Milwaukee leaders and taxpayers have made considerable progress from the dire fiscal cliff that the Wisconsin Policy Forum warned about several years ago. Last fall, we concluded our annual Milwaukee Budget Brief by recognizing the impact of the additional sales tax revenues that the city has received as a result of the 2023 legislation known as Act 12. The 2% city sales tax has kept at bay the financial pressures from pension and labor costs, aging streets, greater debt payments, a decreasing number of staff vacancies, and the added requirements in Act 12 itself to add police and firefighters over time. Milwaukee also has made progress in important areas such as reducing its murder rate and reinvesting in its aging streets and infrastructure.
Yet we noted last year that the city’s financial difficulties had not been defeated, only beaten back as a result of additional help from local taxpayers and state officials. “Despite the generally manageable proposal before the Common Council this fall,” we wrote, “the city will likely face greater challenges in the coming years.”
This year, as predicted, those fiscal difficulties have grown and are evident in our annual review of Mayor Cavalier Johnson’s proposed budget. At the start of the budget process, the gap between the city’s expected revenues and the spending requests from agencies totaled nearly $100 million. That was the fourth highest on record for the city, and there are good reasons to think that number will grow in future years.
For now, the city’s fiscal bulwarks can defend it against these challenges. To balance the budget, the mayor’s proposal taps city reserves that have been built up since the pandemic and are for now large enough to justify the withdrawals. The budget raises a number of fees, trims the number of city positions, and makes service cuts in some areas such as weekend library hours. Yet the proposal also keeps the city’s property tax increase below the rate of inflation – a benefit to homeowners and businesses – and keeps up a relatively high level of capital investment in infrastructure.
As we noted last year, the city’s 2027 budget should also benefit from revenues that now provide more growth, including the state shared revenue aid and the new city sales tax. Those two sources are projected to provide a combined increase of $17.7 million to help sustain the rising cost of services.
Other key revenue streams, however, are rising much more slowly, including the property tax, while costs such as employee wages and pension contributions have risen much more rapidly in recent years. The city’s overall costs are still growing more rapidly than its revenues, leaving a fundamental imbalance that will grow over time in the absence of action by city or state leaders. On the one hand, potential changes in the state Capitol might make it more likely that state elected officials would assist the city in the future. On the other hand, Act 12 and the sales tax increase on local residents and visitors – many of whom have low incomes – represent a major step that has already been taken to assist the city. Further assistance will not be easy to secure, even with some favorable political winds.
This brief seeks to lay out the city’s budget in an accessible format so that policymakers and the public can quickly grasp the challenges facing the city and the options available to address them. In doing so, we argue neither for nor against the mayor’s budget proposal but instead seek to provide the data and context needed for voters and community leaders to evaluate it for themselves. Continue reading…