Public Policy Forum Blog

City budget manages new fiscal reality, at least for the time being

The main focus of the Public Policy Forum’s annual review of the Mayor’s proposed City of Milwaukee budget – released this morning – is the immense challenge posed by a $59 million pension fund payment in 2013, which marks the beginning of an unprecedented series of pension payments that will impact city budgets for the foreseeable future.  We find that thanks to the foresight exhibited in previous budgets, the impacts in 2013 are manageable.  In fact, the Mayor has proposed a budget that deftly accommodates the remarkable increase in pension payments without fully depleting pension reserves or slashing critical services.

The impact of these new pension payments should not be taken lightly, however.  Pension costs will consume 32% of the city’s property tax levy in 2013, as compared with 15% in 2009. In the next few years, that percentage is likely to continue to grow, as the city’s pension reserves are tapped out and expenditures are cut elsewhere. 

Our 2013 city budget brief also reviews a set of strategic principles proposed by the mayor and his budget team to guide the city through its new budgetary realities.  Those principles emphasize finding new, cost-effective ways of conducting business, with savings reinvested in priority areas while also supporting the sizeable pension payments.  While this concept – labeled “resizing, restructuring and reinvesting” – is both innovative and appropriate, implementing the plan will not be easy.  Indeed, the budget suggests that $65 to $75 million of structural improvements will be needed in the next four years, along with a reduction of 400 to 600 positions.

The 2013 proposed budget also accommodates heightened pension costs with elevated municipal service charges.  The fee increases proposed for 2013 raise the dependency of general fund spending on this revenue source to 19.5%, as compared to 15.9% in 2009.  In fact, in 2013, charges for services become a larger source of support for general departmental spending than the property tax levy, a development that is likely to remain in place for the foreseeable future. 

We conclude by warning that while the 2013 proposed budget largely maintains existing service levels and keeps position reductions at a minimum, it is highly questionable whether enough efficiency can be identified in departmental operations in future years to continue those achievements.  The answer to that question will depend, in part, on the approach the city takes to the revenue side of the equation, as well as how shared revenue fares in future state budgets. 

Our analysis of the 2013 City of Milwaukee proposed budget can be accessed here, and our media release here.

Author: 
Vanessa Allen