NO INCREASE IN RESIDENTIAL PROPERTY TAXES 

Total residential property taxes to be paid in 1992 will show almost no increase over taxes paid the previous year because of the $175‑million lottery credit provided for residential property. According to the Legislative Fiscal Bureau, $164 million of the credits will be paid for residences on residential land an $11 million for homes located on farms. After applying the lottery credit, net residential property taxes are estimated to increase by $63 million‑from $2.45 billion to $2.522 billion‑it is estimated that $54 million of that increase will be paid by owners of newly constructed residential property, leaving an increase of about $9 million on existing residential property, or less than 1 percent. 

These are statewide numbers and the actual effect on individual residential units will vary. 

Historical Picture 

Table 1 shows the property taxes levied by various types of local government between 1982 and 1991. During that period, the gross property tax levy More state credits increased from $2.561 billion to $4.724 billion, or 84 percent. In the last several years, the increase averaged 8 percent. 

Education Levies. In 1991, school property tax levies were $2.569 billion, or 54 percent of the total gross levy. Since 1982, the school levy has increased 87 percent. The last 4 years it averaged about 8.5 percent. The 1991 levy for vocational, technical and adult education schools was $251 million. This is 5 percent of the total. Since 1982, the levy has increased 63 percent. 

County Levy. The 1991 county levy was $753 million. County levies were 16 percent of the total. Since 1982, the county levy has increased by 70 percent. 

Municipal Levy. The property tax levies for municipal (town, village and city) purposes was $935 million, or 20 percent of the total. Since 1982, the municipal levy has increased 74 percent. These levies increased by 6 percent per year between 1987 and 1990. In 1991, they increased 5 percent. 

Property Tax Credits. Offsetting the 1991 $4.7‑billion gross levy were property tax credits of $494 million. These state‑financed credits reduce the property taxes owed and appear on the property tax bill. One, entitled "the school property tax credit" since it is based on school levies, is $319 million. The second, "the lottery tax credit," is $175 million. After subtracting the $494 million in tax credits, the net property tax levy was $4.069 billion, an increase of 4 percent‑the smallest percentage increase since 1985. 

TABLE I
GROSS PROPERTY TAX LEVY BY LOCAL
GOVERNMENT, PROPERTY TAX CREDITS,
NET LEVY, EQUALIZED VALUE AND NET TAX RATE
1983-1991 

a Total levy includes 'Other' category, which is not separately listed.
b School levy, total levy and property tax credits adjusted to normal level to offset transfer of 5155 million in school aids to property tax credits in 1985 and $199 million in 1986.
c Net properly tax levy includes 5175 million for the lottery tax credit that is provided only to the principal residence of a property owner. The net tax rate does not include that credit.
Source: Wisconsin Department of Revenue. 

Equalized Value. These values are as of January 1. Between 1982 and 1991, the value increased by 28 percent. Value increases can occur because of new construction and because of the appreciated value of existing property. Since 1986, the value has been growing at a slowly accelerating rate, reaching $151 billion in 1991, a 7 percent increase over 1990. 

Net Tax Rate. With the amount of taxes to be collected between 1982 and 1991 increasing by 92 percent and the equalized value on which the taxes were levied increasing by only 28 percent, the tax rate had to increase. It rose from $18.68 per $1,000 of equalized value in 1982 to $29.18 in 1991, or 56 percent. The 1991 rate of $29.18 does not reflect the lottery credit, since that credit only applies to residential property. Even without that credit, the net rate increased by only 1 percent, the smallest since 1982. 

Nonuniformity 

The Wisconsin constitution, with certain exceptions, requires that all property be taxed uniformly. This means that, within a municipality, all property is to be assessed on the same basis and the same rate applied. Courts have held that any property tax relief must also be applied uniformly. The lottery credit is not uniform since it applies only to certain residential property. 

To justify the non‑uniform lottery tax credit, the argument, primarily political, is that, since lottery money is being used, the uniformity clause does not apply. This allows elected officials to provide property tax relief only to voters. Owners of manufacturing, commercial (large apartment buildings, shopping centers, office buildings, etc.) and other classes of nonresidential property do not qualify, nor do residential property owned by nonresidents or second homes owned by residents. 

Constitutional Amendment. The issue of constitutionality might become moot after the 1992 fall election. Moving through the legislature is a proposed constitutional amendment (SJR 12), which has already passed in the 1989 session and by the senate in 1991. It would allow the state to provide real property tax relief to residential and farm property as a credit against the income tax or by payments from state revenues. It is assumed the Democrat‑controlled assembly will also approve this joint resolution in 1992 and the question will be on the November 1992 ballot. If the amendment is adopted, property tax relief will again be a major issue at the 1993 session, but still accompanied by the nagging question of how to pay for it. 

