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1 Focus | September 2020
Serving State Facilities:
A look at how cities are reimbursed
tate funding to reimburse municipalities for
services linked to state-owned facilities was about
$18.6 million in 2019, or 34.7% of what communities
were eligible to receive -- the smallest share on record
(see Figure 1). This resulted in a total funding gap of
more than $35 million for municipalities last year.
While municipalities derive many benefits from state
facilities, including a boost to their local workforce and
potentially to their tax base indirectly, they may not have
their full costs directly covered by the state. The
Municipal Services Payments (MSP) program is
intended to prevent local taxpayers, who fund the bulk
of municipal service costs, from having to subsidize
them for the state through the property tax.
The city of Madison, with its concentration of state
facilities, is the municipality receiving by far the most
funding from the program: nearly $8.4 million in 2019.
But 361 municipalities received a payment of some
amount in 2019, and many received sizable sums,
especially those with college campuses or state prisons.
Others in the top 10 in funding from the program are
Milwaukee, Oshkosh, La Crosse, Eau Claire, Green Bay,
Stevens Point, Superior, River Falls, and Whitewater. In
total, 24 municipalities got more than $100,000 each
from the program in 2019. On a per-capita basis, three
of the top four payment recipients are small
municipalities: the city of Mauston, village of Camp
Douglas in Juneau County, and town of La Pointe in
Ashland County.
While small in the context of the amount spent by
municipalities throughout the state, these funding gaps
matter to municipalities that rely more heavily on the
program. They could also be increasingly salient as
municipalities make difficult choices to finalize their
2021 budgets amid the COVID-19 crisis.
Entitlements up 74%
The Department of Administration administers the MSP
program and uses a formula to calculate what the
S
As municipalities throughout Wisconsin ramp up work on their annual budgets, they face the largest gap on
record in state reimbursements for costs they incur in serving state facilities. Estimated municipal costs for
services such as fire protection, police, and waste removal rose sharply in the last decade, while state leaders
decreased funding for the program that provides reimbursement. State budget challenges amid the COVID-19
crisis could entrench or even add to the problem.
$0
$10
$20
$30
$40
$50
$60
Statewide Payment Unreimbursed Cost
Figure 1: Municipal Costs Rise, State Payments Flat
Payments and unreimbursed costs in millions
Source: Legislative Fiscal Bureau
2 Focus | September 2020
agency calls “entitlements,” or the amount of
reimbursement earned by each municipality.
The payments offset the share of the cost of providing
fire, police, and waste removal services to state
facilities that otherwise would be borne by local property
taxpayers. Other municipal services to state facilities,
such as water, sewer, or electrical, are paid for by the
responsible state agency in the form of user fees. While
counties may not receive direct payments under the
program for services such as law enforcement, they
may be repaid indirectly through an inter-governmental
agreement with the municipality where the state facility
is located.
Statewide, the program accounts for a mere 0.3% of
total general revenues for all Wisconsin municipalities.
But for some communities, the unreimbursed cost can
be significant (see Figure 2). For example, Madison’s
unpaid amount in 2019 was nearly $15.8 million, or
about twice the $7.9 million the city expects to collect in
2020 from a new $40 per vehicle registration fee.
If state policymakers appropriate less funding for the
program than the total amount of entitlements – as has
been the case since 1982 – available funding is
prorated. Gov. Tony Evers, a Democrat, maintained a
freeze on funding for the program in his proposed
2019-21 state budget and the GOP-controlled
Legislature approved his recommendation.
Based on available funding, municipalities in 2019 were
slated to get a combined total of $18.6 million out of
the $53.6 million in their total entitlements, according
to a November DOA report to the Legislature’s Joint
Finance Committee.
Our analysis found municipalities’ entitlements, for
which fire and police are by far the largest components,
rose by more than 74% in the last decade. This is a
consequence of several factors, starting with the
increasing costs to municipalities to provide those
services. Other factors are that a growing share of those
services are being supported at the municipal level by
the property tax instead of state aid, and an increasing
ratio of the property values of state facilities to the
combined value of all buildings and improvements in
the municipalities – a key component of the state’s
formula.
Funding gap grows since 2009
This trend toward a widening funding gap began under
the last budget signed by former Gov. Jim Doyle, then
accelerated during the eight years under former Gov.
Scott Walker. In 2008, municipalities got actual
payments totaling nearly $22 million, or 81.1% of their
entitlements under this program.
In Doyle’s final budget, with state finances under duress
from a recession in 2009, that payment was cut to
$20.6 million. Meanwhile, entitlements increased
significantly starting in this period. The Legislative Fiscal
Bureau attributes recent increases to rising police and
fire service costs, as well as to “increases in the value
of state facilities that outpaced increases in private real
estate values, particularly due to the construction of
additional state facilities in the city of Madison.”
The formula used to calculate MSP entitlements
increases a municipality’s entitlement if there is an
increase in the ratio of the property value of its state
facilities to the values of all of its private real estate
improvements, such as buildings. Land values, private
or public, are not included in the state’s formula and
neither are state highways. In the municipalities
receiving payments, this statewide ratio increased in the
3 Focus | September 2020
last decade, from about 5.4% in 2009 to about 7.2% in
2019.
In one key example, the city of Madison in recent years
saw the construction of large facilities such as the Hill
Farms state office building and numerous buildings on
the University of Wisconsin-Madison campus. This
caused Madison’s ratio of state facility values to those
of all real estate improvements to increase from 20% in
2009 to 23.8% in 2019.
Madison’s concentration of state facilities means it gets
about 45% of the total program funding, about $8.4
million in 2019 (see Table 1). The city also receives
more funding from the program because Madison
depends more heavily than most municipalities on
property taxes to fund its services and receives less in
the kinds of state aid payments that would reduce its
MSP entitlements. The share of overall funding for the
program that Madison receives ticked up modestly in
the last decade, from 42.7% to 45%.
Making a choice
Even before the COVID-19 crisis, Wisconsin legislators
and governors of both parties have made a choice in
the last decade to make funding for the MSP program a
lower priority relative to other budgeting needs. Some
have argued, and not without cause, that state facilities
bring benefits to a community such as stable, middle
class jobs that help to offset the additional costs of
providing services to those properties.
Given the long-term trend and the likelihood that state
fiscal challenges might grow in light of the economic
impacts of the coronavirus, the prospects for increased
funding for the program in the next state budget in
2021 appear dubious and even some of the existing
dollars could be at risk.
A legitimate case can be made that, by locating jobs in
these municipalities, the state is already giving them
their fair share of resources. The flipside is that the
reimbursement levels that some municipalities once
enjoyed have lagged as their other fiscal pressures have
grown, and that those levels may not appropriately
account for costs they incur to provide essential
services to large facilities such as prisons or
universities.
Residents in these communities may need to
understand and accept some level of higher property
taxes in exchange for the benefit of housing state
properties. Still, state officials may want to consider the
recent trend as they seek to balance larger competing
priorities and make tough budgeting decisions in the
year ahead.
Table 1: Top 8 Municipalities by Payment Amount
Municipality
Payment
Amount
Unpaid
Amount
Per Capita
Payment
Madison $8,366,922 $15,776,295 $32.73
Milwaukee $2,177,294 $4,105,409 $3.69
Oshkosh $1,049,657 $1,979,185 $15.62
La Crosse $798,921 $1,506,410 $15.31
Eau Claire $558,364 $1,052,827 $8.20
Green Bay $465,496 $877,719 $4.40
Stevens Point $464,786 $876,380 $17.55
Superior $352,957 $665,519 $12.97
Source: Wisconsin Department of Administration