“Tools of Development” News Release
Study: Wisconsin Municipalities Under Fiscal Stress Before Proposed Budget Changes
A newly published study reports that Wisconsin municipalities have continuously faced financial stress, even before proposed changes to state budget policies related to intergovernmental aids.
The study, titled “How Stressed are Wisconsin Cities and Villages?” was conducted in partnership with researchers from Cooperative Extension, UW – Madison, UW-Oshkosh and UW – Milwaukee.
Researchers administered a web-based survey to local officials of Wisconsin cities and villages in September 2010 to gauge state municipalities’ fiscal health. When municipalities are fiscally healthy, they have the ability to create an environment that maintains existing service levels, withstand economic disruption and meet the demands of growth and decline, according to the report.
A total of 195 municipalities responded to the survey. Fifty-three percent reported that their revenue base at the end of 2010 weas inadequate. More than 62 percent projected that their fiscal condition would be inadequate in five years.
“The combined effects of flat and declining state aids to local municipalities, coupled with limits on the property tax, mean that Wisconsin municipalities are facing difficult financial times, said Steve Deller, community development economist with Cooperative Extension, professor of applied and agricultural economics at UW-Madison and co-author of the report. Another co-author, Craig Maher, professor of public administration at the UW -Oshkosh said: “The uncertainty surrounding the state budget situation has significantly elevated the financial stress facing Wisconsin cities and villages.”
The study, issued as a Dept. of Agricultural and Applied Economics Staff Paper, also documents what types of strategies cities and villages have typically used to cope with fiscal constraints faced by their municipalities. Some strategies actively pursued in response to fiscal stress included adopting or increasing user fees and charges; improving productivity through better management; and pursuing grants from the federal and state governments. Participants reported that the strategies least likely to be pursued included laying off workers; increasing short-term debt; and reducing hours of operation.
“The difficulty facing many municipalities in Wisconsin is that many of the short-term cost saving strategies have been put in place and there is little additional room left to maneuver,” said Deller.
“The rules under which Wisconsin municipalities are allowed to function greatly limits their ability to make radical changes to achieve significant cost savings,” said Maher. The entire report is available online at http://www.aae.wisc.edu/pubs/sps/pdf/stpap557.pdf
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