MILWAUKEE COUNTY GOVERNMENT: HISTORY AND CHALLENGES

Rob Henken, PresidentNovember 2013

Established in 1913 as a good government watchdog, the Public Policy Forum is a nonpartisan, independent government research organization that focuses on a broad range of public policy issues.

We seek, discover and disclose true and accurate

information to enhance the effectiveness of government and public policy in southeastern Wisconsin, the state and the nation; and we facilitate public policy discussion and action.

Public Policy Forum MissionPublic Policy Forum Mission

County government in Wisconsin dates back to 1818, when the territorial governor created three counties to perform law enforcement and taxing functions.

Today, county governments exist as creations of the state , with specific reference in the Wisconsin Constitution. Article IV, Section 23 empowers the legislature to “establish one or more systems of county government,” while Section 22 allows the legislature to “confer upon the boards of supervisors…such powers of a local, legislative and administrative character as they shall from time to time prescribe.”

Wisconsin CountiesWisconsin Counties

Unlike cities & villages, counties do not have broad “home rule” authority; may only undertake functions expressly authorized by state; in fact, often called “administrative arms” of the state.

Certain county officials are specified in the Wisconsin Constitution: Sheriff, Register of Deeds, District Attorney, County Clerk, County Treasurer.

Prior to 1960, county boards functioned as both legislative & executive branch; in 1960, position of county executive mandated for Milwaukee County; separation of powers specified in statutes.

Wisconsin CountiesWisconsin Counties

With 950,000 residents, Milwaukee County is the largest county in Wisconsin. Several provisions of the state statutes pertaining to counties refer only to Milwaukee County.

County’s $1.3 billion budget covers a broad array of programs and services that impact virtually every facet of the region’s economic competitiveness and quality of life.

Those include: a 200-bed mental health complex; a 15,000-acre parks system; a 2,000-specimen zoo; a 400-bus transit system; a 10,000-client care management organization; a 3,000-inmate set of adult corrections facilities; a nine million passenger-per-year airport; and a judicial system that handles 50,000 cases annually.

Milwaukee County

Counties originally were intended by the state to administer local functions on its behalf, but not necessarily to do anything more.

Over time, Milwaukee County has elected to do much more, which is a reason for its unique nature and, arguably, its unique problems.

A good deal of the public debate about Milwaukee County’s financial challenges has centered on the condition of its parks, cultural facilities and transit system – three functional areas that the county elected to assume with the permission of state government, but not at its behest.

Milwaukee County

Milwaukee County Expenditures

Milwaukee County Revenues

State/federal revenue sources that support mandated services have not kept up with extraordinary cost pressures, necessitating increased use of local revenue sources to make up the difference.

Closing the state/federal aid gap for mandated services with local tax funds leaves fewer local resources for discretionary services; also, local revenues stagnant.

Because it is difficult to reduce spending on mandated programs or debt service, annual budget cuts borne largely by discretionary functions, creating difficult questions regarding the future of those functions.

The Problem: Operating Budget

2013 locally allocated revenue by function

Major sources of state revenue

$0

$10

$20

$30

$40

$50

$60

2003 2004 2005 2006 2007 2008 2009

Income Maintenance

Court Support

Mass Transit Fixed Route

Youth Aids

Community Aids

Shared Revenue

Milw. Cty local tax revenues, shared revenue, and inflation, 2003-2011 (indexed to 100)

Milwaukee County pension and health care expenditures, 2001-2010 (millions)

History of initial funding gaps

Primary Causes of Budget Gaps

Annual increases in pension contributions and health care costs

Transit system budget imbalance

Debt service

Mental health system cost pressures

Deferred maintenance needs

Stagnant or reduced state revenues

Milw. County holds $748 million of direct long-term debt: $369 million in general bonds/notes for capital improvements, $379 million for POBs. Debt service of $68 million included in operating budget.

County’s 2003 debt restructuring initiative accompanied by new debt management policy - caps on annual bonding for 2005-2008, annual increases after that not to exceed 3%.

Imperatives to limit annual debt issuances and control debt service contradict imperative to maintain and repair aging infrastructure.

 

The Problem: Capital Budget

Source: Milw. Co. Exec Budget Briefing, Aug. 2011 

The Problem: Capital Budget

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Eliminating a government with a $1.4 billion budget, 5,700 full-time employees, several critical state-mandated functions, and unfunded retirement liabilities exceeding $2 billion is far easier said than done.

