A Primer on Shared Revenue
For decades and longer the state has provided general, unrestricted aid to municipalities, towns and counties through several programs, which include county and municipal aid, utility aid, expenditure restraint, and state aid for tax exempt property. Collectively, these programs are traditionally called the shared revenue program. The Department of Revenue (DOR) administers these programs.
The county and municipal aid and utility aid programs, combined with the expenditure restraint aid program, rank as the sixth largest state general fund program in 2020-21, behind elementary and secondary school aids, medical assistance, corrections operations, the University of Wisconsin system, and the school levy and first dollar tax credits.
While shared revenue remains one of the largest state programs in terms of total funding level, it has declined in relative size to the rest of the state budget over the last 20 years due to funding cuts to the program in 2004, 2010, and 2012, and little or no growth in other years. In 1994-95, shared revenue made up 12.5% of the state's total general fund appropriations, but that share has decreased to 4.3% of general fund appropriations in 2020-21.
Payments under the county and municipal aid program comprise 90.8% of the total distribution collectively referred to as shared revenue. Utility aid comprises a more significant percentage of total payments to counties (23.3%) and towns (20.3%) than for villages (12.6%) and cities (3.6%). Utility aid payments are particularly significant for local governments where large power production plants are located.
The county and municipal aid program replaced the original shared revenue program as the largest local assistance program for municipalities and counties in 2004. For 2003, $981.6 million in aid payments to municipalities and counties were made under the shared revenue ($949.2 million), county mandate relief ($21.2 million), and small municipalities shared revenue ($11.2 million) programs. All of these programs were rolled into the county and municipal aid program in 2004 and funding was reduced by 7.9% at the same time.
The county and municipal aid program payments were further reduced by $76.8 million in 2012, to $753.0 million. Of this total, $47.7 million was cut from municipal aid and $29.1 million from county aid reductions. Over the last 18 years, $94 million has been cut from the part of county and municipal aid that goes to cities, villages, and towns, a 12 percent drop.
Since 2013 each individual municipality and county receives the same payment as it received in 2012. Total payments have also remained at the 2012 level of $753.0 million. The formula for distributing shared revenue was turned off in 2002 and has not be used since. Annual payments are based on what a community received the prior year.
Distribution of Estimated 2021 County and Municipal Aid Payments (In Millions)
ACTION STEP: Help us tell your shared revenue story in the Capitol! Compile a narrative detailing what previous cuts in shared revenue have meant to your municipality and what an increase could mean for your community. There is a perception in Madison that increases will fund 'wants' and not 'needs.' At the League, we know that is not the case, but we need your help to provide the necessary and accurate details that will resonate with legislators. Please prepare your community's shared revenue story and share it with your legislators. Please also send your completed piece to Gail Sumi, Member Engagement and Communications Director
, so that we can use your story when discussing the need for shared revenue increases under the dome!
Federal COVID Relief Package
This week the League sent a letter to our Congressional Delegation to advocate for federal resources that can be delivered straight to Local Governments to ease the burden related to ongoing struggles with COVID services. Read the letter below.
New State Revenue Estimates Provide Positive News
Last week, the Legislative Fiscal Bureau released its latest state revenue and expenditures estimates. In the report the Fiscal Bureau compares it's analysis of state finances with a DOA/DOR report on general fund revenue and expenditure projections for the 2020-21 fiscal year and the 2021-23 biennium released in November 2020. According to the Wisconsin Budget Project:
- The new sales and income tax estimates are $437 million (GPR) higher in the current fiscal year, and $719 million in the next biennium ( about $1.15 billion total over 3 years, compared to the Nov. projections).
- The projected GPR balance at the end of the current fiscal year is now about $1.8 billion (an increase of $630 million compared to the Nov. estimate).
- Part of that improvement results from a lower estimate of spending in the current fiscal year – thanks primarily to continuation of the federal Public Health Emergency, which extends the higher federal match rate for Medicaid (which is expected to result in $256 million less in the state Medicaid spending than anticipated in Nov.).
- The State's Rainy Day Fund is expected to increase by $233 million (reaching almost $1 billion).
Legislature's COVID Response Bill and Resolution Repealing Governor's Public Health Emergency Briefly on Hold
The Assembly did not take action last week on either AB-1 as amended by the Senate (the Legislature's COVID Response Bill), nor SJR-3, repealing the Governor's latest public health order including the mask mandate. The Assembly recessed its floor session to the call of the chair to give it time to review questions raised about the impact of the repeal of the Governor's emergency health order on the loss of $49 million in additional federal dollars under the Supplemental Nutrition Assistance Program. It is likely the Assembly will return this week to take further action on these matters. We will send a Capitol Buzz if and when the Assembly takes action this week to repeal the Governor's latest public health order.