Tony Evers wants the state to give more money to local governments. Here's how it would work.

Gov. Tony Evers' release of a proposed two-year budget included additional details on plans to boost funding to local governments.

The proposal — and the fact that one of its key funding mechanisms was originally proposed by Republicans who control the state Legislature — gave Milwaukee leaders and organizations representing local governments a sense of optimism that they could come out ahead when budget negotiations wrap up.

"The headline ought to be that there’s bipartisan agreement on the mechanism to attach local government (funding) to the economy," said Mike Koles, executive director of the Wisconsin Towns Association.

Evers' proposal focuses on an idea from Republican lawmakers that would dedicate 20% of the state's sales tax collections each year to shared revenue funding for municipalities and counties. The plan would increase shared revenue to local governments by $576.2 million next year. It would separately open up new options for local sales taxes ― if approved by residents through referenda.

Even so, those keeping tabs on the negotiations cautioned that much about the plan could change as the state Legislature now takes up the Democratic governor's proposed budget. Republican Assembly Speaker Robin Vos told reporters the budget likely includes areas of common ground but that legislators would offer "dramatically different" solutions to the ones Evers laid out.

While League of Wisconsin Municipalities Executive Director Jerry Deschane said an influx of new revenue to local governments would keep core services alive, he warned against assuming the estimated payouts to local governments under Evers' plan will ultimately remain the same.

"I would caution everyone not to get caught up in the spreadsheets at this point in the process," he said. "The Legislature has been working on this problem for several months. It is not clear to me that the administration and the Legislature are working on the same sorts of formulas. ... You need to get deeper under the hood."

Here's what we know about the proposal so far:

Local governments say additional funding is critical

"Extraordinarily important," is the kind of phrase Milwaukee-area leaders and organizations representing local governments used to describe new funding.

From Milwaukee to Wisconsin's smallest community, local governments are struggling to maintain core local services such as police forces, street plowing and more. That's because the funds that return from the state to local governments, known as shared revenue, have been stagnant for decades and other ways of raising revenue for local governments are limited.

"While an argument could be made that the state’s shared revenue appropriation is still generous compared to other states, what clearly had been lost was this notion of revenue sharing, this notion that as state income and sales tax collections grow, so would the allocation of local aids on a proportional basis," said Rob Henken, president of the nonpartisan Wisconsin Policy Forum. "That ... appropriation essentially has been frozen for 25 years."

The current rise in costs has not helped.

"Inflation on those core services is absolutely killing us right now," Koles said.

What higher revenue would allow local governments to do

The new dollars would allow local governments to not only prepare for the 2024 and 2025 budgets but also to catch up in areas they may have been underinvesting, such as infrastructure, mechanisms for recruiting and retaining public safety employees and more, Henken said.

For future distributions of the new shared revenue, no local government would receive less than 95% of the previous year's allocation, and existing shared revenue programs would continue as they're currently structured under state law, according to Evers' office.

What would the impact be in Milwaukee, Milwaukee County?

Milwaukee and Milwaukee County leaders said the combination of increased shared revenue and additional sales tax dollars is critical to sustaining local services as both governments face financial reckonings in the coming years.

Under the proposal, new local sales taxes could be approved by residents in a referendum.

Milwaukee County would be allowed to impose an additional 1% sales tax, with half of the new funds going to the City of Milwaukee. The 0.5% sales tax currently imposed in Milwaukee County generated about $96.3 million last year, according to state Department of Revenue data on county sales tax distributions. A 1% sales tax would be roughly double that figure, if sales and other factors remain steady.

"When you think about our legacy costs, shared revenue is not going to fix our long-term fiscal problems," Milwaukee County Executive David Crowley said. "We need to make sure that we have a healthy mix of revenues, and we know that the 1% sales tax is a good mix, a healthy increase in making sure that we can ... continue our programs and services that so many people rely on."

Milwaukee's fiscal situation is more immediately dire. Rising costs, stagnant shared revenue, declining savings and a significant spike in its annual pension contribution have forced the city to become increasingly dependent on federal pandemic aid to maintain city services. Those funds will be gone soon.

Milwaukee officials say the city needs about $150 million more annually to maintain services on which residents and visitors rely.

The proposal would also allow counties other than Milwaukee County to impose a 0.5% sales tax and municipalities with populations larger than 30,000 other than the city of Milwaukee to impose a 0.5% sales tax, if approved by voters.

How much would go to each community?

Evers' proposal would send dramatically different amounts of new $576.2 million in shared revenue to communities across the state, with Milwaukee receiving the largest sum.

Milwaukee County would receive an estimated $27 million in additional shared revenue while the smallest distribution, to Menominee County, would total $175,327, according to figures provided by the Governor's Office.

The City of Milwaukee's allocation would be an estimated $82.3 million, according to the Governor's Office. The smallest communities would receive just over $10,000.

For towns and other local governments, there is a collective impact from neighboring communities each receiving funds, Koles said. The dollars can be pooled to bolster collective services such as ambulances and capture economies of scale, he said.

Here are a few ways things could still change

Deschane is among those who will be closely watching negotiations over the coming months to see how the funding plan changes.

Details such as how the money is distributed and any conditions on receiving the funds will determine whether the problem of funding local government in Wisconsin is solved, he said.

"This is as complicated a topic as it is critical," he said.

Milwaukee leaders would like to see the 1% local sales tax in place by the time the Republican National Convention arrives in downtown Milwaukee in the summer of next year.

Requiring a local referendum could make it tricky to meet that deadline.

Milwaukee Mayor Cavalier Johnson said he has told Republicans he would like to instead implement the sales tax through legislation, allowing it to go into effect earlier and take advantage of the influx of people and dollars that will flow to Milwaukee for the RNC.

He said all local governments should be able to depend on a rebuilt shared revenue system but that Milwaukee in particular should be able to implement a local sales tax to take advantage of the dollars spent in the city where so much economic activity takes place.

The city is likely to have a sense in early March whether a legislative package will include shared revenue and whether there is support for a sales tax, Jim Bohl, Johnson's nominee to serve as legislative liaison director, told a Common Council committee.

He noted the Republican plan to create separate standalone legislation that would provide a framework for new revenues. Using separate legislation would prevent Evers from accessing the powerful partial veto he holds on spending bills. That legislation is expected to develop over the course of March.

Once the separate legislation has been proposed, the funding for it will be inserted into the budget, Bohl said.

Contact Alison Dirr at adirr@jrn.com. Follow her on Twitter @AlisonDirr. 

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This article originally appeared on Milwaukee Journal Sentinel: Tony Evers wants state to give more to local governments. Here's how.