Most big restructuring initiatives in other metro areas (e.g. Indianapolis, Louisville) have taken the opposite approach: moving municipal functions into a county or regional government.

GMC Report: ChallengeGMC Report: Challenge

What are biggest logistical hurdles to eliminating county government & how can they be addressed?

What is the appropriate home for the different county services, and would other appropriate entities be willing to take them on?

Would elimination of county govt. save taxpayer dollars & truly improve the quality of services?

What could and should be done with $2.4 billion in unfunded liabilities, most of which will remain even if the government is eliminated?

GMC Report: QuestionsGMC Report: Questions

Break down budgets of critical county functions that could most logically be moved elsewhere: parks, transit, cultural institutions, airport, mental health, Family Care, courts/DA, sheriff, public works.

Determine actual annualized cost of providing those

functions (as opposed to “county cost,” which includes legacy); this essential in consideration of transferring them to some other entity.

Analyze potential receiving entities, discussing pros,

cons & practical considerations associated w/each.

GMC Report: ApproachGMC Report: Approach

Next, model and analyze what county government would look like under various scenarios in which key functions are moved to other entities, as well as a scenario under which it is eliminated entirely.

Fold in case studies, including MMSD privatization,

Milwaukee Public Museum model, transfer of Milwaukee County DA’s to state.

Discuss Massachusetts’ experience with abolishing county governments.

GMC Report: ApproachGMC Report: Approach

GMC Report: CourtsCourts

Cost to operate as county department (current practice)

Cost to operate minus legacy

costs Legacy costs

     Using 2008 fringe allocation method*

Based on retiree history**

Administrative $886,653 $800,107 $86,546 $83,955 Information technology $537,469 $485,007 $52,462 $50,892 Legal counsel $0 $0 $0 $0 Facility management $6,180,188 $5,576,938 $603,250 $585,189 Fleet management $176 $159 $17 $17

Central charges/overhead $7,604,486 $6,862,210 $742,276 $720,052 Salary and wages $13,905,509 $13,905,509 $0 $0 Social security $1,007,629 $1,007,629 $0 $0 Employee healthcare $4,000,322 $4,000,322 $0 $0 Employee pension $1,499,219 $1,499,219 $0 $0 Retiree healthcare $4,000,322 $0 $4,000,322 $2,925,158 Retiree pension $749,609 $0 $749,609 $596,998 Other ($44,046) ($44,046) $0 $0

Personnel costs $25,118,564 $20,368,633 $4,749,931 $3,522,156Non-personnel expenditures $18,676,152 $18,676,152 $0 $0 TOTAL EXPENDITURES $51,399,202 $45,906,995 $5,492,207 $4,242,208

State revenue $6,021,195 $6,021,195 $0 $0 Federal revenue $76,467 $76,467 $0 $0 Other revenue $4,741,112 $4,741,112 $0 $0

TOTAL REVENUES $10,838,774 $10,838,774 $0 $0          TOTAL LEVY $40,560,428 $35,068,221 $5,492,207 $4,242,208

Unfunded OPEB liability *** $67,507,074 $67,507,074 $67,507,074 $67,507,074 Unfunded pension liability*** $21,243,829 $21,243,829 $21,243,829 $21,243,829 Outstanding debt/ interest**** $0 $0 $0 $0

TOTAL LONG-TERM DEBT $88,750,903 $88,750,903 $88,750,903 $88,750,903

Counties have long cited courts as most egregious example of under-funded state mandate – part of state judicial system so no levy should be required.

WCA: in 2007, counties spent $150 million on circuit courts statewide, but received only $19 million in circuit court support grants; state keeps $26 million in court fees.

State officials say counties have long tradition of providing funding for trial courts, makes sense given that courthouses traditional home of county government; counties also get shared revenue.

GMC Report: State Takeover of Courts

2002 WI Supreme Court subcommittee:

No “right way” to finance circuit courts; ideal of stable funding “impervious” to political forces unrealistic.

Refine distinction betw. county- and state-funded court operations by re-establishing definition of “court services”.

Personnel-related services most difficult to distinguish – county or state employees?

National trend has been shift to state financing, but logistical hurdles (e.g. health care) experienced.

If it’s going to happen, needs to be phased approach.

