As recently as the fall of 2022, an in-depth assessment by the Wisconsin Policy Forum found that the city of Milwaukee was beset by a series of fiscal issues that seemed almost insoluble. The lifeline of federal pandemic aid from the American Rescue Plan Act was scheduled to run out in 2024 just as the city would face a massive jump in its contribution for its underfunded pension system. As in many American cities, crime rates in Milwaukee had shot upward and staff vacancies had also risen amid low unemployment and rampant inflation. The city’s reserves had dwindled, its debts had grown, and infrastructure needs in areas such as streets and water lines also needed to be addressed.
The years since then have gone as well as Milwaukee leaders could have hoped. In 2023, Mayor Cavalier Johnson and the city council secured a new 2% city sales tax and an influx in shared revenues from the legislation known as 2023 Wisconsin Act 12. Crime rates began to fall and city leaders made enhanced investments in streets and other infrastructure. As we noted in last year’s city budget brief, those new funds enabled them to wean the city off federal pandemic aid in 2025 while using the last of the funds to increase city reserves and better prepare Milwaukee for the future.
Milwaukee’s challenges, however, are beginning to slowly return, starting with a massive increase in pension payments for the city’s existing obligations and the added mandates in Act 12 that aim to strengthen the city’s retirement system. Wages and benefits for employees are rising, helping to lower vacancies but also raising the city’s labor costs. The starting gap between projected revenues and the city’s cost-to-continue its present services reached just over $100 million for 2026, down sharply from the starting gaps in 2023 and 2024 but otherwise the most on record going back to 2005.
Still, the budget largely avoids painful measures, with some increases to property taxes and fees but limited impacts to city services. Milwaukee continues to benefit from increases in city sales tax revenue and a form of state aid known as shared revenue that together are helping to offset the new pension costs and ongoing effects of inflation. The mayor’s proposed budget also draws on some of the reserves that the city built up in 2024 to help ease the current pressures. Though Act 12 has not been perfect, it has clearly strengthened city finances overall.
Despite the generally manageable proposal before the Common Council this fall, however, the city will likely face greater challenges in the coming years. Costs for wages, pension benefits, and infrastructure will continue to rise. The portion of the city’s property tax used for operations is currently limited under state law to a rate of growth well below the current rate of inflation. Expenses such as health care that have been under control in recent years could start to rise once again. In the near term, the city is unlikely to gain any new tools as sizable as those in Act 12. As a result, city leaders will likely have to identify efficiencies, structural changes, or partnerships with other local governments that could help to absorb these future demands.
In this brief, as the Forum does each year, we will explore the city’s recent gains, present circumstances, and potential future challenges. As always, we seek to provide an impartial analysis into the city’s financial condition and the proposed budget to guide both city residents and elected officials on the Common Council as they consider taxes, fees, and service levels for Wisconsin’s largest city. Continue reading…