Analysis critical of proposed constitutional revenue limits

The full text of the analysis is on-line in PDF format at:
From the UW-Madison on-line press releases:
Analysis critical of proposed constitutional revenue limits
February 14, 2006
by Dennis Chaptman
Proposed limits on the amount of revenue Wisconsin governments can collect would reduce public services, hamstring the state’s future economic growth, and diminish local control, according to an analysis by a UW-Madison economist.

“If the costs of providing public services continue to grow faster than the inflation and population growth rates, the impact of the amendment would be to continuously reduce the level and quality of public services,” says Andrew Reschovsky, professor of public affairs and applied economics.
Lacking high-quality services, notably education, Reschovsky says the state’s ability to compete for businesses and residents would be damaged.
The state Legislature is considering a complex, 2,500-word constitutional amendment that would link state, school and local government tax collections to factors including inflation and population growth.
Reschovsky’s analysis found that the proposed revenue limits would hurt economic development by limiting government’s ability to invest in education, health care and transportation infrastructure.
Additionally, Reschovsky says that the limits would deprive communities of local control, which is important to help tailor solutions that respond to problems at the Main Street level. Reschovsky says that there appears to be no evidence that the current budgeting process, which relies on the judgment of elected local officials, is seriously flawed.
Reschovsky also discounted the argument that taxes and spending in Wisconsin are “out of control.” According to state Department of Revenue data, he says that state and local taxes relative to state personal income are considerably lower today than they were 10 years ago.
His analysis also notes that, using the sum of all taxes and fees relative to personal income, Wisconsin is a rather average state. According to the U.S. Census Bureau, Wisconsin ranks 23rd, only a few tenths of a percentage point above the national average.
If the limits had been in effect beginning in 1985, Reschovsky says that state government revenue today would be about 30 percent less than the actual amount, while University of Wisconsin System state appropriations on a “best-case” basis would be an estimated 25 percent less.