deller uwex county leadership conference

The Fiscal Conditions of Wisconsin Local Government

Steven DellerUniversity of Wisconsin-Madison/Extension

Craig MaherUniversity of Wisconsin-Oshkosh

John KovariUniversity of Wisconsin-Milwaukee

The Fiscal Conditions of Wisconsin Local Government

"Fiscal stress,“….results from failure to align revenues and expenditures…Shelley (1982)

“…fiscal stress as occurring when local government revenues fall without a compensating decrease in the demand for local government services; when citizens increase their demand for local government services and local revenues do not or can not increase; or when a higher level of government ….forces the lower level to increase services without providing the necessary funding for the increased service responsibility.” Chapman (1998)

The Fiscal Conditions of Wisconsin Local Government

"Fiscal stress," as either “budgetary fiscal stress” or “citizen fiscal stress.” Budgetary stress occurs when a local government cannot balance its annual budget, with the greater the current account deficit, the greater the fiscal stress. Citizen fiscal stress occurs when residents face an increased tax burden for an average level of locally provided services as the average of the service levelschange for other jurisdictions) or as their level and quality of services falls for an average tax burden. Bradbury (1982)

“Financial condition” — an organization’s ability to maintain existing service levels, withstand economic disruption, and meet the demands of growth and decline — Maher and Nollenberger (2009)

The Fiscal Conditions of Wisconsin Local Government

Chapman (1999)…. “There is no definitive definition of local fiscal stress….”

But there are two common themes in most definitions:

The structural cause of fiscal stress relates to the built-in set of rules that the jurisdiction has enacted. (e.g., property tax limits)

The cyclical cause of fiscal stress relates to the affect of the business cycle on the jurisdiction’s budget. (e.g., the current “Great Recession”)

The Fiscal Conditions of Wisconsin Local Government

Two sets of analysis to share with you today……

1) A set of survey results…..survey of Wisconsin county, city and village administrators completed August 6, 2010

2) Secondary data analysis using Wisconsin county audited data (detailed GREAT data)

How Stressed are Wisconsin Cities and Villages?http://www.aae.wisc.edu/pubs/sps/pdf/stpap557.pdf

The Fiscal Health of Wisconsin Counties: An Analysis of Primary and Secondary Datahttp://www.aae.wisc.edu/pubs/sps/pdf/stpap552.pdf

Adequate revenues and able to reduce taxes

Adequate revenues but not able to expand services

Inadequate revenues but not reducing services

Inadequate revenues and reducing services

0 10 20 30 40 50 60 70 80

Future Current

County Conditions August 2010 (%)

Zero responses

Adequate revenues and able to reduce taxes

Adequate revenues but not able to expand services

Inadequate revenues but not reducing services

Inadequate revenues and reducing services

0 10 20 30 40 50

Future Current

Cities and Villages Conditions August 2010 (%)

Adequate revenues and able to reduce taxes

Adequate revenues but not able to expand services

Inadequate revenues but not reducing services

Inadequate revenues and reducing services

0 5 10 15 20 25 30 35 40 45 50

2010 2007 2004

Cities and Villages Current Conditions (%)

Adequate revenues and able to reduce taxes

Adequate revenues but not able to expand services

Inadequate revenues but not reducing services

Inadequate revenues and reducing services

0 10 20 30 40

2010 2007 2004

Cities and Villages Future Conditions (%)

Strongly Disagree

Disagree Agree Strongly Agree Don't Know0

5

10

15

20

25

30

35

40

45

50

Our current fiscal situation is acceptable.

Counties Cities/Villages

Strongly Disagree

Disagree Agree Strongly Agree Don't Know0

10

20

30

40

50

60

We are able to maintain three months of operating expenditures with current cash reserves.

Counties Cities/Villages

Strongly Disagree

Disagree Agree Strongly Agree Don't Know0

5

10

15

20

25

30

35

40

45

Our current capital improvement plan is fully financed.

Counties Cities/Villages

Strongly Disagree

Disagree Agree Strongly Agree Don't Know0

10

20

30

40

50

60

70

Our current credit rating is acceptable.

Counties Cities/Villages

Strongly Disagree

Disagree Agree Strongly Agree Don't Know0

10

20

30

40

50

60

70

80

We are near our debt level capacity.

Counties Cities/Villages

Strongly Disagree

Disagree Agree Strongly Agree Don't Know0

10

20

30

40

50

60

70

We have been able to roll over cash reserves from the previous budget cycle.

Counties Cities/Villages

Strongly Disagree

Disagree Agree Strongly Agree Don't Know0

10

20

30

40

50

60

70

We are able to maintain our current employee bene-fits package.

Counties Cities/Villages

Strongly Disagree

Disagree Agree Strongly Agree Don't Know0

5

10

15

20

25

30

35

40

45

50

The property tax limit has negatively impacted our fiscal situation.

