The 2024 budget was an unusually easy one that benefited from the new 2% city sales tax and a surge in shared revenues from Wisconsin Act 12, as well as the opportunity to spend the last $110 million tranche of federal pandemic relief aid. As they prepared the 2025 budget, however, the Mayor and his budget team saw a return to more traditional challenges. Faced with the expiration of the American Rescue Plan Act (ARPA) funds, new Act 12 obligations to increase police and fire department staffing levels, and typical cost to continue challenges, budget officials initially warned of an $87 million budget gap that might necessitate the resumption of staffing and service cuts in non-public safety departments.
Yet, as the 2025 budget picture came into clearer focus, two important realizations emerged. First, it became apparent that several steps prudently taken in the 2024 budget to prepare for 2025 challenges would work as planned. In addition, it turned out (at least for now) that Act 12 not only would provide a one-year solution to the city’s immediate fiscal cliff, but also would pave the way for sufficient annual revenue growth to offset some of the city’s ongoing expenditure pressures.
One of the main stories of the mayor’s proposed budget is its use of $44.6 million from reserves to eliminate more than half of the projected gap. This was a move that was helped greatly by the decision to cease most reserve withdrawals in 2024 as a means of rebuilding them and providing capacity for large transfers in 2025.
The budget also benefits from $4.9 million of shared revenue growth, an extra $8.9 million from the city sales tax, and a $4.8 million payment from the state to offset elimination of the personal property tax – all stemming from Act 12. Relatively modest property tax and fee increases totaling $14 million fill most of the remaining gap, with minor and mostly harmless reductions from agencies’ original requested budgets taking care of the remainder.
The end result – somewhat surprisingly – is a second consecutive city budget that is largely devoid of cuts to city departments. While there is little room for investment in new programs and services, areas like libraries and neighborhood services that have been on the chopping block in previous years are essentially made whole.
There are also plenty of indications, however, that the tranquility will be short-lived. As we will discuss, robust reserve withdrawals may not be sustainable, while continued mandated boosts in public safety staffing levels are likely to consume major chunks of the city’s newfound revenue growth in future years. Moreover, unexpected health care savings in 2023 and 2024 – which aided the effort to rebuild reserves and allow for a $1.3 million reduction in health care expenditures in the 2025 proposal – are far from assured in the future.
In the pages that follow, we further analyze and discuss these and other keys to the 2025 proposed budget and also explore how these major decisions will impact the city’s future outlook. Our intention is to provide an objective, third-party take on both the mayor’s proposal and the city’s overall financial condition that will provide greater understanding for city lawmakers and the public as 2025 budget deliberations continue.