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Legislative Update


Wis. Policy Forum reports point to challenges for schools in upcoming state budget debate

by | Dec 11, 2020 | Legislative Update Blog, State Issue

A pair of study reports released this week by the non-partisan Wisconsin Policy Forum shed light on the potential challenges school leaders will confront as the state of Wisconsin addresses its 2021-23 biennial (two-year) budget.

The first report suggests the state will face its toughest budget challenge since 2011. The second report shows 2020 school district property tax levies rising significantly faster than inflation, although at a slower rate of increase than in 2019.

According to the first report, the state would need to spend down its budget reserves by nearly $400 million in order to balance the next biennial budget even if—and this is unlikely—the governor and lawmakers rejected every request for additional spending from state agencies.   

On the brighter side, the report notes the state has substantial reserves to lean on, but also notes “the state also faces massive additional costs for state health programs for those in need.”

The report’s analysis begins by comparing projected increases in state tax collections with base spending levels and assumes no additional federal relief will be provided.  After including routine adjustments for debt payments and employee compensation but excluding all new spending requests by state agencies, the report finds state general fund spending (i.e., spending from income and sales taxes—the same funding source that supports state schools aids) would exceed projected revenues by $373.1 million over the next budget cycle which runs from July 2021 through June 2023.

The report concludes that to make up that $373 million difference – equal to about 1% of spending over the two-year budget cycle – the state would either have to spend down reserves, adopt spending cuts or tax increases, delay payments for certain obligations, or draw on some other new source such as additional federal aid or some combination of all these options.

The analysis did not factor in the projected costs of maintaining current Medicaid programs, which it pegged at more than $1.1 billion over the next two years. Nor did it factor in any additional spending on pandemic response, state aid to K-12 schools or local governments, prisons, or the University of Wisconsin System. However, the report suggests new spending in at least some of these areas appears inevitable, particularly in the case of Medicaid, adding substantially to the challenge.

The second report finds Wisconsin school district gross property taxes for the coming year are increasing by 3.3 percent to a statewide total of nearly $5.4 billion. Although this increase represents a slowdown from the 4.5 increase in gross school property tax levies in 2019, it is still the second-highest percentage increases since 2010. Among the factors contributing to the increase were the per pupil increases allowed in state revenue limits for school districts as well as increases in the low revenue ceiling for certain low spending districts.  Another key factor was the continued high rate of passage for school district referenda.

The report also finds that increases in county and technical college tax levies on this December’s bills suggest that this year’s overall statewide property tax increase will one of the largest in recent years.

Although the report did not factor in property tax levy increases in municipalities (i.e., in cities, villages and towns), which were not yet available, it notes that K-12 schools, counties and technical colleges together account for roughly two of every three property tax dollars collected in the state.  

The report notes that after four years of stagnant per pupil revenue limits, the 2019-21 state budget increased them by $175 per pupil last year and $179 per pupil this year, with the 2020-21 increase amounting to roughly $150 million statewide. In both years, the state also increased the revenue limits for certain low-spending districts. Some of the increase in revenue limits was offset by additional state aid.

Last year, the state provided an $83 million increase in general school aids – not enough to offset the increase in revenue limits. This year, the state provided an additional $163.5 million in general aids, a 3.4% increase that was the largest since 2005, and was meant to offset the $179 per pupil increase in revenue limits and help to curb the overall growth in property taxes statewide.

Despite the overall trend of increased property taxes for schools, the report finds 150 school districts—more than one-third of those in the state—will decrease their levy, including large districts like New Berlin (-$3.4 million), De Pere (-$3.2 million), Wauwatosa (-$2.5 million), Eau Claire (-$2.2 million), and La Crosse (-$2.0 million). 

Finally, the report found that if the levy increases in the state’s two largest districts—Milwaukee ($42.5 million) and Madison ($19.9 million), both of which successfully passed referenda—are excluded from the statewide total, the overall statewide increase in school levies would drop from 3.3 percent to 2.2 percent.

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