Counties Cities/Villages

Strongly Disagree

Disagree Agree Strongly Agree Don't Know0

10

20

30

40

50

60

70

The property tax limit has forced us to improve our ef-ficiency.

Counties Cities/Villages

Strongly Disagree

Disagree Agree Strongly Agree Don't Know0

10

20

30

40

50

60

The property tax limit is a sound public policy.

Counties Cities/Villages

Discouraged population growth

Increased short-term debt

Created or expanded enterprise funds

Reduced hours for public facilities

Eliminated services

Refinanced outstanding debt

Drawn down cash reserves to meet daily operations

Delayed routine maintenance expenditures

Delayed capital expenditures

Laid off workers

Across the broad budget cuts

Contracted out services

Hiring freeze

Raised property tax levies

Pursued regional cooperative agreements

Consolidated departments

Adopted or increase user fees and charges

Pursued grants from federal/state government

Targeted budget cuts

Improved productivity through better management

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Success Utilization

Figure 25. Strategy Usage and Satisfaction

Not at all Not very much Somewhat A lot Don't Know0

10

20

30

40

50

60

70

Improved productivity through better management.

Counties Cities/Villages

Not at all Not very much Somewhat A lot Don't Know0

10

20

30

40

50

60

70

Pursued regional cooperative agreements.

Counties Cities/Villages

Not at all Not very much Somewhat A lot Don't Know0

5

10

15

20

25

30

35

40

45

Eliminated service.

Counties Cities/Villages

Not at all Not very much Somewhat A lot Don't Know0

10

20

30

40

50

60

70

Adopted or increase user fees and charges.

Counties Cities/Villages

Not at all Not very much Somewhat A lot Don't Know0

10

20

30

40

50

60

Pursued grants from federal/state government.

Counties Cities/Villages

Not at all Not very much Somewhat A lot Don't Know0

10

20

30

40

50

60

Across the broad budget cuts.

Counties Cities/Villages

Not at all Not very much Somewhat A lot Don't Know0

10

20

30

40

50

60

70

Targeted budget cuts.

Counties Cities/Villages

Top Five Strategies Identified by Counties Improved productivity through better management 52.6%Targeted budget cuts 50.0%Pursued grants from federal/state government 39.5%Adopted or increase user fees and charges 36.8%Delayed capital expenditures 36.8%Consolidated departments 34.2%Raised property tax levies 31.6%Across the broad budget cuts 23.7%Pursued regional cooperative agreements 21.1%Laid off workers 21.1%Hiring freeze 21.1%Drawn down cash reserves to meet daily operations 18.4%Delayed routine maintenance expenditures 18.4%Contracted out services 15.8%Refinanced outstanding debt 13.2%Created or expanded enterprise funds 5.3%

Notice: “Elimination of Services” was not selected by even one respondent….

Administra

tion

Protecti

ve Se

rvice

s

Roads and Tra

nsporta

tion

Sanita

tion

Health and H

uman Servi

ces

Parks, C

ulture

, Conse

rvation and D

evelopment

Debt Servi

ceOther

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

11.2%

17.6%

7.5%

0.5%

41.7%

8.5%5.6% 7.6%

Figure 2. Wisconsin County Expenditure Shares (2008)

All Counties Counties below 20,000 peopleCounties between 100,001 and 500,000 people Counties between 20,001 and 50,000 peopleCounties between 50,001 and 100,000 people

Perc

enta

ge (%

)

1987 1998 20080%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

11.2%

17.6%

7.5%0.5%

41.7%

8.5%

5.6%

7.6%

Figure 3. Expenditure Shares over Time

Administration Protective ServicesRoads and Transportation SanitationHealth and Human Services Parks, Culture, Conservation and DevelopmentDebt Service Other

Perc

enta

ge (%

)

Property Taxes State Shared Revenues

Other Aids Charges/Fees Other Other Financing Sources

0%

5%

10%

15%

20%

25%

30%

35%

40%

27.2%

2.4%

26.7%

15.5%17.4%

10.7%

Figure 7. County Revenue Shares (2008)

All Counties Counties below 20,000 peopleCounties between 100,001 and 500,000 people Counties between 20,001 and 50,000 peopleCounties between 50,001 and 100,000 people

Perc

enta

ge (%

)

1987 1997 20080%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

29.9%

2.7%

29.4%

17.1%

9.2%

11.8%

Figure 8. Revenue Shares over Time

Property Taxes State Shared Revenues Other AidsCharges/Fees Other Other Financing Sources

Perc

enta

ge (%

)

Total RevenuesTotal Revenues per CapitaIG Revenues TotalIntergovernmental Revenues/Total Revenues PercentageProperty Tax Revenues/Total Revenues PercentageTotal ExpendituresTotal Expenditures per CapitaNet Income/LossRevenues minus ExpendituresOperating Surplus or Deficit/Operating Revenues PercentageRetained Earnings/Fund Balance at End of YearGeneral Fund Balance/General Fund Revenues PercentageFund Balance (end of year)General Fund Balance/General Fund Revenues Percentage (Alternative)

Annual 1998 to 2008

Can we create a scalar index of fiscal health?