COMPETITION FOR STATE TAX DOLLARS 

In the last 21 years, there has been a dramatic shift in the allocation of funds among the major programs financed by state general purpose revenues (GPR). In the category of state payments to local governments, between 1972 and 1992, state school aids increased from 17.2 percent to 29.1 percent of total GPR expenditures, while payments to municipalities and counties (shared revenues and property tax credits) decreased from 36.1 percent to 18.5 percent. Among other programs, medical assistance expenditures increased from 3 percent of the total in 1972 to 11.5 percent in 1992, while the amount for the University of Wisconsin (UW) system decreased from 16.3 percent to 11.4 percent. Table 2 provides information on the largest state spending programs from 1972 through 1992. 

Fast Growth Programs 

The fastest growing expenditure is the state share of Medicaid‑1,649 percent increase since 1972. The $754 million appropriated in 1992 now exceeds the UW appropriation of $750 million. 

School aids of $1.909 billion in 1992 are 678.7 percent higher than the 1972 expenditures of $245 million. Since 1982, they have increased 143.3 percent, the fastest growing expenditure in that period. 

Slow Growth Programs 

The amounts paid to municipalities in shared revenues and to finance property tax credits are $1.2 billion in 1992, 135.4 percent more than in 1972 and 60 percent over 1982. This is considerably less than the percent increase for all GPR expenditures of 359.5 percent since 1972 and 90.2 percent since 1982. 

The 1992 UW appropriation is $750 million, a 222.7 percent growth since 1972 and 56.5 percent since 1982. The 10‑year growth rate is the lowest of the major appropriations. 

Future Trends 

State payments for local assistance (school aids, shared revenues, property tax credits and other aids) now claim 58 percent of state GPR expenditures. With the current emphasis on reforming elementary and high school education and the powerful interest groups of teachers, school boards, parents and businesses, there will be pressure to spend more for school aids. There will also be a continuing demand for state‑financed property tax relief. As the number of people in the elderly age group continues to rise, so will Medicaid expenditures. The cost of the state's correctional system‑prisons, probation and parole‑will also show rapid growth. This pressure for increased expenditures means elected officials will have to make some difficult financial decisions. 

WHAT IS THE STATE POLICY ON GAMBLING? 

Like a never‑ending novel, the gambling saga continues to evolve at the State Capitol. The newest chapter is a special session called for June 30, 1992, by Governor Tommy G. Thompson to consider a joint resolution amending the constitution to prohibit all gambling except the state lottery, pari‑mutuel betting, bingo and raffles. If the joint resolution is adopted now, it also can be voted on early in the 1993 session and join five advisory bingo referenda already on the April 1993 ballot. 

Chapter 1‑ Gambling Prohibited 

For the first 117 years of the state's history, Wisconsin's policy on gambling was crystal clear. No gambling was allowed. Section 24, Article 4, of the Wisconsin Constitution originally provided: "The legislature shall never authorize any lottery ." Supreme court decisions and attorney general opinions had interpreted the term "lottery" to mean any kind of gambling. 

Chapter 2 ‑ A Crack in the Dike 

The first exception to the gambling prohibition was in 1965. A constitutional amendment was adopted that said it was OK to send in box tops or to fill out entry blanks or coupons to enter give‑away programs. 

This was followed by a 1973 amendment authorizing bingo games by various religious and charitable organizations, and by a 1977 amendment permitting raffles operated by these organizations. 

Chapter 3 ‑ The Prohibition Is Breached 

Ten years later, in 1987, two gambling constitutional amendments were enacted. One allowed pari‑mutuel on‑track betting. The second provided for the creation of a state‑operated lottery with the proceeds used for property tax relief. The lottery question on the 1987 ballot related only to a state‑run lottery, but unwittingly laid the groundwork for general expansion of gambling. 

Chapter 4 ‑ Indian Gambling 

Under their treaties with the United States, Indian tribes retained authority for the conduct of certain activities on their reservations. After bingo games were authorized, several Indian tribes also offered the games to non‑Indians, but with higher stakes than allowed under Wisconsin law. The federal district court in Madison in 1981 ruled that, once bingo was authorized, it could be provided by the Indians and without state regulation. 

In 1988, the federal gaming act, which imposed limits on Indian gambling, was enacted. The law defined three types of gambling and the rules that applied to each. Class 1 games are those played only by tribal members and controlled by the tribe. Class 2 games include bingo, certain card games and video displays of these games, and state approval is not required. Class 3 games constitute everything else, such as pari‑mutuel betting on horse and dog races, casino‑type gambling and slot machines. Tribes are allowed to offer these kinds of gambling if not prohibited by the state and under the terms of a compact entered into by the state. The state is required to negotiate with the Indian tribes. 

