Our latest take on the 2018 Milwaukee County budget

By Rob Henken

While Forum members and supporters know that we publish budget briefs each year analyzing the City of Milwaukee, Milwaukee County, and Milwaukee Public Schools budgets, some may be unaware that our work does not stop there. After releasing our budget analyses, we continue to monitor budget deliberations, and we offer presentations and briefings to legislative bodies and individual policymakers. We also seek opportunities to inform the public; for example, we recently presented our findings on the City budget to attorneys at Quarles and Brady, members of the University Club, and the residents at St. John’s on the Lake.

We weighed in on the “super amendment” proposed by the Milwaukee County Board Chairman, which would re-write significant components of the County Executive’s recommended budget for 2018 if adopted by the full Board. That testimony is below:

Good evening. My name is Rob Henken, and I am President of the Public Policy Forum, a nonpartisan, nonprofit organization established in 1913 to enhance the effectiveness of government through objective research of public policy issues.

Hopefully, each of you has had a chance to review the Forum’s analysis of the 2018 Recommended Budget. Knowing that my time is limited this evening, I would like to focus not on that report, but on the super amendment that was adopted by the Finance Committee last week.

On the positive side, we commend the author and supporters for carefully considering how to eliminate the $30 VRF increase without shirking standards of fiscal responsibility. We applaud you for holding the line on the Debt Service Reserve and avoiding reductions to the recommended Pension Fund contribution. Likewise, it is notable that the amendment shuns other budgetary “gimmicks,” such as unrealistic revenue estimates.

A major component of the amendment, of course, is the 0.75% across-the-board cut for most County departments. Here, we have mixed views. On the negative side, across-the-board budget cutting is not an ideal practice. Optimally, departmental spending would be reduced in a strategic manner based on the County’s priorities and programmatic performance data.

That being said, we sympathize with your inability to take such an approach given the compressed timeframe for budget deliberations. Also, it is important to note that your effort to reduce departmental expenditures as a VRF alternative would address the County’s structural deficit and does get you started on the expenditure reductions that appear inevitable in future years.

Overall, while a 0.75% expenditure increase may be manageable for some departments, it certainly could be onerous for others. We are in no position to tell you where the greatest service-level impacts would occur and what those would be; but we would caution you that, at minimum, you are asking your departments to give up whatever small amount of “cushion” they may have going into the year, as opposed to letting things shake out during the year.

Consequently, you should be prepared for razor thin margins in departmental budgets for 2018; you should be ready to arbitrate various competing requests for use of your limited Contingency Fund monies; and you should know that you have minimized the chances for a sizable year-end surplus in 2018, thus further exacerbating your challenges in future years.

Perhaps our biggest concern with the super amendment is its deferral of several capital projects as a means of eliminating any increase in the VRF. In the Forum’s latest report on local government infrastructure, we labeled the County’s capital outlook “unmanageable” in light of the huge backlog of needed projects that has been building for more than a decade, and the fact that departmental requests for capital projects now exceed your available borrowing capacity by tens of millions of dollars each year.

As we pointed out in our budget brief, this problem exceeds even the County’s pension and retiree health care liabilities as its foremost fiscal challenge. Your infrastructure problem is not going away, and it grows more difficult with each successive year that needed projects are deferred.

In closing, we would agree that the proposed VRF increase is far from ideal, particularly as a one-year bump. However, in future budgets, you likely will need to consider even larger fee increases, as well as more drastic spending cuts, to responsibly address your retirement obligations and infrastructure challenges.

The question is how to achieve the right mix of revenue increases and spending cuts in this particular budget to minimize service-level impacts while improving your overall financial position going forward. We can’t make that call for you, but we would suggest that some compromise may be in order to help those departments hit hardest by the across-the-board reduction and to avoid digging an even deeper hole on the capital side for 2019 and beyond.

Thank you for the opportunity to testify.