Two approaches:

1) Simply add the three (currently three) measures together…..2) Use statistical methods to aggregate…..

Principal Components:

Simple Correlation Matrix KB2 KB5 KB6_1

Intergovernmental Revenues/Total Revenues Percentage (KB2) 1

Operating Surplus or Deficit/Operating Revenues Percentage (KB5) 0.1945 1

General Fund Balance/General Fund Revenues Percentage (KB6_1) 0.2532 0.0358 1

WeightsIntergovernmental Revenues/Total Revenues Percentage 0.6875Operating Surplus or Deficit/Operating Revenues Percentage 0.4566General Fund Balance/General Fund Revenues Percentage 0.5647

Variation Explained 44.60%

Adams County -0.003 Marathon County -0.172Ashland County -0.095 Marinette County -0.145Barron County -0.267 Marquette County -0.109Bayfield County -0.225 Menominee County -0.088Brown County -0.210 Milwaukee County -0.356Buffalo County -0.116 Monroe County -0.289Burnett County -0.126 Oconto County -0.245Calumet County -0.276 Oneida County -0.169Chippewa County -0.288 Outagamie County -0.202Clark County -0.285 Ozaukee County -0.230Columbia County -0.192 Pepin County -0.191Crawford County -0.036 Pierce County -0.187Dane County -0.252 Polk County -0.178Dodge County -0.161 Portage County -0.196Door County -0.196 Price County -0.201Douglas County -0.303 Racine County -0.256Dunn County -0.266 Richland County -0.152Eau Claire County -0.226 Rock County -0.284Florence County -0.166 Rusk County 0.108Fond du Lac County -0.163 Sauk County -0.208Forest County 0.001 Sawyer County -0.147Grant County -0.351 Shawano County -0.265Green County -0.179 Sheboygan County -0.244Green Lake County -0.097 St. Croix County -0.225Iowa County 0.187 Taylor County -0.149Iron County -0.028 Trempealeau County -0.350Jackson County -0.105 Vernon County -0.321Jefferson County -0.249 Vilas County 0.028Juneau County -0.262 Walworth County -0.216Kenosha County -0.256 Washburn County 0.088Kewaunee County -0.158 Washington County -0.193La Crosse County -0.279 Waukesha County -0.211Lafayette County 0.028 Waupaca County -0.248Langlade County -0.058 Waushara County -0.193Lincoln County -0.193 Winnebago County -0.231Manitowoc County -0.308 Wood County -0.245

Index based on statistical analysis, listed alphabetically.

Milwaukee County -0.356 Door County -0.196Grant County -0.351 Lincoln County -0.193Trempealeau County -0.350 Washington County -0.193Vernon County -0.321 Waushara County -0.193Manitowoc County -0.308 Columbia County -0.192Douglas County -0.303 Pepin County -0.191Monroe County -0.289 Pierce County -0.187Chippewa County -0.288 Green County -0.179Clark County -0.285 Polk County -0.178Rock County -0.284 Marathon County -0.172La Crosse County -0.279 Oneida County -0.169Calumet County -0.276 Florence County -0.166Barron County -0.267 Fond du Lac County -0.163Dunn County -0.266 Dodge County -0.161Shawano County -0.265 Kewaunee County -0.158Juneau County -0.262 Richland County -0.152Racine County -0.256 Taylor County -0.149Kenosha County -0.256 Sawyer County -0.147Dane County -0.252 Marinette County -0.145Jefferson County -0.249 Burnett County -0.126Waupaca County -0.248 Buffalo County -0.116Oconto County -0.245 Marquette County -0.109Wood County -0.245 Jackson County -0.105Sheboygan County -0.244 Green Lake County -0.097Winnebago County -0.231 Ashland County -0.095Ozaukee County -0.230 Menominee County -0.088Eau Claire County -0.226 Langlade County -0.058St. Croix County -0.225 Crawford County -0.036Bayfield County -0.225 Iron County -0.028Walworth County -0.216 Adams County -0.003Waukesha County -0.211 Forest County 0.001Brown County -0.210 Lafayette County 0.028Sauk County -0.208 Vilas County 0.028Outagamie County -0.202 Washburn County 0.088Price County -0.201 Rusk County 0.108Portage County -0.196 Iowa County 0.187

Index based on statistical analysis, listed “worse” to “best”.

The Fiscal Conditions of Wisconsin Local Government

Is “fiscal stress” or “fiscal condition” in the eye of the beholder?

Does the primary data (survey) match and/or complement the secondary data (audited)?

Stress levels for cities/villages not a “bad” as one might expect.

Stress levels for counties appear to be much higher.

Elimination of programs by counties not held in high regard.

Program revenue may become expected.

Outside grants encouraged.