A Message from the President with Mike Theo: We Can Have it Both Ways

 Mike Theo  |    September 10, 2014

There is a debate — a healthy one — brewing in Wisconsin over the future funding of technical colleges. As an association, we share the near universal support our fabulous technical college system and institutions enjoy with students, parents and businesses across the state. But in our role as advocates for affordable housing and sane levels of property taxes, we as an industry face a conundrum. Our dilemma is that like K-12 schools, tech colleges rely heavily on the property tax for funding. Without changes, we will continue to struggle with our desire for a quality technical college system and the business and economic benefits that result, versus our desire to reduce Wisconsin’s sky-high property taxes and the significant burden they inflict on families and businesses across the state.

But is it really a zero sum, either/or proposition? We think not. We can have it both ways. 

A special Legislative Council study group is currently studying the technical college funding issue and wrestling with how to reset that current funding mix between state, federal, tuition and property tax sources. During the previous legislative session, the state legislature indicated its strong support for lowering the property tax portion of tech college funding when it (with the full support of the WRA), voted to increase state support for technical colleges by $406 million and lower the property tax by the same amount. Using surplus state revenues, the legislature's action translated into a property tax cut of approximately $131 on the average homeowner in Wisconsin. It’s very important to note that this shift from property tax funding to state funding did not reduce technical college funding and as such was not opposed by the technical colleges.

It’s interesting to note that in the current iteration of this debate, the technical colleges are actively opposing any changes to their funding structure, now arguing that any changes to reduce reliance on the property tax and increasing state funding will result in a loss of local governance and control and leave a system that is less responsive to local business needs. While they raise legitimate concerns, they provide little if any evidence to support this conclusion. Indeed, it’s far from a foregone conclusion that with more state funding comes less local control. 

Control of technical colleges should remain local, but funding should shift from the property tax to other sources of revenue. Here’s why:

  • Wisconsin is overly dependent on property tax as a revenue source. We have the 9th highest property taxes in the nation and the second highest in the Midwest. When measured as a percentage of home value, Wisconsin property taxes jump to 4th highest in the country. Property taxes have increased nearly 30 percent between 2000-2011 and provide almost 40 percent of all local government revenues. By comparison, we rank 12th highest in income taxes and 35th highest in sales taxes. 
  • While onerous on homeowners, property taxes are also the number one tax on businesses in Wisconsin. Fifty-one percent of all business taxes, which is about $4.335 billion, go to pay business property taxes. 
  • Wisconsin residents hate the property tax. A poll earlier this year showed that 60 percent of voters felt the property tax was too high, and when asked if they could cut just one tax, 42 percent chose the property tax (34 percent would cut income taxes and 22 percent would cut sales taxes). 
  • Until last year, property taxes were the number-one revenue source for technical colleges, providing 44 percent of their revenues. Nineteen percent came from federal funds, 16 percent from tuition and fees; 15 percent from miscellaneous sources; and only 6 percent from the state. Only Arizona relied more heavily on property taxes than Wisconsin. That is, 48 states rely less on property taxes than we do.

The fact is we rely too heavily on the property tax to fund our technical colleges, and that should change. Changing the funding mix will not automatically change the governance of our tech colleges. In fact, in 1979, state aid paid for 28 percent of tech college costs in Wisconsin and governance remained local. It worked then and it can work now.

We support local control, and we support our technical colleges. We will work closely with the Legislative Council study group and the technical college system to find ways to both lower property taxes and maintain the high quality of our technical colleges. We can, and should, have both.

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