Rick's Notebook

I will post my monthly magazine articles here for your convenience. As other topics come up, they will be posted here as well. Following are my April and May 2008 columns. Visit the archive to see earlier articles.

Regards, Rick Stadelman - Executive Director.

State Budget Deficit -- April 2008

            In mid-February the Legislative Fiscal Bureau projected the closing net general fund balance for the end of the current biennium (June 30, 2009) to be a deficit of $652.3 million. The Governor had taken steps through the Department of Administration only a day before to address this projected deficit by primarily taking two actions relating to state agency spending. First, the Administration directed that projected lapse balances of $200 million that were written into the State Budget bill from last year (2007 Wis. Act 20) will be taken from segregated funds and program revenue accounts. Second, the Administration will require GPR-funded agencies to lapse a total of $111 million by the end of the biennium. These two actions will improve the deficit by the total of $111 million compared to estimates used under the budget bill, Act 20.

            In addition the Administration has indicated it will use its existing legal authority to roll over short-term general obligation borrowing that otherwise would have been paid off in this biennium. The rolling over to next biennium of these short term debts will reduce GPR (which stands for General Purpose Revenue) debt service by an estimated $125.4 million more in savings. Taken in total these Administration actions reduce the projected biennial deficit from $652.3 million by $236.4 million to a figure of $415.9 million.

            The state law requires when estimated expenditures would exceed revenues by more than 0.5% of GPR appropriations the Governor must submit a budget adjustment bill to meet the deficit. On Monday, March 10, 2008 Governor Doyle introduced his proposed “budget repair bill” and called a special session of the Legislature to begin on Wednesday March 13, 2008.

            The Governor’s ‘budget repair bill” proposed among a number of items the following major provisions:
(1) Increase the projected lapses and transfers from segregated funds, program revenues and GPR lapses from the $311 million as described above to $330.4 million over the rest of the biennium.
(2) Secure $700 million in new federal revenues to support a Medicaid rate increase for hospitals by implementing a 0.7 % assessment on hospitals. (The new revenues would reduce state taxpayer support for Medicaid by $125 million GPR over the biennium.)
(3) Transfer from the Segregated Transportation Fund$293 million . This transfer would be backfilled in part by $190 million in GPR-funded general obligation bonds. In addition the state highway projects would be funded by an additional $76.9 million in federal funds not previously earmarked in Act 20 and issuance of $67 million of transportation revenue bonds.
(4) Modify the tobacco bond refinancing proposal under Act 20 to generate $15 million more in on-going savings.
(5) Several other changes to reduce spending or transfer funding from GPR in varying amounts.

            On Wednesday, March 13, 2008, the State Assembly passed on basically party lines (51 ayes and 46 nays) a substitute bill to the Governor’s budget repair bill. The Assembly substitute bill included the following major provisions:
(1) Modify 2007 Wis. Act 20 (State budget from last year)    to reduce the biennial lapse to $150 million rather than $200 million as passed. Then would exempt the Department of Transportation and general equalization school aids from any lapse requirement.   Would require for the balance of 2007-09 and the 2009-01 biennia the DOA Secretary lapse or transfer $250 million from GPR appropriations (other than sum sufficient appropriations and general equalization school aids) of all other executive branch agencies and GPR compensation reserves.
(2)   Make a payment of $200 million for school aids on the first Monday of July each year rather than the third Monday of June.   {Note current law already provides for $75 million paid on first Monday of July to be counted against last years payment, thus this is an increase of $125 million delay from one year to the next.}
(3) Reduce the current balance ($57.5 million)   in the Budget Stabilization Fund by $55 million by transferring to the GPR fund, leaving a balance of $2.5 million.
(4) Reduce the statutory balance required by law from current $65 million to $20 million at the end of the biennium.

            While the Assembly passed this substitute bill on Wednesday, March 12, 2008, the Senate has not taken up the bill. Senate Majority Leader Russ Decker has stated the bill will be referred to the Joint Finance Committee. To date   (it being March 17, 2008) no hearing has been scheduled before the Joint Committee on Finance. It is unlikely that this committee will meet until the last week of March or even later.

