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MILWAUKEE COUNTY GOVERNMENT: HISTORY AND CHALLENGES Rob Henken, President November 2013 MILWAUKEE COUNTY GOVERNMENT: HISTORY AND CHALLENGES Rob Henken, President November 2013

Public Policy Forum Mission q Established in 1913 as a good government watchdog, the Public Policy Forum Mission q 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. q 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.

Wisconsin Counties q County government in Wisconsin dates back to 1818, when the territorial Wisconsin Counties q County government in Wisconsin dates back to 1818, when the territorial governor created three counties to perform law enforcement and taxing functions. q 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 Counties q Unlike cities & villages, counties do not have broad “home rule” Wisconsin Counties q 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. q Certain county officials are specified in the Wisconsin Constitution: Sheriff, Register of Deeds, District Attorney, County Clerk, County Treasurer. q 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.

Milwaukee County q With 950, 000 residents, Milwaukee County is the largest county in Milwaukee County q With 950, 000 residents, Milwaukee County is the largest county in Wisconsin. Several provisions of the statutes pertaining to counties refer only to Milwaukee County. q 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. q 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 q Counties originally were intended by the state to administer local functions Milwaukee County q Counties originally were intended by the state to administer local functions on its behalf, but not necessarily to do anything more. q Over time, Milwaukee County has elected to do much more, which is a reason for its unique nature and, arguably, its unique problems. q 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 Expenditures Milwaukee County Expenditures

Milwaukee County Revenues Milwaukee County Revenues

The Problem: Operating Budget q State/federal revenue sources that support mandated services have not The Problem: Operating Budget q 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. q Closing the state/federal aid gap for mandated services with local tax funds leaves fewer local resources for discretionary services; also, local revenues stagnant. q 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.

2013 locally allocated revenue by function 2013 locally allocated revenue by function

Major sources of state revenue Major sources of state revenue

Milw. Cty local tax revenues, shared revenue, and inflation, 2003 -2011 (indexed to 100) Milw. Cty local tax revenues, shared revenue, and inflation, 2003 -2011 (indexed to 100) $135 Property tax $125 Sales tax State Shared Inflation $115 $105 $95 2003 2004 2005 2006 2007 2008 2009 2010 2011

Milwaukee County pension and health care expenditures, 2001 -2010 (millions) $160 $140 Pension Health Milwaukee County pension and health care expenditures, 2001 -2010 (millions) $160 $140 Pension Health care $120 $100 $80 $60 $40 $20 $0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

History of initial funding gaps 2009 2010 2011 2012 2013 2014 $0 -$10 ($15. History of initial funding gaps 2009 2010 2011 2012 2013 2014 $0 -$10 ($15. 3) -$20 -$30 ($26. 6) ($28. 5) -$40 ($44. 9) -$50 ($51. 5) -$60 -$70 -$80 -$90 -$100 ($90. 0)

Primary Causes of Budget Gaps p Annual increases in pension contributions and health care Primary Causes of Budget Gaps p Annual increases in pension contributions and health care costs p Transit system budget imbalance p Debt service p Mental health system cost pressures p Deferred maintenance needs p Stagnant or reduced state revenues

The Problem: Capital Budget q Milw. County holds $748 million of direct long-term debt: The Problem: Capital Budget q 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. q 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%. q 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 Source: Milw. Co. Exec Budget Briefing, Aug. 2011

www. publicpolicyforum. org www. publicpolicyforum. org

GMC Report: Challenge q Eliminating a government with a $1. 4 billion budget, 5, GMC Report: Challenge q 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. q 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: Questions § What are biggest logistical hurdles to eliminating county government & GMC Report: Questions § 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: Approach q Break down budgets of critical county functions that could most GMC Report: Approach q 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. q 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. q Analyze potential receiving entities, discussing pros, cons & practical considerations associated w/each.

GMC Report: Approach q Next, model and analyze what county government would look like GMC Report: Approach q 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. q Fold in case studies, including MMSD privatization, Milwaukee Public Museum model, transfer of Milwaukee County DA’s to state. q Discuss Massachusetts’ experience with abolishing county governments.

