by Harry Allen, Associate Municipal Advisor
The Expenditure Restraint Program (ERP) provides aid to Wisconsin communities that limit their spending growth. The ERP payment is in addition to the shared revenue payments made under the county and municipal aid program. Counties cannot qualify for payments under ERP. Annual funding for the program has been set at $58,145,700 and is divided amongst qualifying communities. Qualifying your municipality for ERP is a critical part of the budgetary process and can often be a challenge. Qualification criteria dictates that the:
- Equalized municipal tax rate must exceed $5.00 per thousand of value.
- General fund budget expenditure change from the previous year’s budget must be less than the allowable percentage increase provided by the Wisconsin Department of Revenue (“DOR”) which is equal to the sum of the Consumer Price Index (CPI) for the prior 12 months ending August 31, plus 60% of net new construction percentage for the current budget year (up to a maximum of 2.0%).
For purposes of ERP, “general fund budget expenditures” includes all general fund expenditures, including transfers out and the property tax levy for other funds. Several deductions are permitted to reduce general fund expenditures reported, including:
- Principal and interest on long-term debt
- Recycling fee payments (the tipping fee per ton paid for solid or hazardous waste disposal at any licensed Wisconsin landfill)
- Revenues shared with other local governments under local revenue sharing agreements
- Unreimbursed expenditures related to an emergency declared by the Governor
- Cost of providing contract services to another local government up to the payment amount received from the other local government for providing the service
- Expenditures associated with certain grant payments awarded to local governments with development in an electronics and information technology manufacturing zone (also referred to as the mass transit grant)
- Payments of certain insurance premiums for hospital, surgical and other health insurance for the surviving spouse(s) and dependent(s) of law enforcement officers, emergency medical service practitioners and firefighters who died in the line of duty
- Personal property aid payments received for termination of a tax incremental district, based on the personal property aid payment received for termination of a tax incremental district
There are also adjustments for transfers of services to and from local governments for the first time.
The recently enacted Act 12 will result in significant increases in state shared revenues for many communities which will likely result in reciprocal expenditure increases. Subsequently, the Act included a law change that makes several adjustments to the program over the next couple years. Those adjustments are as follows:
- If a community did not qualify for an expenditure restraint payment for fiscal year 2024 (based on the form filed in May 2023 that compared the 2023 budget to the 2022 budget), a community will not be eligible to receive an ERP payment in fiscal year 2025.
- The ERP amount received in 2025 is frozen at the same amount as 2024 and communities who qualified for a 2024 payment will automatically qualify for a payment in 2025.
- An ERP form will need to be filed in 2024.
- There will be no changes to the 2024 form.
- The sole purpose of the form will be to establish the new budget base going forward that incorporates increased supplemental aids for comparison to the 2025 budget the following year to determine if an ERP payment is received in FY 2026.
- Changes to the form are expected in 2025 to account for subtractions for innovation grants under Wisconsin Statutes section 79.038.
So, what does this mean for your community? The normal eligibility criteria for ERP will not apply to the 2024 budget. Local governments will still need to be mindful of levy limits, but with expenditures likely to increase in the 2024 budget because of increased supplemental aid, there will not be an ERP consequence to doing so. The form filed in May 2024 will establish the new baseline that will be used for comparison to the 2025 budget to determine if a community qualifies for an ERP payment in 2026.
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