Rep. Scott Allen tells Waukesha finance committee city is 'squeezed out' by shared-revenue formulas

Representative Scott Allen told the Waukesha City Finance Committee on July 14 that Wisconsin’s shared-revenue system has evolved in ways that leave mid-sized cities such as Waukesha getting little benefit.

Allen gave a 20-minute overview of shared revenue’s history in Wisconsin, saying the state has shared revenue with local governments since 1911 and that early formulas returned most income-tax revenue to the local unit where it was collected. He said reforms in later decades moved the system to formula-driven allocations and, more recently, legislative distributions. "Waukesha is getting squeezed out of shared revenue formulation formulations," Allen said, arguing that political coalitions and complex formulas have masked partisan choices.

Allen noted that state shared revenue allocations fell from nearly $1,000,000,000 in 2003 to $753,000,000 in 2019. He described the 2023 changes (Act 12 and the supplemental aid program) as creating a local government fund tied to sales-tax collections that benefits some small rural communities and Milwaukee while delivering only a small increase for mid-sized cities. "That little pink blip is the additional revenue provided by the state through the supplemental aid program," he said while showing comparative charts for Green Bay, Janesville, Waukesha and Waukesha County.

Alderman Matthews pressed Allen on the original logic behind formulas that reward smaller or rural communities and asked how Waukesha can fight for a fairer share given its landlocked status. "How do we fight this? ... we're landlocked," Matthews said, stressing the city cannot expand its tax base through annexation like some other communities.

Allen responded that changing allocations requires coalition-building across municipalities that share similar interests and that targeted modifications to the supplemental aid program or a "hold harmless" provision might be easier to pass than an overhaul of the entire shared-revenue statute. "Step number 1 ... is building the coalitions that are necessary," he said, adding that political realities make sweeping reallocation difficult.

Committee members and staff discussed constraints imposed by levy limits and the expenditure-restraint program (ERP). Chair (speaker 4) said from a levy-limit standpoint the council is constrained — "last year that was 1.66" — while local labor and service costs are rising, and noted ERP rules can make intergovernmental revenue-sharing effectively neutral by requiring offsetting expenditure reductions.

Mr. Brown said property taxes represent roughly 65% of the city’s general fund and asked what concrete solutions Allen is pursuing with other representatives. Allen said both technical modeling and political strategy are needed and invited the committee to help craft a statutory definition of "landlocked" and potential revenue triggers or carve-outs.

The committee did not take formal action on the subject. Chair closed the item, announced upcoming budget events (including an August 25 capital budget "show-and-tell" at the City Garage) and adjourned the meeting.

Next steps: Allen invited local officials to collaborate on draft language to define "landlocked" and explore targeted statutory changes; no votes or referrals were recorded at the meeting.