GMC Report: State Takeover of Courts

Pros

Improved accountability by linking funding to outcomes Better opportunity for chief judge to lobby for fiscal

support Shield courts from county’s financial difficulties, legacy

costs, personnel rules

Cons

Court services not as responsive to Milwaukee’s unique needs

Chief judge’s lobbying capacity diluted in larger state govt. Local budget affords greater accountability

GMC Report: State Takeover of Courts

Logistical questions/obstacles

Would state really replace $35 million of local tax levy support?

Who would pay $4 million in annual legacy costs?

What about the state’s other 71 counties?

Treatment of retirement benefits for courts employees if moved to state payroll.

Constitutional issues re. clerk of circuit court?

GMC Report: State Takeover of Courts

Hypothetical Governance Reform Models

Key functions removed

Budget Tax levy

Legacy as %

of levy

FTEs

Current $1.3 B $236 M 34% 5,707

Elimination All $85.6 M $80.6 M 100% 0

Streamlined parks, culture, airport, transit, all HHS

$370.3 M $104 M 77% 2,424

Mandated parks, culture, airport, transit

$1.0 B $182 M 44% 4,567

Who takes over county services?

EliminationCourtsSheriffDistrict AttorneyMedical ExaminerRegister of DeedsElection CommissionHighway Maintenance Dept of Health and Human ServicesChild Support EnforcementAgingBehavioral Health DivisionCare Management Organization

StreamlinedDept of Health and Human ServicesChild Support EnforcementAgingBehavioral Health DivisionCare Management Organization

Mandated

(None)

Func

tions

mov

ed to

the

STAT

E

MilwaukeeCounty

Who takes over county services?

MilwaukeeCounty

Elimination

BHD

Zoo & Cultural

Func

tions

mov

ed to

SPE

CIAL

DIS

TRIC

TS/

SEPA

RATE

TAX

ING

AU

THO

RITI

ES

Parks

Sheriff

Transit

Airport

CMO

Mandated

Zoo & Cultural

Parks

Transit

Airport

Streamlined

BHD

Zoo & Cultural

Parks

Transit

Airport

CMO

Who takes over county services?

MilwaukeeCounty

EliminationEmergency Medical ServicesHighway Maintenance Election Commission

StreamlinedEmergency Medical Services

Func

tions

mov

ed to

MU

NIC

IPAL

ITIE

S

Mandated

(None)

What costs might still remain for county taxpayers?

Legacy for retirees

Long-term debt

Airport $2.2 M $16 M

Behavioral Health 12.3 M $301 MCare Management Organization $1.4 M $34.2 M

Courts $4.2 M $88.8 M

District Attorney $1.3 M $28.7 M

Zoo $1.8 M $73.9 M

Parks $9.5 M $345 M

Sheriff/HOC $12.1 M $293 M

Transit $0.04 M $24.2 M

Where there would be savings…

Elimination Streamlined Mandated

County Executive ($830,000) ($657,000) ($285,000)

County Board ($5.5 M) ($4.4 M) ($1.7 M)

County Treasurer ($1.2 M)

County Clerk ($310,000)

Election Commission ($1.2 M)

Community Business Development Partners

($418,000)

Personnel Review Board

($171,000)

Civil Service Commission

($28,000)

Total ($9.6 M) ($5.1 M) ($1.9 M)

It all depends on Madison

Immediately decide the future of discretionary functions

House in county government or in special districts?

What level of service is desired?

Continue to fund with property tax, move to a sales tax, or other?

Could this be an opportunity to change the mindset?

Decisions to be made

Decisions to be madeIsolate and control legacy costs

Close current pension system to new employees & new benefit earnings?

Move current employees to state pension system?

Change to defined contribution plan for current and new employees?

Join the state health care plan?

Modify retirement benefits?

Decisions to be madeTake stock of county’s assets

Could asset sales or leases buy down liabilities?

Are physical assets underutilized & too expensive to maintain?

Best use of County Grounds?

Pursuit of long-term leases for airport and other assets?

Decisions to be madeAlternative governance structures

Where are services being duplicated?

Which level of government is most appropriate for which services?

Does consolidation of services make sense?

Is there any appetite for regional service delivery?

The Latest $23 million surplus in 2012 and $6.4 million surplus

projected for 2013.

2014 “gap” of $15.3 million the lowest in years; reflects progress on structural deficit.

Debt service costs reduced by $15 million in 2015.

Mental health system in process of redesign; still may be a need for increased investment.

Structural hole in transit budget remains; CMAQ funds about to expire.

Comprehensive facilities assessment now in hand.

Legislation that cuts Board to part-time makes problem-solving all the more difficult.