The proposed budget for 2026 highlights a financial turnaround for the city of Madison after officials warned about a sizable potential shortfall last fall. After a property tax increase on December 2024 bills that was the largest in more than a generation, the proposed levy increase would moderate this year. After discussions last year about possible cuts, this budget plan would increase staffing and service levels in targeted areas to help keep up with the city’s growing population.
Buoyed by the successful November 2024 referendum, city property tax collections rose sharply last year beyond the limits imposed by state law. State aid – an area where the city has long been passed over by officials in the state Capitol – is also now unexpectedly rising on multiple fronts. As a result, the proposed budget can fund staffing for a new library and ambulance crew while keeping the proposed levy increase on this December’s tax bills to roughly the present rate of inflation.
These developments are worth noting since they represent a brighter picture than the one that city officials were faced with in the fall of last year. At that time, the Forum noted, “As Madison seeks to balance its 2025 budget, the city will largely do so on its own.” After the large budget gap and local tax increase a year ago, the relatively small budget gap and unexpected increases in state aid for the upcoming budget represent a major change. New figures about the sizable increase in city reserves may even lead some to question whether the full referendum amount was necessary.
However, Madison residents and officials should not become complacent. Despite a solid local economy and strong property values, the city’s long-term finances are still fundamentally unbalanced. As we will detail in this annual review of Mayor Satya Rhodes-Conway’s proposed budget, city spending is rising at a rate that outpaces its core revenues. The city’s property tax accounts for nearly three-quarters of the revenues in its main fund, yet the growth in the portion of the tax used for city operations is limited to well below the recent rate of inflation. City spending, meanwhile, would rise under the proposed budget more rapidly than consumer prices.
To their credit, Madison officials have shared with the public a six-year plan for helping the city cope with this ongoing imbalance – a proactive step that their peers in many other communities have not taken. This plan seeks to keep the budget balanced using the current tools available to the city while they lobby lawmakers for new options such as a city sales tax that would be similar to the one recently approved for the city of Milwaukee. At least in theory, this plan would balance the books for the city, but would come with risks and tradeoffs that we will outline in the pages that follow.
Madison remains an unusually prosperous city with many advantages. Those range from a growing population and vibrant technology sector to the stability that comes from being home to state government and the University of Wisconsin-Madison. Even though Milwaukee has more residents, Madison outranks its larger sibling as the city in Wisconsin with the highest overall property values. Yet despite all these advantages, more work will be needed to ensure city agencies can deliver the services needed for this growing community while maintaining a strong financial footing.
As always, this Forum analysis seeks neither to endorse nor to oppose the mayor’s proposed budget. Instead, we hope to illuminate its key elements for the Common Council and city residents to help ensure an informed debate and better understanding of the challenges that lie ahead. Continue reading…