In Defense of Revenue Limit Law

One of my favorite reforms from the Tommy Thompson era is the revenue limit law for school districts.  This 1993 law is a testament to faith in the wisdom of local voters.  The law ended sharp property tax increases by requiring voter approval for a local district to raise revenue beyond a limit based on enrollment and previous spending.  The law endures, having weathered partisan swings in state government, because it grants taxpayers an element of control to balance the power of their local school board.

School districts rely on a blend of local property taxes and state support.  Under this law an increase in state funding lowers the local property tax burden unless the voters approve an overall revenue increase.  A school board wishing to spend more than allowed by the law must first get voter approval.  A more accurate name could be the “referendum threshold” law.  School boards may independently spend up to the “revenue limit”, but spending over the “limit” requires a district referendum to ask voter permission to exceed the limit.

Last week some members of the state assembly proposed a partial exemption from the law for about half the districts in the state.  Their proposal weakens the referendum by allowing 208 school districts with annual spending lower than $9,800 per pupil (close to the state median) to increase their revenues to that amount without going to the voters.  This proposal is unnecessary and based on false premises.

The authors wrote “Levy limits (sic), while useful, have left frugal districts locked into low spending limits.”  The facts show otherwise.

Every district with spending per pupil under the state median could be said to be “lower spending”, not necessarily “frugal”.   Do local property taxpayers think spending $9,700 per student each year is “frugal”?  The answer is not to allow every district in the lower half of the spending distribution to increase their spending to the median.  In Lake Wobegon “all the children are above average”.  In the real world, simple mathematics dictate that half the districts will always be below the median.   Removing spending restraints on the lower spending half of the districts isn’t the answer.

The authors have mentioned a few districts they think are “locked into low spending limits”.  Yet voters in Elkhorn, Green Bay and Tomahawk already approved over-ride requests in recent years, so they clearly aren’t locked in.  In Manawa, Marinette and Merill, the boards have not asked their voters to exceed the limit even once in the last five years.  An exemption is hardly needed for districts that haven’t even gone to a vote.

In fact a review of election records reveals that over half of the 208 school boards that would be exempted from the limits haven’t asked their voters for permission to exceed the limit during the last five years.  Why circumvent a requirement that hasn’t even been tried?  When voters are asked for an increase, they approve more than two out of every three.  Among the districts that would be granted this new exemption 40 % have already passed override votes during the last five years, often on a second attempt after the first plan failed to gain approval.

In the years since Act 10, the success rate for school boards asking to exceed their revenue limit has improved to 73% with 199 of 274 approved.  More than two thirds of the requests to exceed the limit long term have passed, and more than three quarters of districts succeed when asking to exceed the limit for a few years or less.  Districts in the upper half of the spending distribution go to referendum less often but succeed more frequently with an 76% passing of 115 votes in the last five years, while lower spending districts successfully exceeded the revenue limit in 69% of 159 attempts.  Our most cost-effective districts are hardly “trapped”.

The proposal would ignore the will of the voters in districts like Amery, Denmark, Southern Door County,  where taxpayers voted at least once in the last five years to exceed the limits but rejected extra spending earlier this year.

Even worse, the proposal would allow a property tax increase in the handful of lower spending districts (only 14  statewide) where voters haven’t approved going past the limit even once in five years but instead rejected a over-ride request.  These voters in lower spending districts at Cameron, Cashton, Chilton, Gillett, Hayward, Hortonville, Howard-Suamico, Kiel, Menasha, Necedah, Osceola, Phillips, Pulaski and Westby rejected board requests to exceed their limits.  Does this mean these districts are “locked in” to lower spending?  Not hardly.  Odds are if they tried at least three times they would find a plan their voters could approve.

Notice that 12 of these 14 districts are represented by Republicans in the state assembly. Voters in these districts elected Republicans who vowed to control property taxes, including Governor Walker and their own representative.  These voters exercised their right to say No to higher local taxes.  Republicans in the legislature should respect those voters and the enduring legacy of this Thompson era reform that still functions well today.

My former colleagues in the legislature should always put the taxpayer first.  Voters appreciate the right to serve as a balance to their local school board.  It’s the reason why this law has survived so long.


10 truths for conservatives at budget time (and why Walker is right to oppose gas tax hike)

Governor Walker has consistently opposed any increase in Wisconsin’s gas tax unless balanced by tax cuts elsewhere in the budget.  Walker believes funding for roads is a priority but the money should come from existing revenue.  He is right on both counts. These 10 truths about government and budgeting help explain why.  Conservatives should remember these as we enter budget season in Wisconsin.