            It is likely that the State Senate will take the bill up and more than likely pass a budget repair bill more similar to the Governor’s original proposal than the version adopted by the State Assembly.   As in the normal budget process, this budget repair bill with different versions being passed by each house will be referred to a conference committee.   If the conference committee can agree upon a bill, the conference committee will report a bill will be presented to each house. The legislators can either vote the conference committee report up or down, they can not amend the bill at this stage.

            From the standpoint of town and village government, while neither version of the budget repair bill (Governor or State Assembly) cuts shared revenue or current levels of transportation aids, there are criticisms of both versions that can be made.

First, the Governor’s version uses $298.00 million of Transportation Revenues for General Purpose Revenue, while only providing $190 million in GPR-Supported bonds to backfill the Transportation Fund. This is not a new issue to how the State has handled the past two budgets. As a result of the last two budgets before Act 20 last year, $1,102 million of Transportation Revenues were used to balance the General Fund balance from 2003-2007, et only $815.5 million of GPR-Support Bonds were used to backfill the loss to the Transportation Fund.   In addition the 2003-05 budget provided that Transportation Funds were to be used to fund part of the Debt Service (interest payments) on the GPR-Supported bonds to the amount of $43.9 million.   The total that would be loss to the Transportation fund, which would not be repaid by GPR bonds from 2003-09 would be $438.4 million.   This would be lost forever to meet the needs of transportation in Wisconsin.

            The additional cost of repaying principal and interest on the newly proposed GPR supported bonds   under the Governor’s budget repair bill, to partially repay the Transportation Fund will be an additional $20.5 million per year added to the current $90.5 million per year for bonds issued from 2003-07.   This total of GPR debt service is over and above all other GPR supported debt.

            The Governor’s proposal will use an additional $77.0 million of federal funds which will be received in the next year or so, which were not projected in the Act 20 budget bill last year. These additional funds could have been used to increase additional highway construction or meet transportation needs, but will be instead be used to offset additional segregated reductions that are used, in turn to increase the transfer to the general fund. Similarly, under the Governor’s proposal the use of $67.0 million in additional transportation revenue bonds increases future transportation debt service payments thus in effect increasing the transfer to the GPR fund.   The use of increased federal funds and transportation revenue bonds totaling $144 million increases the amount transferred to the GPR funds by $103 million.

            The Legislative Fiscal Bureau also pointed out that although the Governor’s proposal would limit the transfer from the Transportation Fund to $293.00 million in 2007-09, no such limit would be created for   the 2009-11 biennium.   The Legislative Fiscal Bureau estimates that total lapses and transfers from the executive agencies and in the 2009-11 biennium could be $530 million of which the transportation fund could be required to contribute toward.   Thus there are no limits on what future budgets and deficits may mean to the Transportation Fund.

            Many legislators have criticized the “hospital assessment” as a tax increase because it is an assessment on the hospitals’ gross patient revenue. However, by increasing the state share of the costs for inpatient and outpatient services hospitals provide to medial assistance (MA) and Badger Care Plus recipients, the Federal MA reimbursement will increase to hospitals, more than the initial hospital assessment. In addition, the Governor is proposing a rate adjustment to rural hospitals.   The State Hospital Association has   supported this proposal both in last year’s budget bill (but was not passed) and now in the Governor’s budget repair bill.

            Criticism of the State Assembly version is that it merely pushes off a debt by paying it in July rather than June, which puts a substantial payment of ($200 million) into the next biennium.   In addition, the Assembly version reduces both the Budget Stabilization Fund to a mere $2.5 million and in effect reduces the statutory balance of $65 million to only $20 million.   Both of these provisions are weakening the state’s financial standing more than it already is.

Although the Assembly version does not transfer any funds from the Transportation Fund (as the Governor’s proposal does), it does lapse more funds over this biennium and into the next from GPR appropriations than the Governor. The Assembly version does not identify where those lapse should come from other than not from school equalization aids or from transfers from the Transportation Fund.

