This past January, the new year opened with the prospect of real gains for the city of Madison and its residents. The pandemic had loosened its grip on the city, and the state had a substantial budget surplus that suggested the possibility of a massive increase in state aid for local governments.
Ultimately, the new state budget did deliver a historic increase in state aid in 2024. Along the way, however, legislators sharply revised the formulas for awarding those funds to local governments.
As we discuss in this brief, that change had a huge impact on Madison – next year the city will receive only a modest increase in state aid. Though some additional help is better than none, the passage of the final state budget and aid package reduced the state surplus substantially and also makes it much less likely that the Legislature will take up an ambitious new measure to help local governments like Madison in the near future.
For now, at least, that does not spell disaster for the state’s capital city. In our annual brief on the city budget, we find Madison has a vibrant local economy and largely healthy finances, including strong reserves, high service levels, modest liabilities for pension and retiree health care benefits, and a premium bond rating from Moody’s Investors Service.
Yet Mayor Satya Rhodes-Conway and the city council face challenges for the 2024 budget and even greater ones in future years. The federal pandemic relief funds that have helped sustain city services since 2020 are running out and key revenue streams have yet to recover enough to make up for their looming loss. City receipts from bus fares, parking fees, and even room taxes have yet to return to 2019 levels when accounting for inflation. Madison leaders have worked on spending cuts, but city spending levels per resident remain relatively high compared to other cities and villages in Wisconsin, as tracked by metrics such as the Forum’s Municipal DataTool.
Other lesser concerns have also arisen, such as a reliance on reserves and an inability to increase staffing levels to match the growth in residents. Also, high rates of inflation and elevated turnover in key agencies like the police department will continue to put pressure on city leaders to raise wages. To cope with these long-term challenges, the city needs new revenues or creative spending cuts. For now, the state is neither providing substantial new aid nor changing restrictions on the city’s taxes or its obligation to bargain with firefighters and police for higher wages. In future years, city officials will need either a breakthrough at the state level or some other new, homegrown approach.
In this brief, we provide details on the city’s future plans and present challenges. In doing so, we hope to illuminate the landscape ahead as elected leaders and city residents together plot their steps forward. Continue reading…