#1: Budgeting requires tough choices among competing priorities

A healthy budget process involves setting clear priorities and then allocating resources accordingly.  Walker has a clear priority that taxes will not be increased during his time as Governor.  Our state is best served by a healthy competition among the various agencies seeking their share of limited state funds.

#2: Spending more on top priorities should mean spending less elsewhere

Unless sufficient new revenues are available, increased spending in one area of the budget should require cutting back in other areas.  Here is a secret: this rarely happens.  The reason has to do with political opposition to cutting programs.  The added spending on top priorities comes instead from the gradually increasing state revenue stream, estimated to go up about 4% this year.

#3: Getting the same results with fewer dollars leaves more for other priorities

The big lesson of Act 10 was that school districts, as well as state and local governments could get the same results while spending less.  The pursuit of cost efficiencies and innovation across government can help control our tax burden or leave more money available to be spent on other programs.  Major reform within government rarely happens outside of a competitive budget process.

#4: Every department wants a consistent, dedicated funding source free of competition from other priorities

The Department of Public Instruction wants a dedicated 1% sales tax for school funding.  A dedicated fund would remove competition for that money.  Other agencies wish they had “their own money” too.  The majority of the Department of Transportation’s funding comes from dedicated vehicle registration fees and the gas tax.  DOT competes with other agencies for general fund revenue, but only for the portion they want to spend in excess of the dedicated funds.

#5: Departments with dedicated funding will spend it all and come back asking for more

In government nothing disappears faster than surplus funds.  Governments or departments with a dedicated funding stream will routinely spend it all.  It won’t be long before they request more funding through an increase in the dedicated taxes or fees.

#6: Only elected officials can restrain the insatiable appetites of bureaucrats for more spending. Wish lists for spending are not budget deficits

Benjamin Franklin worried that “When the people find that they can vote themselves money that will herald the end of the republic.”  Well, Ben, the secret is out.  Government agencies and the people have both found “they can vote themselves money”.  As Ben feared, both have an insatiable appetite for more spending.  At any point in time every government agency or department has a “wish list” of additional spending.  It is a mistake to label as a budget deficit the difference between current funding and the wishful dreams of those spending tax dollars.

#7: Those who benefit from more spending hire lobbyists, while taxpayers rely solely on the courage of elected officials

Benjamin Franklin may not have foreseen the influence wielded by lobbyists in the service of those who benefit from government spending.  The taxpayers depend only on the often wavering courage of elected officials who stand in their defense.  Governor Walker is a man of conviction who has shown he will be unflinching in defense of taxpayers.

#8: Spending more using temporary revenue lays a trap for future leaders

Often departments will offer a temporary funding source such as a grant, federal money, unexpected surplus, or legal settlement as a means to pay for new spending.  Unfortunately this is a trap.  The temporary money will soon be gone but the longterm spending commitment is very difficult to rollback.  Lawmakers are suckers for this trap.

#9: Spending more with borrowed money cowardly puts off tough choices

In my first term in the Assembly, a Senate veteran with decades of experience and a fellow Republican, told me that “no politician gets any credit for reducing debt or cutting spending.  The only political payoff”, he said, “comes from cutting taxes or increasing spending.”  He preferred to do both while increasing debt.  I was taken aback at his candor in supporting what I considered a cowardly approach.  The courage to make tough choices now must be fostered and encouraged in our elected officials.

#10: Voters may approve a tax increase when a strong case is made, but taxes should never be raised without a referendum

Since 1993 Wisconsin taxpayers have been protected by “levy limits” and “revenue limits” that require the approval of local voters for tax increases.  This law has proven to be successful and popular.  Through periods of Democrat control of state government, or divided control, or now under all Republican control, this law has endured.  It is detested by local administrators and elected officials who would prefer to quietly raise taxes without making the case or getting voter approval.

In the years since Act 10 the approval rate for local referendum elections has soared to 3 out of 4.  Lawmakers in Madison should take heed and take their own medicine.  No increase in the gas tax would pass a statewide referendum vote.  Proponents of a gas tax increase who think it would should make the case to the voters and put the question to a referendum.  Until then requests for more transportation funding should compete with other priorities like education and health care.

Governor Walker is not just being stubborn in his objection to a tax increase.  He knows that the DOT will not be as motivated to find efficiencies and innovation without the pressures of the budget process.  He knows that budgeting must be about making hard choices.  Scott Walker deeply believes these things.  More importantly, Scott Walker has the courage to stand up for taxpayers. That’s why I still stand with Walker.

One year ago

It has been a year since I announced my decision to not seek re-election to the Wisconsin state assembly.  Rep. Shannon Zimmerman has taken office and I’m confident that he will represent our district well.  I intend to post here with occasional opinions or insight into political affairs.