County Executive Falk Releases Memo to the County Board of Effects of TPA on Local Government
February 28, 2006
DATE: February 28, 2006
TO: Scott McDonell, Chair
Dane County Board of Supervisors
Members, Dane County Board of Supervisors
FROM: Kathleen M. Falk
Dane County Executive
RE: SJR 63/AJR 77 (TPA/TABOR)
As you are probably aware, the State Senate and Assembly are considering an amendment, the Taxpayer Protection Amendment (TPA), to Wisconsin¡¦s constitution to limit revenues to state and local government. The following points summarize the key provisions of this proposal and how it might affect Dane County if it were to become law. It also provides a comparison to some of the major provisions of the Taxpayers Bill of Rights (TABOR) amendment that the legislature considered but did not approve in 2004.
This proposal would limit Dane County¡¦s ability to determine locally how and to what extent we fund vital services that we provide our residents. I think you will agree that the impacts of the new proposal would be significant. The following are some key problems:
-- The TPA operates by limiting the revenues a local government can take in. Under TPA, county revenue growth would be limited to the average of CPI for the last three years, not to exceed the percentage increase in state personal income, plus the percentage increase in population. While a few revenues are excluded, most significant revenues are included under the limit. Some of the significant revenues sources included under the TPA that would affect Dane County would be sales taxes, property taxes, tipping fees from the landfill, revenue for the AEC, parks fees, zoning fees, interest earnings, Register of Deeds revenues, inmate related charges (Huber board, telephone), parking ramp revenue, methane gas revenue, and property tax interest and penalties. (The TPA does allow the legislature to change the definition of ¡§revenue.¡¨ So it is possible that other exclusions could be added if the amendment were approved.)
-- Neither TABOR nor the TPA makes any distinction between the capital and operating budgets. Under TABOR, an increase in expenditures for a large capital project would have required referendum approval unless expenditures were reduced elsewhere in the budget. Under the TPA, the revenue from bond proceeds would count against the annual limit on revenue increases. This is an extremely significant provision because capital revenue raised by bonding would count against the revenue limit; it would directly pit the county¡¦s long-term building or infrastructure needs against ongoing operational or programming needs. It would virtually guarantee that any significant capital project (jail, nursing home, major highways, or parks as examples) or group of smaller capital projects would have to go to referendum.
-- This is yet another impact of the TPA on bonding that is significant. Not only would the County need to seek referendum approval of the revenue from the bond sale, but because the TPA does not exclude moneys raised to pay debt service (except for revenues to repay ¡§municipal economic development bonds¡¨) the County could not pledge an unlimited tax levy for the repayment of its bonds unless it received referendum approval to increase revenue each year for the debt service on the bonds.
-- Under the TPA, if the state legislature imposes a new service mandate on local governments, it is required to provide state funding for the mandate. The TPA makes the legislature the sole determinant of a reasonable cost for local government to provide the services. It is not clear how the increased cost of providing a mandated service over time would be treated. It has been the Dane County¡¦s experience that prior intentions (such as the state funding the court system) have not materialized, and that existing revenues from the state tend to grow much more slowly than the actual cost of providing mandated services.
-- Under the TPA, local governments are allowed to increase revenues to make up for any loss in state aid of shared revenue, community aids, and general transportation aids. The loss or reduction in funds from a state grant is not included, nor are reductions in medical assistance and other human services revenues (for example, Youth Aids).
-- The TPA requires that if a local government receives revenue that exceeds its limit, it must refund the difference to the taxpayers in the calendar year following the year the excess revenue was received. The amendment does not limit the refund to those paying only property taxes. This would be a significant undertaking to identify all county taxpayers and present them with refund checks. In theory, under this proposal, the county would be responsible for refunding any amount, even as much as $1,000 in excess revenue, to all taxpayers in the county.
Another way of illustrating the impact of the TPA is to note the difference it would have made in our current 2006 budget. While we lack specific guidance on how the Department of Revenue would administer the TPA, it appears that the TPA would have allowed Dane County to increase total revenues by 2.86%. The increase in operating revenues between the 2005 and 2006 budgets was about 2.4%. While the County could have increased revenues by an additional $888,000 under the limit, this would not have met the capital needs of the county for 2006 of $26.23 million. All major capital spending included in the 2006 budget, such as highways, planning for the replacement of Badger Prairie Nursing Home, the additions to the Henry Vilas Zoo, radio system upgrades, the Conservation Fund and planning for the new AODA/Huber center would not have been included in the 2006 budget without a referendum.
In addition, because the county was at the legally binding levy limit, we could not have gained this $888,000 through higher property taxes. And we all know how difficult, if not impossible, it would be to come up with an additional $888,000 in other types of eligible revenues.
As you can see, the TPA would have made it impossible to pursue almost any significant capital projects without a referendum or, as an alternative (albeit, a probably unacceptable one), to significantly cut programs, beyond our efficiency efforts of recent years, in order to fund capital needs.
For more detailed information concerning the comparison of TPA and TABOR or a more detailed analysis of TPA, please contact Chuck Hicklin, the Dane County Controller, at 266-4109.
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Lesley Sillaman, Office of the County Executive (608) 267-8823 or cell (608) 669-5606