Is Wisconsin state government trying to put towns out of business? No legislator would ever admit to such a thing, but, according to the Wisconsin Policy Forum, the combined effect of state-imposed levy limits and declining state shared revenue has left the state’s towns financially strapped, increasingly in debt and unable to fulfill their basic mission, road maintenance. None of this suggests a bright future for townships.
Wisconsin’s towns have a big job. Wisconsin’s 1,260 town governments spend nearly a billion dollars each year to provide services to around a third of the state’s population, around 1.6 million people.
Yet, state policies don’t make that easy. The state in 1990 used to share $76.2 million of its income and sales tax with towns as state shared revenue. This sum paid for about a quarter of town expenses. By 2020, however, the state only provided towns with $55.8 million which, when adjusted for inflation, calculates to a 63 percent decrease. State shared revenues are no longer a major source of town revenue. They account for a mere six percent of town budgets.
Lacking state revenue, town governments must turn to the property tax and, just as state shared revenue has declined, reliance on the property tax has increased. Back in 1990, towns used property tax to pay roughly a third of their budget. By 2020, property taxes paid 48 percent of town expenses. Towns would likely lean even more on property taxes but levy limits prohibit that. State rules allow municipal and government only to increase property taxes by the same percentage of new construction within their borders. Town governments, however, don’t see the same amount of growth that cities and villages see. In 2021, towns saw only 1.2 percent new construction, a third less than other municipalities. It’s impossible, then, to make up for a loss of state shared revenue with property tax.
The result is that towns, increasingly, are turning to debt to balance their budgets. Back in 1990, townships had $249 million in general obligation debt. That sum has soared. By 2020, town debt stood at $472 million, not quite double. Town debt from 2014 to 2020 increased by a third after adjusting for inflation.
The other way towns are balancing budgets is by cutting back on services, notably road maintenance. The share of town budgets dedicated to road maintenance has declined from 37 percent in 2020 to 30 percent in 2020. This reduction in road patching affects Wisconsin’s transportation picture generally. Townships have jurisdiction over 61,416 miles of roads in Wisconsin. These roads represent 60 percent of all local roads in Wisconsin. It is true that state transportation aids paid to townships over the years have increased, but the increase has not been enough to sustain road maintenance.
Is this situation sustainable? We don’t see how it could be. State leaders put towns, just like other municipalities and counties, in a fiscal squeeze box, forcing them to finance operations through debt. That might work in a low interest environment, but, with interest rates heading higher to beat back inflation, town bank payments will start to rise. Debt service paid by towns increased from 8 percent to 12 percent of budgets between 1990 to 2020. Can towns sustain higher debt payments? Unlikely.
The most disappointing part of all this is where our state leaders, flush with new taxes as we crawl out of the COVID-19 recession, boast about surpluses and their superior skills at financial management. That’s hooey. There is no surplus if towns across Wisconsin have to borrow money just to maintain gravel roads. The situation is like a father flashing the crowd at the bar how thick his wallet is when his children at home wear rags.
We support town government. It is government close to the people, a bastion of democracy. We think state government should support towns, but it doesn’t. Towns can share services with other towns, consolidate and try to achieve savings through economies of scale. That’s good management, but, as decisions are made further from the people, bad government.
A Wisconsin township is a plot of land six miles by six miles. Is that an obsolete concept? Maybe the state thinks so. We, however, disagree.