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Wednesday, April 27, 2011

Destroying Government to Save It

What's the fuss about a Milwaukee County takeover?

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Rumors are still swirling that there's a secret plan that would allow the state to take over Milwaukee County and other local governments.

First reported by prominent Madison attorney Ed Garvey on his FightingBob.com blog, the secret plan allegedly is similar to a new Michigan law that allows that state to take over a struggling local government or school district and appoint an emergency financial manager who can eliminate the power of local elected officials, sell assets, revoke labor contracts and suspend collective bargaining for up to five years.

Wisconsin Gov. Scott Walker has denied that he's involved in the plan that, according to anonymous documents sent to Garvey, is being drafted by the Milwaukee law firm Foley & Lardner.

On Monday, Walker's spokesman Cullen Werwie told the Shepherd that the governor isn't involved and "hasn't even considered" supporting a Michigan-style emergency financial manager bill.

But that hasn't put the rumors to rest, since the alleged plan follows in the wake of years of prodding by Milwaukee's business community—and even Walker himself—to radically reform county government.



Blowing Up the County

Central to the saga is the Greater Milwaukee Committee (GMC), a conservative business organization that has been pushing for radical reforms of government to benefit business interests.

One of the most outspoken members of the GMC, investor Sheldon Lubar, has called for dismantling county government and merging it with other governments or spinning off functions—such as transit or the parks—and running them independently.

Back in 2006, the GMC launched a study of the county's financial outlook, led by Lubar and philanthropist-turned-Milwaukee County Executive Chris Abele. That study didn't push for getting rid of county government; instead, it made more modest recommendations to modify the county's health insurance policy, share services with other governments and pay for its pension liabilities with bonds.

While the report did not recommend blowing up county government, Lubar made numerous public comments about "devolving" county government.

"The time has come for county government to retire itself in an orderly fashion, reduce the burden on area taxpayers, and reshape the way taxes are collected [and] services are delivered, and thereby lead to a better economy and quality of life in Milwaukee," Lubar told the Rotary Club of Milwaukee in 2008.

The GMC also commissioned two studies by the Public Policy Forum (PPF) on Milwaukee County's finances. The first, released in March 2009, looked at the county's looming fiscal crisis. The second, titled "Should It Stay or Should It Go?," explored the issues surrounding downsizing or eliminating county government. Released in January 2010, the report did not make any recommendations about blowing up the county, although the common perception is that it did.

"Clearly the report didn't say, 'Yes, blowing up county government would be an easy thing to do and, from a public policy perspective, would necessarily be the best thing to do,'" said Rob Henken, head of the PPF.

Henken said the most important finding was that even if county government was eliminated, massive pension and outstanding bonding obligations would have to be covered by some entity.

"There was a notion out there among some that if you got rid of government you would somehow be able to solve its financial problems in one fell swoop," Henken said. "Our report showed how that wasn't necessarily the case."

'An Idea Whose Time Has Come,' Walker Argued

Nevertheless, right-wing Milwaukeeans continued to entertain the fantasy that blowing up the government was the cure-all for the county's ailments.

Even Walker, as county executive, urged the elimination of county government.

In a July 20, 2009, letter sent to the county board, Walker wrote, "I do not believe that it is enough to just nibble around the edges of major reform. I believe that we need to consider a more fundamental change."

Walker recommended merging county functions with either the state or local governments and creating transportation or parks districts.

"Eliminating a layer of government and consolidating it with other governments is an idea whose time has come," Walker concluded.

He mentioned nothing about paying for the county's outstanding financial obligations.

Walker name-checked "Shel Lubar" and the GMC, promising that the Public Policy Forum's forthcoming GMC-commissioned study would show "how to bring about this kind of fundamental reform."

But as Henken explained, the PPF's 2010 study did not provide a blueprint on how to dismantle county government. Instead, the PPF provided pros and cons of alternative county government structures. No recommendations, roadmap or blueprint were offered.

The Michigan Example

Fast-forward to 2011: Walker is now Wisconsin governor and intent on remaking state government and busting public employee unions, using the state's alleged fiscal emergency as the catalyst. Conservative governors in Florida, Indiana, New Jersey, Ohio and Michigan also have made jaw-dropping reforms in the Walker vein.

In Michigan, Gov. Rick Snyder signed a bill that would give state-appointed emergency financial managers the ability to put a local unit of government or school district in receivership if it failed a "stress test" administered by the state. Then, the governor could appoint an emergency financial manager who would have almost unlimited power and could terminate or modify collective bargaining and vendor contracts, as well as sell assets. Local elected officials would be stripped of their power.

At the same time Gov. Snyder was extending his power over local governments, in his 2012 budget he proposed cutting state aid to local governments by $307 million and making $425 million in cuts to public schools. The nonpartisan Michigan House Fiscal Agency estimated that up to 40 school districts and dozens of local governments would face financial emergencies as a result of those state cuts and the weak economy.

The conservative Mackinac Center for Public Policy—funded by the Milwaukee-based Bradley Foundation, the Charles G. Koch Charitable Foundation, and the Wal-Mart and Amway families—had pushed for expanded powers for emergency financial managers as a means to combat the power of unions.

"For those who are genuinely worried about the powers wielded by emergency financial managers, there is an alternative: Rein in the powers wielded by government employee unions," wrote the Mackinac Center's Paul Kersey. "Less union power should improve fiscal discipline, leading to fewer financial emergencies, and fewer fallible mortals being given god-like powers."

Already, the mostly African-American and poor town of Benton Harbor has been taken over as business interests pursue building a luxury golf course on publicly owned land.

Whose Milwaukee?

Meanwhile, in Wisconsin, the GMC launched its "Make It Your Milwaukee County" initiative in March. With shades of Snyder's Michigan, it recommended developing a "statewide fiscal stress test," but it fell short of advocating for a state takeover of local governments or schools.

Henken said that the Public Policy Forum has not done any research on fiscal stress tests for local communities, but that its previous research on Milwaukee County's finances indicates that it would likely pass a test. For example, the county manages its debt responsibly and doesn't have a cash flow problem, although its revenue stream is flat due to tightened federal and state aid.

"I don't believe that if you put Milwaukee County government up to a fiscal stress test that it would necessarily meet the criteria that would require there to be some sort of rash move," Henken said.

In addition to the fiscal stress test, an earlier draft of the GMC's initiative apparently argued for allowing local governments to file for bankruptcy. As reported by Dan Bice in the Milwaukee Journal Sentinel, the GMC had put that plan on hold before the 2010 gubernatorial election. It was modified and released earlier this year, without the bankruptcy proposal and other recommendations.

GMC President Julia Taylor has issued statements distancing the organization from a plan to blow up county government.

"Neither the GMC, nor the 'My Milwaukee County' initiative, advocate the elimination of county government," Taylor said in a Monday statement.

Ed Garvey, however, isn't buying the denials.

"Someone gave us a packet of materials that a rational person, looking at this, knowing the background of Scott Walker and the GMC and what their plans are, would say, 'This is exactly what Rick Snyder is doing in Michigan,'" Garvey said.