Over the last 15 years, the Wisconsin Policy Forum has issued three in-depth analyses assessing the city’s fiscal condition. Between a Rock and a Hard Place, Making Ends Meet, and Nearing the Brink each issued stern warnings of a city facing deep structural challenges that threatened its ability to provide reasonable levels of core services to its citizens. While health care savings and various short-term fixes staved off draconian budget cuts over the period, Nearing the Brink – written just last year – emphasized that “the city of Milwaukee is once again on the brink of a financial crisis.”
With that warning as a backdrop, the remarkable nature of the 2024 proposed budget comes into focus. Most strikingly, this is a budget that for the first time in recent memory adds positions, refrains from tapping into reserves, and almost unimaginably provides departments with the resources they sought in their requested budgets.
This extraordinary turn of events is almost entirely attributed to the passage of 2023 Wisconsin Act 12, the landmark state legislation adopted in conjunction with the state budget this past summer. The legislation provides the city with its first shared revenue increase in decades, while its authorization of a 2% local option city sales tax provides both a huge infusion of revenue and the ability to spread some of the cost of city services to the non-residents who use them. With more than $200 million in projected new revenue now at their disposal, city leaders are able to consider how to invest – instead of where to cut — for the first time in a generation.
On top of these two new revenue streams, 2024 is the last year that city leaders can spend down monies from the federal American Rescue Plan Act (ARPA). Between previously unallocated and reprogrammed funds, an additional $110.3 million is available for spending purposes.
The budget that results from this good fortune strives to address the city’s current needs while also planning for the future. Budget officials are cognizant that the good times will not last: just one year from now, ARPA monies will disappear, and the city’s employer pension contribution that demands more than $180 million in spending each year will remain.
Consequently, in recognition of this year’s unique fiscal abundance, the proposed budget makes a number of important investments that are designed to shore up longstanding areas of need while reducing cost pressures in the future. For example, tens of millions of dollars are dedicated to a major restructuring of compensation levels for key city positions in an effort to make recruitment and retention more viable in a historically tight labor market. The proposed budget also seeks to build up critical reserve funds while using cash– instead of funds derived from borrowing – to carry out nearly $37 million in capital projects.
In the pages that follow, we discuss how key spending pressures that placed the city on the precipice of fiscal crisis have been alleviated in 2024, as well as the prospects for renewed structural challenges in 2025 and beyond. Our hope is to provide city leaders and citizens with enhanced perspective on the most important decisions for next year’s budget as well as what those decisions will portend for the future. Continue reading…