GMC Report: Courts Administrative Information technology Legal counsel Facility management Fleet management Central charges/overhead GMC Report: Courts Administrative Information technology Legal counsel Facility management Fleet management Central charges/overhead Salary and wages Social security Employee healthcare Employee pension Retiree healthcare Retiree pension Other Personnel costs Non-personnel expenditures TOTAL EXPENDITURES State revenue Federal revenue Other revenue TOTAL REVENUES TOTAL LEVY Unfunded OPEB liability *** Unfunded pension liability*** Outstanding debt/ interest**** TOTAL LONG-TERM DEBT Cost to operate as county department Cost to operate (current practice) minus legacy costs $886, 653 $537, 469 $0 $6, 180, 188 $176 $7, 604, 486 $13, 905, 509 $1, 007, 629 $4, 000, 322 $1, 499, 219 $4, 000, 322 $749, 609 ($44, 046) $25, 118, 564 $18, 676, 152 $51, 399, 202 $6, 021, 195 $76, 467 $4, 741, 112 $10, 838, 774 $40, 560, 428 $67, 507, 074 $21, 243, 829 $0 $88, 750, 903 $800, 107 $485, 007 $0 $5, 576, 938 $159 $6, 862, 210 $13, 905, 509 $1, 007, 629 $4, 000, 322 $1, 499, 219 $0 $0 ($44, 046) $20, 368, 633 $18, 676, 152 $45, 906, 995 $6, 021, 195 $76, 467 $4, 741, 112 $10, 838, 774 $35, 068, 221 $67, 507, 074 $21, 243, 829 $0 $88, 750, 903 Legacy costs Using 2008 fringe Based on retiree allocation method* history** $86, 546 $83, 955 $52, 462 $50, 892 $0 $0 $603, 250 $585, 189 $17 $742, 276 $720, 052 $0 $0 $4, 000, 322 $2, 925, 158 $749, 609 $596, 998 $0 $0 $4, 749, 931 $3, 522, 156 $0 $0 $5, 492, 207 $4, 242, 208 $0 $0 $5, 492, 207 $4, 242, 208 $67, 507, 074 $21, 243, 829 $0 $0 $88, 750, 903

GMC Report: State Takeover of Courts q Counties have long cited courts as most GMC Report: State Takeover of Courts q 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. q 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. q 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 q 2002 WI Supreme Court subcommittee: § No GMC Report: State Takeover of Courts q 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 q Pros § § § q Improved accountability GMC Report: State Takeover of Courts q Pros § § § q 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 q Logistical questions/obstacles § Would state really replace GMC Report: State Takeover of Courts q 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?

Hypothetical Governance Reform Models Key functions removed Elimination All Streamlined parks, culture, airport, transit, Hypothetical Governance Reform Models Key functions removed Elimination All Streamlined parks, culture, airport, transit, all HHS Mandated parks, culture, airport, transit Tax levy Legacy as % of levy FTEs $1. 3 B Current Budget $236 M 34% 5, 707 $85. 6 M $80. 6 M 100% 0 $370. 3 M $104 M 77% 2, 424 $1. 0 B $182 M 44% 4, 567

Functions moved to the STATE State Who takes over county services? ·Courts Elimination ·Sheriff Functions moved to the STATE State Who takes over county services? ·Courts Elimination ·Sheriff ·District Attorney ·Medical Examiner ·Register of Deeds *Election Commission *Highway Maintenance Streamlined ·Dept of Health and Human Services ·Child Support Enforcement ·Aging *Behavioral Health Division *Care Management Organization Milwaukee County Mandated (None)

Functions moved to SPECIAL DISTRICTS/ SEPARATE TAXING AUTHORITIES Special Districts Who takes over county Functions moved to SPECIAL DISTRICTS/ SEPARATE TAXING AUTHORITIES Special Districts Who takes over county services? * BHD Parks * CMO Elimination Zoo & Cultural Transit * Sheriff * BHD Parks Airport * CMO Airport Streamlined Transit Zoo & Cultural Parks Milwaukee County Airport Mandated Zoo & Cultural Transit

Who takes over county services? Elimination Services *Highway Maintenance *Election Commission Milwaukee County Functions Who takes over county services? Elimination Services *Highway Maintenance *Election Commission Milwaukee County Functions moved to MUNICIPALITIES Municipalities ·Emergency Medical Streamlined ·Emergency Medical Services Mandated (None)

What costs might still remain for county taxpayers? Legacy for retirees Long-term debt Airport What costs might still remain for county taxpayers? Legacy for retirees Long-term debt Airport $2. 2 M $16 M Behavioral Health Care Management Organization 12. 3 M $301 M $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 ($830, 000) ($657, 000) ($285, 000) Where there would be savings… Elimination Streamlined Mandated ($830, 000) ($657, 000) ($285, 000) County Board ($5. 5 M) ($4. 4 M) ($1. 7 M) County Treasurer ($1. 2 M) ($5. 1 M) ($1. 9 M) County Executive County Clerk Election Commission ($310, 000) ($1. 2 M) Community Business Development Partners ($418, 000) Personnel Review Board ($171, 000) Civil Service Commission ($28, 000) Total ($9. 6 M)

It all depends on Madison It all depends on Madison

Decisions to be made Immediately decide the future of discretionary functions House in county Decisions to be made 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 Isolate and control legacy costs Close current pension system to Decisions to be made Isolate 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 made Take stock of county’s assets Could asset sales or leases Decisions to be made Take 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 made Alternative governance structures Where are services being duplicated? Which level Decisions to be made Alternative 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 p $23 million surplus in 2012 and $6. 4 million surplus projected The Latest p $23 million surplus in 2012 and $6. 4 million surplus projected for 2013. p 2014 “gap” of $15. 3 million the lowest in years; reflects progress on structural deficit. p Debt service costs reduced by $15 million in 2015. p Mental health system in process of redesign; still may be a need for increased investment. p Structural hole in transit budget remains; CMAQ funds about to expire. p Comprehensive facilities assessment now in hand. p Legislation that cuts Board to part-time makes problem-solving all the more difficult.