The State of Wisconsin is Defunding Milwaukee

As budget debates and ARPA funding discussions heat up in Milwaukee, one thing has become crystal clear: The state has not been a good partner to its largest, most diverse city. That needs to change.

The Recombobulation Area is an award-winning weekly opinion column by veteran Milwaukee journalist Dan Shafer. Learn more about it here.

At Milwaukee City Hall, leaders are in the midst of crucial debates on funding for the 2022 city budget and for one-time funding from the American Rescue Plan. But does any of this have the chance to be transformative? iStock / Getty Images Plus

It’s a crucial time of year for policy-makers in Milwaukee. 

The Milwaukee Common Council has begun discussions on the $1.75 billion proposed 2022 budget from Mayor Tom Barrett, and Milwaukee County Executive David Crowley just last week unveiled his $1.28 billion proposed budget for next year. 

Any budget for a city and county of Milwaukee’s size is always a big deal, but this year’s budget cycle is like none other in recent history. The American Rescue Plan Act (ARPA), passed earlier this year by Democrats in Congress and signed by President Joe Biden, is bringing hundreds of millions of dollars to Milwaukee. A big piece of ARPA is its infusion of financial resources — $350 billion in total — to help local governments respond to the pandemic, replace lost revenue, and address underlying issues exacerbated by the pandemic. It also presents a one-time opportunity for local governments to make the kinds of investments they might not otherwise be able to consider, the types of undertakings that could really lift a city, a chance to take bold action to  emerge stronger from the depths of this devastating pandemic.

From ARPA, the City of Milwaukee is receiving about $394.2 million, and Milwaukee County is receiving $183 million. These funds present a massive opportunity for the city and county.

Or rather, they should. 

What’s unfolding in reality is that these funds appear to be becoming temporary stop-gap measures that will bide Milwaukee’s time as it careens toward a cliff of financial crisis. 

Crowley wrote in an op-Ed that “for Milwaukee County, this is not “once in a generation” or “transformational” funding. It’s a lifeline to keep critical services running.” Barrett recently surprised the Common Council by recommending that $55 million of the city’s first $197 million ARPA installment be put toward lost revenue as a result of the pandemic. Public discussions are still underway to determine how these funds will be spent, but it’s being made clear that these federal funds are not going toward opportunities for real transformation. 

Because the fact is this: The long-term outlook for Milwaukee’s local government, both city and county, is dire. 

For the city, a new report this week showed that without a solution to the city’s pension problem, 24% of its workforce — about 1,300 people — could be let go between 2023 and 2025. 

The grim outlook for the county’s finances is nothing new — we wrote about its looming crisis here in 2019 — and is an even more dire situation. Introducing his budget last week, David Crowley said that by 2027, there will be no funding left for local priorities at Milwaukee County. Less than six years and Milwaukee County will be fundamentally out of money. Remarkably, this statement — that the government for the state’s largest county, home to nearly a million people, would be out of money in less than six years -- has not since registered as a major news story in Wisconsin. 

What’s happening here is that the state of Wisconsin mandates that the county provide certain services — court services, certain social programs, etc. — and these currently consume more than 70% of the county’s budget. That number is growing to 100% by 2027. Meaning that by then, as Crowley said, “Milwaukee County will not have enough money to fund essential services not mandated by the state like parks, bus routes, emergency services, arts, senior services, public safety, disability services, and youth services.”

Such an outcome is obviously unacceptable. The city and county need to act now. But because of the way Wisconsin is structured for state and local governments, Milwaukee cannot take action alone. It certainly would have if that path were available, but local governments do not have much local control in Wisconsin. No other Midwestern state has a tax structure like Wisconsin’s. Cities and counties need the state’s help. It’s not an ideal system.

Which brings us to what’s at the core of the problem: The Republican-controlled Wisconsin State Legislature. It’s not just the shameful rhetoric and not-so-veiled insults that Republican leaders often lob at Milwaukee, which in itself is deeply harmful, especially when those words come with a certain dog whistle to their tone. It’s also that the legislature — under total Republican control for the last decade — has squeezed Milwaukee financially, directly contributing to the circumstances the city and county find themselves in at this crucial moment.

They’ve done so, primarily, in two ways.

One is through shrinking shared revenue payments going to local municipalities like Milwaukee. The amount in taxes that come from Milwaukee and go to the state have been steadily rising, but the amount coming back to the city and county have remained flat. This essentially amounts to a major budget cut for Milwaukee. 

And this isn’t just a small shift for a year or two we’re talking about. This is now hundreds of millions of dollars over nearly two decades that Milwaukee is missing out on. 

As Urban Milwaukee’s Jeramey Jannene writes: “In 2003, the state shared revenue formula (originally intended and used for more than a century as a rebate of income taxes) allocated $249.9 million to the city. In 2021, it is providing $229.4 million, a $20.5 million reduction. If the 2003 figure was adjusted for inflation and left as is, the city would be receiving an additional $118.5 million annually. That creates a massive hole in the city budget.”

