Evers, Republicans reach deal on shared revenue. Why it could be a lifeline for Milwaukee

MADISON, Wis. (CBS 58) -- A standoff between top Republicans and Democratic Gov. Tony Evers over how to overhaul funding for local governments -- and save Milwaukee from a looming fiscal crisis -- has ended. 

Assembly Speaker Robin Vos, Senate Majority Leader Devin LeMahieu and the Evers administration reached a deal Thursday to give every municipality a minimum increase of 20% in state aid, including allowing Milwaukee officials -- instead of voters -- to raise their local sales tax in part of a much larger package to increase funding to K-12 schools.  

It took months to get to this point, and both sides had to give something up to reach an agreement after a main sticking point was deciding who would have the power to raise taxes in Milwaukee and Milwaukee County.

The agreement came one day after Vos and LeMahieu both threatened to remove Milwaukee provisions designed to help them from making deep financial cuts to police, fire and other essential services.    

Under the plan, as CBS 58 first reported, Milwaukee would be allowed to pursue a 2% city sales tax and Milwaukee County could bump its sales tax to 0.9%, from its current 0.5% tax. 

For Milwaukee, which is currently the only U.S. city of its size without a municipal sales tax, that would amount to nearly $200 million per year in additional revenue. Milwaukee County's increased sales tax would increase annual revenue by about $80 million.

The ability to raise those taxes will now rest with the Milwaukee Common Council and Milwaukee County Board, which would have to approve the tax hikes with a two-third majority vote.

That means 10 of 15 city alders and 12 out of 18 county board supervisors must approve the taxes.

This component of the bill was supported by Milwaukee leaders, Evers, and LeMahieu, but opposed by Assembly Republicans who preferred allowing voters to decide through referendum. 

"This compromise will be transformative for our communities and our state, and coming to an agreement on major parts of this proposal is a significant milestone in my negotiations with Republican leaders over the past few months," Evers said in the statement. 

The additional funding would save Milwaukee from the brink of bankruptcy. The nonpartisan Wisconsin Policy Forum, a statewide think tank, first warned in 2009 the city was on pace to face a financial crisis.

Rob Henken, president of the forum, said without being able to take in a lot more money, Milwaukee would have to cut about $150 million -- equivalent to about 25% of all city spending -- from its budget by 2025.

"Think about what would happen if, suddenly, city government had to make reductions that were equivalent to 25% of the total budget for all of the core services it provides," Henken said. "[The cuts would affect] police, fire, emergency medical services, public works, libraries, neighborhood services, etc."

Henken said the biggest contributors to that crisis becoming imminent were the city's pension fund not growing at projected rates, retirees living longer than they had in the past and the state freezing its shared revenue payments for more than a decade. 

Republican lawmakers at a Thursday press conference said they were satisfied with the deal, which would keep the state's biggest city from having to make disastrous cuts to services.

"This is a good day for the state to give Milwaukee the opportunity to correct years of mismanagement and I'm very proud of the effort of the team," Rep. Tony Kurtz (R-Wonewoc), a lead Republican author of the bill, said.  

Henken said the sales tax provision for Milwaukee was more a matter of fairness than a bailout for the city.

"Arguably, you are making things more equitable," Henken said. "By asking those who are coming to the city, who don't live in the city, but are consuming in the city and paying money for goods and services, to have a sales tax that would allow them to contribute a little bit to the cost of the city services they're using."

There are strict prohibitions on how Milwaukee can use the sales tax dollars, which raises questions about whether the local elected bodies can guarantee the needed two-thirds majorities to approve the taxes.

The city's Fire and Police Commission would have to dedicate two of its seats to members selected by the fire and police unions and would ban the commission from setting policy department policy.

The bill also set additional conditions for the city and county:

• Milwaukee Public Schools would have to bring back school resource officers
• Tax revenue cannot go toward the Milwaukee streetcar
• Race cannot be a consideration when awarding government contracts
• A mandatory audit of Milwaukee's Office of Violence Prevention

County Executive David Crowley said it's ultimately a worthwhile tradeoff because it was the best available option for bringing in badly needed revenue.

“Anyone who wants to see Milwaukee County avoid the reported service cuts or staff reductions and continue its journey to achieve race and health equity should support this deal," Crowley said in a statement.

Milwaukee Mayor Cavalier Johnson also issued a statement noting his frustration with some of the requirements, but he said it was the cost of compromise.

“There are aspects to this legislation that I strongly object to," Johnson said in the statement. "However, through the give-and-take, no party to these negotiations is completely satisfied with final product."

The extensive bill also includes a massive compromise between liberals and conservatives on education, boosting state aid for both public schools and charter/private school vouchers.

Under the deal, the state will spend $1 billion on K-12 schools, a $325 per pupil increase, which was a huge priority for Evers.  

At the same time, the agreement also invests more money in the state's school choice program, something Evers has long opposed but Republicans have championed.

While it does not overhaul the formula for how schools are funded, which Evers has sought, the deal includes the $1 billion for public schools, $50 million slatted for improving reading scores and $30 million for mental health programs in schools.  

"Today is one of those opportunities where each side brought their best ideas to the table," Vos said. "We will have transformational school choice expansion; we will have money for public schools, and we will have more money for all of the government services that we know are priorities." 

On Wednesday, both chambers are scheduled to vote on the bill. Republicans could need Democratic votes to pass the bill but Vos and LeMahieu were confident it would reach the finish line. Historically, GOP leaders do not bring a bill to the floor unless they have enough Republican votes to pass the measure.