Robert M. La Follette School of Public Affairs
Tuesday, April 16, 2013

Reschovsky to retire, continue tax policy research

Andrew Reschovsky

Reschovsky helps students sharpen analysis skills

Andrew Reschovsky has trained many La Follette School alumni in the intricacies of state and local government finance, government finance in developing countries and microeconomic policy analysis.

Most recently, the course in state and local public finance has been his favorite to teach. "Recent events in Wisconsin and in other state capitals, coupled with funding cutbacks at the federal level, have led students to the realization that the action is now at the state and local level," says Reschovsky.

As an instructor for the workshop in public affairs, Reschovsky has guided teams of domestic and international public affairs students as they conducted research and policy analysis for real-world clients that include the city of Milwaukee; the Wisconsin Legislative Council; the Wisconsin departments of Revenue and Health Services; and the Organisation for Economic Co-operation and Development in Paris.

"The public affairs workshop lets graduate students at La Follette improve their policy analysis skills while they contribute to the capacity of the collaborating agency to provide services," Reschovsky says.

"The best way to learn policy analysis is to do policy analysis," he adds. "Analysis is central to our discourse about public policies, especially in public finance, a highly contested area as people debate taxes and the appropriate role of government in our economy. Our students graduate with a strong portfolio of analytic skills and a deep appreciation of the importance of careful analysis in the functioning of governments at all levels."

Andrew Reschovsky has spent his career exploring how tax policies affect individuals and the various ways in which state and local governments are financed.

Although the government finance expert is retiring from the University of Wisconsin – Madison, his research schedule remains full, with further exploration of the fiscal health of central cities in the United States and plans for a conference and journal issue on school finance.

Reschovsky's work spans several themes, including city finance, intergovernmental fiscal relations, and tax policy. His recent scholarship has appeared in a number of academic journals, including the National Tax Journal, Regional Science and Urban Economics, Public Finance Review, Education Finance & Policy, Public Budgeting and Finance, Comparative Education Review, and Public Finance and Management.

Reschovsky's significant contributions to state and local government finance were recognized in 2011 with the Steven D. Gold Award, given by the Association for Public Policy Analysis and Management, the National Conference of State Legislatures and the National Tax Association.

Reschovsky will continue to research city finance as he and coauthors expand their analysis of the fiscal health of U.S. cities. Reschovsky, Howard Chernick of Hunter College and Adam Langley of the Lincoln Institute of Land Policy have constructed what they call "fiscally standardized cities." This calculation, which was described in the fall 2012 La Follette Policy Report, allows the authors to account for all local government revenues received by local governments that provide services to city residents and businesses.

"The basic idea is to include all revenues collected by a central city municipal government and by that portion of independent school districts, special districts and county governments that overlay municipal boundaries," Reschovsky says. "We refer to the result of this calculation as the revenue of a 'fiscally standardized city government.'"

Reschovsky and his coauthors have data for 109 U.S. cities from 1977 to 2010, and they are adding data from subsequent years as the information becomes available.

"One of our goals is to use these data to determine the fiscal health of central cities," Reschovsky says. "More importantly, we want to know why some cities are in particularly weak fiscal health, and which policies and governance structures lead to improved fiscal conditions. We want to identify both good and bad practices."

Reschovsky first became interested in local financeand intergovernmental relations while a doctoral student in economics at the University of Pennsylvania. For his dissertation on intra-metropolitan residential location and the local public sector, Reschovsky studied the role of local taxes and public spending on households' residential choices within Minnesota's Twin Cities metropolitan area.

Exploring the distributional impacts of various public policies is another theme of Reschovsky's research. He has strived to understand how policies affect different individuals and how best to measure these effects. He looked at the effects of Proposition 13, California's 1978 constitutional amendment to limit property taxes; taxation of poor people; and taxation of Social Security benefits. He also examined the distribution of tax burdens from gasoline taxes.

"These issues keep coming back," Reschovsky says, noting that one of his spring 2013 Workshop in Public Affairs groups is investigating Wisconsin's policy relating to the taxation of retirement income. "Policy analysts should keep in mind they never write the definitive answers to these issues."

Formula design—how state and federal policymakers distribute aid to governmental units—is a third element of Reschovsky's research. His second teaching job took him from Rutgers University to Tufts University in Massachusetts. His early years there included incumbent governor Michael Dukakis' 1979 loss and 1983 re-election.

"Dukakis ran on a platform that included a promise that the state government would provide more state aid to local governments in the wake of the state having passed property tax limits," Reschovsky says. "The question was how to allocate the aid. Few scholars were working on state and local public financing, so with three other economists, I helped develop a funding formula that became the basis of how aid was distributed in Massachusetts. We took into account not only property values, but the fact that some municipalities operated in more expensive environments — higher population density, concentrations of lower income families — which raises the costs of providing public services, such as public safety and education. Some local governments need to spend more money to provide any given level of public service, and the factors in the distribution formula should account for these higher costs."

Reschovsky expanded on that experience and participated in designing state aid distribution formulas in Wisconsin, Minnesota, Texas and South Africa. "South Africa was decentralizing as it moved away from being a highly centralized state during the apartheid era," Reschovsky says. "The nation had to figure out how to allocate central government resources to its newly democratized provincial and local governments. I was delighted to play a small part in helping them achieve that goal."

Reschovsky was a consultant to the national government's Department of Provincial and Local Government, and he has served as a technical advisor to the South African government's Financial and Fiscal Commission since 1999.

In Wisconsin, one recent analysis provided strong statistical evidence that few elderly homeowners are forced to move from their homes because of rising property taxes. Another study found that an increase from two to three property tax installment payments each year would reduce the property tax delinquency rate by about a third. Other analyses have focused on aspects of school funding in Wisconsin.

In a 2004 paper discussed at the La Follette School's January 2005 conference Taxing and Spending Limits in Wisconsin, Reschovsky demonstrated that a proposed amendment to Wisconsin's constitution to limit government spending and taxing authority would lead to reductions in programs that help the state's most vulnerable residents, a downsizing of the University of Wisconsin System and reductions in school districts' ability to provide quality education.

Reschovsky also was one of the first analysts to anticipate and project Wisconsin's "structural deficit," which Reschovsky defines as occurring when the amount of money needed to maintain current public services exceeds the revenue generated by the state's existing tax system. In a 2002 La Follette School primer, Reschovsky noted the state has had a structural deficit since at least the mid-1990s, and he predicted the state would continue to see annual structural deficits through fiscal year 2009–10. The "structural deficit" was much discussed in Wisconsin during the 2010 governor's race.

Upon retiring in June after 24 years with the University of Wisconsin–Madison, Reschovsky and his wife, Julia K. Murray, a professor of Chinese art history at UW-Madison, will move to the Boston area, where he plans to continue his research on state and local public finance and on the fiscal health of U.S. cities.

With the support of the Lincoln Institute of Land Policy, in Cambridge, Massachusetts, where he has been a visiting fellow since 2007, Reschovsky is organizing a conference to examine the role of school property taxes. "The Property Tax and Financing of K-12 Education" will be held October 18-19 in Cambridge.
Papers presented at the conference and other submissions will be considered for inclusion in a special issue of the journal Education Finance and Policy that Reschovsky is co-editing.

The primary objective of the conference and the special issue is to encourage research on the role that the property tax or alternative local government revenue sources play in funding public education, Reschovsky says. "A major focus will be the fiscal behavior of local school districts in an environment of declining or, at best, stable state and federal intergovernmental revenues."

This article appears in the spring 2013 issue of La Follette Notes.