Public Policy Forum Blog

County Board Actions Address Key Issues in Recommended Budget, But Long-Term Challenges Remain

The Forum's budget brief on the Milwaukee County Executive's 2016 Recommended Budget – released in mid-October – found cause both for optimism and concern.   

On the one hand, the budget's ability to painlessly absorb a $20 million spike in the required pension fund payment showed how far the County has come in recent years in controlling other deficit drivers (e.g. health care and debt service) and restoring overall fiscal stability. Yet, on the other hand, we questioned whether two of the key strategies used to limit the pain in 2016 – a $17.5 million draw from reserves and a $9.8 million lump sum reduction to the Sheriff's budget – would erode that progress in future years.

Now that the County Board has passed its own version of the budget, our assessment is similarly mixed. On the positive side, the Board responsibly addressed the two major question marks in the recommended budget. First, it used savings from a deleted capital project, adjusted health care cost projections, and surplus bond proceeds to reduce the reserve withdrawal by $6 million. These savings could have been earmarked for new spending; instead, the Board prudently used them to diminish the hit on reserves, thus sustaining over a longer period the nest egg the County commendably has built in recent years. 

The hole in the Sheriff's budget also was reduced via the allocation of $4 million in additional property tax levy. While this contributed to an overall levy increase of 1.4%, that amount still is below the projected 2016 inflation rate of 1.7%.

On the negative side, the Board utilized a few questionable strategies of its own to identify resources for new projects. For example, amendments to add some small projects in County parks were financed with uncertain revenues or with no revenue source at all. Meanwhile, a new African American Community Economic Stimulus Package was funded with land sale revenue, despite recent efforts to refrain from using such revenue for operating needs in light of its volatile nature.

Also of concern is a 1% across-the-board cut to several County departments that was adopted at the end of the budget process to keep the overall levy increase at $4 million. While holding down the levy is a laudable goal, across-the-board budget cutting generally is frowned upon by government finance professionals because of its arbitrary nature. A far more preferable approach would have been to identify specific budget cuts based on programmatic priorities.   

The ball is now back in the County Executive's court to determine his list of budget vetoes. While the rhetoric surrounding those vetoes is likely to be supercharged – as it has been throughout this year's budget process – calm reflection would indicate that not much has changed with regard to the County's overall fiscal prognosis after six weeks of contentious budget deliberations. 

The County's fiscal outlook is much improved from five years ago. Still, a looming shortfall in the transit budget, vast infrastructure repair needs, stagnant revenue streams, and ongoing fringe benefit challenges continue to threaten its long-term structural health.

The Board's actions to reduce the use of reserves and alleviate the Sheriff's budget gap would put the County in a much better position to address such challenges going forward; yet, the other moves noted above – as well as failure to address growing financial concerns associated with the new transit GO Pass program – may create new problems.

As we have stated repeatedly in the past, achieving long-term structural balance will require difficult decisions by policymakers on both the expenditure and revenue sides of the budget ledger. The use of health care savings and reserves – which were available because of prudent decisions made by both branches in previous years – allowed County leaders to largely avoid such decisions for 2016. Unfortunately, those tools soon may be exhausted, setting up an even more contentious set of deliberations in 2017 and beyond.       

Author: 
Rob Henken