Our Association will continue to monitor the budget repair bill as it moves along. We will oppose transfers from the segregated Transportation Fund in any form. We will oppose any cuts in shared revenue and transportation aids as established by the state budget last year in 2007 Wis. Act 20. We would encourage all town and village officers to follow these budget repair deliberations in the media and through the Wisconsin Legislature’s website. One valuable source of information is the Legislative Fiscal Bureau’s website: http://www.legis.state.wi.us/lfb/index.html

Look under Publications for recent memos.

“Local Control” – April 2008

            At a recent county unit meeting I attended a discussion started about “local control.” A comment was made that it appeared that towns and local governments were losing more “local control.” The concern expressed by a few of the officials was not that towns and villages had lost authority as much as ‘that if a town or village wanted to regulate a business or activity it would have to adopt an ordinance, appoint someone to enforce, and (worse of all fates) “hire an attorney.” Things weren’t like the old days when the town or village could just ban or say “no” to a particular business or activity.’

            After thinking about that discussion more and more on the drive home I have felt I had to write a response to these concerns for all town and village officers. First, “local control” of governmental decisions by town and village officers is very important. The right to decide to regulate or not regulate a business or activity should be retained to the greatest extent possible by towns and villages. However, it is not new that with the “right to exercise local control” comes “responsibility.” This responsibility has many aspects some of which I intend to address in this short article.

            The first important issue for local officials to understand, particularly for town officers is that local governments are “creatures of the state” under the state constitution and as creatures of the state we only have the authority granted by the constitution and state statutes. Villages and cities actually have more inherent power under the constitution granted by “home rule” under Article XI, Sec. 3 of the Wisconsin Constitution. “Home rule” generally allows the cities and villages to control the local affairs and government without a specific statutory grant of authority, unless limited by state legislative preemption on the grounds the matter is exclusively of statewide concern. An example of this is the registration and possession of firearms, which the state legislature has enacted specific state laws which preempt all local governments from licensing of guns.

            Towns and counties under the Wisconsin Constitution do not have “home rule” as cities and villages. However, town boards that are given “village powers” by the town electors at an annual or special town meeting of the electors under Sec. 60.10 (2)(c) and Sec. 60.22 (3) of Wis. Statutes may exercise those powers that villages can exercise which are not in conflict with town law. One of the specific grants of authority to villages under Sec. 61.34 (1) of Wis. Statutes is villages “shall have power to act for the government and good order of the village, for its commercial benefit and for the health, safety, welfare, and convenience of the public, and may carry its powers into effect by license, regulation, suppression, borrowing, taxation, special assessment, appropriation, fine, imprisonment, and other necessary or convenient means.”

            A town board that has been granted village powers may adopt ordinances that regulate activities to protect health, safety, and welfare of the town, although there is not specific statutory authority to adopt the ordinance. Village powers is an expansion of the town board regulatory power but it is not unlimited. As with the state preemption of the “home rule” for cities and villages the state legislature has enacted state laws which have preempted town authority to adopt certain local regulations.

The first point to be restated again, is that local governments must have authority to adopt regulations either through express statutory authority or inherent authority (home rule for cities and villages, and village powers for towns) to regulate for the public health, safety, and welfare.   However, this can be limited by state preemption.   While this may be viewed as a limit on “local control” the “responsibility” of local government to have authority to enact an ordinance has been the status of the law since the beginning of our statehood.

            Second area to be aware of is that even with proper statutory or inherent authority to adopt an ordinance, the ordinance must be “reasonable and cannot impose arbitrary or unnecessary standards.”
For example, a complete ban on a particular activity would not be defendable in court.   In the mid-1980’s some towns and villages were attempting to adopt ordinances prohibiting the construction of landfills within their boundaries. While a town or village could control the location of landfills by a zoning ordinance, a complete ban on landfills would be “unreasonable and arbitrary.”