Needless to say, if the city had another $118.5 million each year, ongoing conversation about Milwaukee’s finances and its future would look very different. 

It’s not just this grotesque shared revenue imbalance that’s squeezing Milwaukee. Unlike in most states, Wisconsin law says that local municipalities like Milwaukee cannot raise sales tax revenue without permission from the state. Despite a recent proposal from Gov. Tony Evers, the state legislature has not granted that permission, and Assembly Speaker Robin Vos said it’s “never going to happen.”

Having to raise sales tax is no ideal outcome. There are more progressive tax structures that would be more equitable. But more and more, it is becoming clear that Milwaukee needs its own revenue source, one independent of what’s going on down the road in Madison, one that cannot be threatened by a hostile state legislature or governor. We need local control.

The Bucks’ championship run delivered a defining moment for Milwaukee, but none of the tax revenue generated through the playoffs is going to the City of Milwaukee. Jamie Sabau / Stringer. Getty Images North America.

We just witnessed a perfect example of a scenario that should greatly benefit Milwaukee, but instead, saw the city cut out of the funding equation.

The Bucks delivered a championship run for the ages in Milwaukee, with tens of thousands of people flooding the streets and packing Fiserv Forum and the Deer District night after night from May to July, cheering their team on to an NBA Finals victory. But none of the tax revenue generated by that remarkable championship run will go to the City of Milwaukee. Almost all of the millions in additional sales tax revenue from the playoffs will go to the Wisconsin Center District and to the state of Wisconsin. Without the ability to have any semblance of local control, Milwaukee will inevitably miss out in circumstances like this one. And the state, while happy to collect that money, will still keep chipping away at Milwaukee’s budget by reducing its shared revenue from these very taxes. The Wisconsin State Legislature, the entity with by far the largest amount of control over state finances, has boxed the city in, and not even an event like the first championship in the city in 50 years can truly break through.

So, in turn, being boxed in like this gravely affects the day-to-day operations of the city and its ability to meet crises when they occur.

Share

Take what’s happening right now, for example. Milwaukee is currently experiencing an increase in violent crime, gun violence in particular. Community leaders have denounced this unprecedented violence, and naturally, police funding has been part of this conversation. Mayor Barrett this week took the state legislature to task about its lack of partnership in addressing the issue, saying “We have a state legislature that’s filled with people who say they’re against crime and don’t want to let the largest city in the state pay the bills for the police department, so that angers me as well.”

Police funding is, of course, a tricky, complex issue. Regardless of where you stand on it, it too comes back to the funding formula, and Barrett is right to point that out. Because the facts are that Wisconsin ranks last in the country in state spending on law enforcement and in the top ten in municipal spending on law enforcement, according to the Wisconsin Policy Forum. Milwaukee is on the high end of that list for municipalities nationwide, ranking second-highest among America’s largest cities for the percentage of city funds it spends on policing (58%, behind only Billings, Mont.). How much more can (or should) Milwaukee really be expected to fund its police, without state assistance? 

If you think that Milwaukee’s police department should see a decrease in funding so that other city services remain funded, as African-American Roundtable and Liberate MKE have argued, that argument is more than valid, and is one potential path forward. If you’re on the other side of that debate and want to see an increase in police funding, but don’t want to see a disruption to other stretched-thin services, or perhaps you’re somewhere in the middle and want to see MPD’s budget remain as-is while other city services see funding increases, the most clear path forward would be through action at the state level — by adjusting shared revenue or allowing for local control. Without it, cuts for the police department — and every city department — are inevitable. 

There are plenty more examples of how this impacts the city and county beyond police funding. Take the County Parks, for example. The defunding of Milwaukee County has impacted few departments more, as there continues to a nine-figure deferred maintenance backlog for a part of the city that’s been a genuine asset, and there appears to be no solution in sight beyond death by a thousand cuts. And 2027 will come sooner than we think.

The bottom line is this: Wisconsin’s funding formula is broken. It is doing drastic harm to Milwaukee. ARPA funds will help, but only to plug some holes, and only as a one-time fix. We need a long-term solution. We need the state shared revenue equation to be rebalanced. We need local control in Milwaukee.

More than anything, we need the state to be a real partner to its largest city. We need Wisconsin to stop defunding Milwaukee.


Dan Shafer is a journalist from Milwaukee who writes and publishes the award-winning column, The Recombobulation Area. He previously worked at Seattle Magazine, Seattle Business Magazine, the Milwaukee Business Journal, Milwaukee Magazine, and BizTimes Milwaukee. He’s also written for The Daily Beast, WisPolitics, and Milwaukee Record. He’s on Twitter at @DanRShafer.


Subscribe to The Recombobulation Area newsletter here and follow us on Facebook at @therecombobulationarea.

Follow Dan Shafer on Twitter at @DanRShafer.