Chapter 5 ‑ The Prohibition Ceases to Exist 

In 1991, Attorney General James Doyle issued an opinion and Federal District Judge Barbara Crabb, a decision that, when the state lottery was authorized, the general prohibition against gambling no longer existed. The courts ordered the state to negotiate with the Indian tribes over the kinds of gambling that could be allowed and the conditions that could be imposed. The state has now entered into seven‑year compacts with 11 tribes authorizing them to conduct electronic games of chance with video and mechanical displays, such as video poker and electronic slot machines, Blackjack and pull tab tickets. Limits were imposed on the number of locations, amount of a bet, hours of operation and other items. Casino‑type games were prohibited. 

Chapter 6 ‑ Gambling Politics 

Gambling legislation has followed a tortuous route at the 1991‑92 session. After Judge Crabb's decision, Governor Thompson in 1991 proposed that legislation be passed prohibiting all gambling other than lotteries, pari‑mutuel betting, bingo and raffles. The state appealed Judge Crabb's decision, but lost. In the fall of 1991, Governor Thompson appointed a gambling study panel, which recommended that the state allow video poker if closely regulated. Citing the panel's recommendation, the governor included in the budget revision bill introduced in January 1992 a proposal that, if approved by local referendum, video poker machines be allowed in taverns. Strong opposition from the news media, as well as members of his own party, forced the governor to retreat from that position. Later in the spring of 1992, the senate passed a joint resolution to amend the constitution to limit gambling to lotteries, betting on races, bingo and raffles. The joint resolution failed to receive assembly approval. The governor did not give it active support. 

The governor in April called the legislature into special session to pass a bill that would limit gambling to existing forms similar to what he had recommended in August. The legislation was ultimately passed, but thrown in were five advisory referenda questions for the 1993 spring elections asking the voters for their opinions on several gambling questions. 

Chapter 7 ‑ Gambling Spreads 

Gambling received a great deal of public attention recently as the Winnebago tribe proposed building a gambling casino on the outskirts of Madison and the Potawotomi tribe wanted to offer other forms of gambling at its bingo casino in Milwaukee. Other tribes wanted to purchase land or existing hotels or resorts near an urban area. Up to this time, most of the Indian casinos were in northern Wisconsin. 

The recently signed compact with the Winnebago tribe does not allow the proposed Madison casino. The compact with the Potawotomi allows the same gambling granted to other tribes. The City of Milwaukee officials are protesting the agreement. They argue that, when they allowed the tribe, whose reservation is in Forest County, to purchase land in the Milwaukee valley for high‑stakes bingo, it was with the understanding that bingo would be the only game permitted. 

After the governor called the special session for June 30, 1992, offering a constitutional amendment to limit gambling, the assembly Democratic leadership played one‑upmanship and proposed a constitutional amendment to ban all gambling, except bingo and raffles. This would mean the end of betting on races and the state‑run lottery. Assembly Democrats would find it very difficult to vote for their leader's proposal, since it would mean elimination of the lottery-financed property tax credit and the present five dog tracks now in operation. Complicating the politics is Democrat Attorney General Doyle's endorsement of the governor's proposal. 

If voters are confused, it's understandable. It's difficult to determine the state's policy on gambling. 

WHO PAYS THE PROPERTY TAX? 

Net property taxes levied in 1991 and collected in 1992 by Wisconsin school districts, vocational, technical and adult education districts, counties and municipalities were $4.4 billion. This is a 331 percent increase over the 1973 net levy, but all types of property have not increased at that rate. 

Taxes by Property Classification 

For property tax assessment purposes, properties are divided into several classes: residential; commercial; manufacturing, agricultural; swamp and waste; forest; and personal property. The state constitution requires all property, except agricultural and undeveloped land, to be assessed on the same basis, market value, and taxed at the same rate within a municipality. The percentage change in taxes by the various classes of property depends on the change in the amount of taxable value. 

The property taxes of a class of property can increase because of new construction and can either increase or decrease depending on the changes in value caused by economic conditions. The effect is not uniform across all classes of property. For example, there may be many new homes being constructed, while manufacturing plants are being torn down because companies cease operation. Also, economic conditions that adversely affect agriculture or manufacturing might cause a decline in the value of property, while the value of other classes might increase.

TABLE 3
NET PROPERTY TAX LEVIES^a
By Class of Real Property ‑ 1973 Through 1991
(Dollars In Millions)