            In recent times, the question of whether a local ordinance limiting the siting of wind turbines within one mile or more of an existing residence would be defendable or not has been raised in various parts of the state. To the credit of many of the towns and some counties who have adopted setback distances from existing residences, they have done extensive study and can cite scientific studies to support the need for these distances. Whether these distances are “reasonable and necessary” will likely be a question for the courts to determine, and for those local governments to defend in the event that the setback distances are challenged in litigation.   It is important to note that as a part of local control (both in the past and today) is that local governments must be prepared to defend their regulations as being “reasonable and necessary” to protect public health, safety, and welfare.   There is no difference today in 2008 than in 1908 that the “responsibility” to defend whether a local regulation meets this standard is that of the local government.

            Third, compliance with the procedures to adopt ordinances according to law also is the “responsibility” of local governments. This includes following the proper notice and hearing requirements (such as under the zoning laws and subdivision law). Ordinances that have forfeiture provisions must be published in a newspaper, unless the code of ordinance procedures under Sec. 66.0103 of Wis. Statues are followed. The point is again unless proper procedures to enact an ordinance are complied with the local government has the ‘responsibility” to defend the ordinance if challenged in court, a threat to “local control” that also has existed since the being of statehood.

            Fourth, local ordinances themselves must be definite and certain and cannot be vague in terms and application.   A local ordinance must not deny “equal protection” to classes of persons. While classifications can be made in ordinances, the classifications must have a rational basis to protect the public health, safety, and welfare of the community.   Classifications (amongst others) can not be abased upon protected classes such as sex, religion, race, etc. The “responsibility” to enact ordinances that do not discriminate is that of the local government.

            Fifth, local ordinances can not “take property rights” without due process, just compensation, and just cause.   The “responsibility” to insure that property rights are not unjustly taken is based upon the Fourteenth Amendment of the United States Constitution. A “responsibility” that has existed since the founding of our country.

            There are many other legal challenges to the exercise of local control that could be listed here, but one that is basic to enactment of local ordinances is that local regulations must be enacted to serve the “public purpose.”   Ordinances enacted with the intent to serve a private purpose, with the intent to serve some private person or interests, or the intent to harm some private interest would be invalid if challenged in court. The “responsibility” to show that a local regulation has a “public purpose” is that of the local government.

            Lastly, one of the basic “responsibilities” of local control is to enforce local ordinances.   While the state has established a court system that affords due process and rights of a fair trial,   the “responsibility” to enforce a town or village ordinance is that of the town or village.   The town or village may use various procedures, such as the citation procedure under Sec. 66.0113 of Wis. Statues to enforce local ordinances in circuit courts or municipal courts, but the ultimate “responsibility” to enforce local ordinances is that of the local government.   It is the town or village enforcement officer or constable that will be writing the citation. The Attorney General has given an opinion that the County Sheriff may issue citations on behalf of towns, however, due to the press of criminal activity, most Sheriffs do not become involved in local ordinance enforcement.   The “responsibility” to prosecute a town or village ordinance is that of the town or village attorney.   Enforcement “responsibility” may be one of the biggest fears of local officials but it is one of the most important aspects of “local control.”

            The last point that I want to make in this article that with “local control” comes “responsibility” is that the exercise of local control will cost time and effort and yes money! One of the things that runs through the theme of “responsibility” is that the state and federal constitutions and laws must be followed. Going back to the very first point, that local governments are creatures of the state, means that we must act within the authority granted and the due process requirements of the constitution. To meet these requirements, the advice of a capable attorney will help protect towns and villages from legal challenges.   The cost of having an attorney to assist in development of ordinances and advising through the adoption and enforcement is a wise investment for the long term.   There is an old saying that comes to mind at this point: “Those that represent themselves, have a fool for a client.”   We urge towns and villages to recognize that the exercise of “local control” with “responsibility” should be done according to the law upon the advice of legal counsel.

            In summary, the exercise of “local control” by towns and villages should be very important to all officers. The discretion to adopt local regulations or not adopt such regulations should remain with local officials as much as possible.   However, with the exercise of “local control” through local ordinances comes “responsibility.” If this article has sparked a question or doubt in any town or village officer, I would welcome your comments or questions on any item.   I can assure you that the Wisconsin Towns Association Board of Directors and staff is committed to protecting “local control” by towns and villages, while recognizing our “responsibility” to comply with constitu-tional and statutory requirements. It is a concern that we must be aware of every day.