K-12 Tax, Referendum & Spending Climate: Tax base and government income decline

Dean Mosiman:

As a result, Rhodes-Conway is implementing actions including a hiring freeze on all positions with exceptions for essential services, additional review and approval for seasonal hiring, and a halt to purchasing of all nonessential supplies and services in order to reduce spending in the $341 million operating budget for this year.

The revised projections show huge drops in fines, fees, investment performance, hotel room taxes, Metro Transit fares, parking revenues and more.

“These are unprecedented times for our city, state, country and world,” the mayor said. “We have risen to the challenges presented over the past seven weeks and have much more to surmount in the days, weeks, months and years ahead.”

The actions won’t be enough to close the shortfall, and other measures are under review, including service reductions, furloughs and use of the city’s $52 million “rainy day” fund and emergency federal funding for transit, Finance Director David Schmiedicke said.

“This is the first action; others will follow over the summer,” Schmiedicke said. “We hope to avoid layoffs, but permanent reductions are unavoidable given the severity of the economic impacts.”

The mayor also released instructions for the 2021 capital budget, calling for austerity with a focus on recovery needs.

Freeze property taxes Local governments must consider cuts and furloughs too

Scott Girard:

Property-wealthy school districts such as Madison, which receives only 23.3% of its instructional funds from the state, may be in a relatively more stable position because money collected from property taxes makes up a larger chunk of its budget, according to the report.

But Jason Stein, research director for the Wisconsin Policy Forum, said the funding future for all districts is uncertain, regardless of how much they rely on state money, particularly if lawmakers freeze or reduce state-imposed spending limits or if school boards are hesitant to raise property taxes to make up for lost state aid.

Ultimately, all school districts will have the “unusually difficult and speculative task” this spring of planning 2020-21 school year budgets, which need to be initially approved by July 1, the report said.

Future of Madison School District’s budget unclear as state tax revenues plummet amid COVID-19 pandemic

Statewide, districts have seen a growth in fund balances — or money not yet assigned for specific uses — between 2012 and 2018, which is the last year data were available, the report said.

The Wisconsin Public Policy Report.

This has happened before – the state cut aid to schools in the wake of the Great Recession and essentially froze aid in one of the years following the 2001 recession. The move could hit districts in Wisconsin particularly hard given our system of funding schools.


WPF’s report also details district fund balances around the state, for which Madison has the “largest unassigned fund balance” in raw dollars among the state’s 20 largest districts at $53.7 million, though it is not the largest as a percentage of a district budget. Stein added that while that is an important number, fund balances cannot be relied upon to fill long-term holes if there are cuts from the state.

Schools depend more on state aid than other local governments in Wisconsin and less on property taxes, which are more under the control of local leaders. A loss in state aid could lead to higher local property taxes or spending cuts. Districts such as the Milwaukee Public Schools (MPS) with the most underserved students generally depend the most on state aid while districts with greater property wealth depend more on property taxes.

School districts in Wisconsin have raised their core reserve levels in recent years and these fund balances could help to absorb part of the heavy blow from COVID-19. Yet districts still must grapple with emergency and unexpected spending from the crisis on top of the potential loss in state aid. Over the next two months, districts will be struggling to forecast these losses and needs as they craft their preliminary 2020-21 budgets.

Finally, reserve levels vary quite widely by district and MPS is one notable exception to the trend of larger fund balances. Though the recently approved $87 million referendum will help MPS going forward, the lack of reserves could exacerbate the challenges ahead for the state’s largest district. In addition, the 20 largest districts started 2019-20 with generally healthy balances overall but were expecting a modest decline in reserves this year even before the coronavirus hit.