Spending trends for municipal budgeting

On September 15, Jefferson Co. voters turned down a referendum to exceed state levy limits in order to continue operating a county-owned nursing home. The 3,475 (42%) to 4,774 (58%) vote means the county board will proceed to sell the home.

Effective January 2010, income tax reciprocity between Minnesota and Wisconsin will end. Under the pact, cross-border workers would file a return only in their home state, and the two state governments would settle the revenue difference later. Wisconsin has been paying its neighbor because more than twice as many Wisconsinites work in Minnesota than vice versa

For the first time since 1967, Wisconsinites working in Minnesota will have to file returns in both states, claiming Minnesota income taxes as a credit against Wisconsin taxes owed. Wisconsin’s Revenue secretary called the development "unfortunate." The Gopher commissioner said: "Because of the delay in payments [17 months] from Wisconsin to Minnesota, the agreement no longer serves the best interest of our state." As a result, Minnesota will collect $131 million more in revenue in 2010 and 2011.

December property tax bills are still a ways off, but with local governments well into preparing 2009-10 budgets, now—and not December—is the time for interested citizens and community leaders to have a "say" in decision making. One resource to aid discussion is WISTAX’s annual research on municipal finances in 232 of Wisconsin’s most populous cities and villages (see box below).

Operating expenditures

Together, this "group of 232" accounted for $2.23 billion (b) in net operating expenditures, or nearly two-thirds of the state total in 2007 (the most recent year available). Because Milwaukee ($6.58b) and Madison ($2.23b) differ significantly from this group, they were excluded from analysis, as were cities and villages with fewer than 2,000 people.

Per capita. One way to compare cities and villages with different populations is to examine what they spend per person. Net operating expenditures per capita for the 232 municipalities were $805, with a median (half of municipalities above, half below) of $738. Wisconsin Dells ($2,306) and Lake Delton ($3,806), both resort communities whose populations swell in summer months, were highest. Howards Grove ($239) and Redgranite ($295) were lowest. Madison and Milwaukee spent $992 and $1,115 per capita, respectively.

Increases. Growth in operating expenses from 2003 to 2007 varied from place to place. Nineteen reduced expenditures, with Wrightstown (-11.4%) and Washburn (-10.2%) leading the pack. Two communities—Somerset (28.6%) and Lomira (24.3%)—had increases of over 20%. For the study group of 232, spending increased 13.4% over five years, or on average, about 3.2% per year. Increases were more for Madison (30.8%, 6.9% average) but less for Milwaukee (2.4%, 0.6%).

"Basic service costs"

Among municipalities studied, four categories—general government administration, street maintenance, fire/ambulance, and police—accounted for about two-thirds of net operating expenses. After adjustments to "net out" police and fire payments between municipalities and avoid double counting, the four areas comprised "net basic expenditures."

Service "focus." The share of operating expenditures devoted to the four basic services varied considerably. The average was 65.7% (median, 65.9%). Bayside, Oostburg, and West Milwaukee all spent more than 85% of their operating budgets on the four basic services. However, percentages were under 50% in 14 municipalities, with the lowest shares (all 35.0% or less) in Lake Delton, Somerset, and New Glarus. Madison had 56.4% of its operating expenditures in basic services; Milwaukee was higher at 77.1%.

Per capita. Overall, net basic expenditures averaged $528 per person, with a median of $478. Three communities topped $1,000: Lake Delton, West Milwaukee, and Wisconsin Dells.

Figures presented here are based on WISTAX’s databook on municipal finances, MunicipalFacts09. Now more than 15 years old, this project was begun through cooperative discussion between Alliance staff and selected municipal leaders. Calculations are based on municipal reports sent to the Department of Revenue each year; DOR, however, does not audit them.

Fire/ambulance. This category is second in size to policing (16.4% of operations), but generalizing can be problematic because fire departments are full-time, part-time, volunteer, or some combination. Per capita spending averaged $127, with a median of $73. Madison and Milwaukee both spent an above-average amount ($166 per person). Black River Falls, Wauwatosa, and Johnson Creek spent the most (all more than $245).

Streets. Maintaining and building streets in the 232 municipalities studied consumed $113 per capita ($116 median). Grafton ($414) and Oostburg ($324) were highest, while Hobart, Wautoma, Redgranite, Holmen, and Kenosha all spent less than $50 per person. Spending by Milwaukee ($131) was somewhat above the mean, while Madison ($83) was well below. As mentioned, street spending was the fastest growing of the four basic services (17.7%, 4.2% average).

General government. Administrative costs associated with municipal officials, financial operations, legal services, and facilities all fall under this category. The smallest of the four basic services (9.6% of net operations) and the slowest growing (8.8%, 2.1% average), general government costs averaged $78 per capita ($81 median). By individual city or village, per capita costs ranged from $255 in Johnson Creek to $32 in Holmen. Madison’s expenditures were about average ($81), but Milwaukee ($189) more than doubled the average

Debt:  The hidden burden