusted to budget accordingly.
Former Janesville City Manager Mark Freitag felt strongly enough that control over local spending needed to tip back toward local government, that it was put into the city’s 2022 legislative agenda, which drives the city’s lobbying at the state Capitol.
Shortly before he left last month for a new job in Colorado, Freitag told the city council his inability to convince the state Legislature to reform how municipalities are funded was a shortcoming of his tenure.
We’d offer, however, that Freitag’s inability to get that reform enacted was perhaps less his failure than the failure of legislators.
The impact of state control on local spending is clearly illuminated in the executive summaries of annual local budget reports.
Those reports lay out how, under Wisconsin rules, municipalities are held to an annual tax increase based solely on their recent amount of new construction. That’s beneficial for cities that are growing and seeing a lot of new development—while hamstringing municipalities that aren’t.
There are also calls to reform the state’s shared revenue formula for municipalities, that some including Freitag, have said is based on a formula that doesn’t equitably distribute aid to all Wisconsin municipalities.
Meanwhile, alternative ways of funding budgets are limited.
Facing a shortfall for 2023, the city of Janesville is considering drawing $1 million out of its rainy-day fund for next year. Cities—including Janesville—are also increasingly funding services through utility and other fee hikes.
Across the state, it’s become common for school districts and municipalities to put referendums on the ballot to exceed state revenue limits to cover their operating expenses.
The School District of Janesville, for instance, is 2 years into a 4-year operating referendum.
But referendums themselves take time and financial resources to stage and administer. And there’s a catch—a city can pass a referendum to increase its tax levy but if, when it goes to spend that money, its overall budget exceeds yet another line set by the state, it risks forfeiting an annual state expenditure restraint payment.
“Despite the great responsibility municipalities assume, the state has stripped the local ability to generate the revenue to keep up with rising costs and meet citizen expectations,” the city of Janesville noted in its 2022 Legislative Agenda.
For too long, too many Wisconsin municipalities and school districts have struggled to fund basic budgets.
Is there a better way to sufficiently and equitably help fund the operating needs of school districts and municipalities across the state, while not breaking taxpayers’ banks?
That, we feel, is the legislature’s responsibility to figure out. And the first step is honestly listening to school districts and municipalities, about what isn’t working.
