Public Policy Forum Blog

Milwaukee city and county budgets not for the faint-hearted

The Forum released its analysis of the 2010 proposed City of Milwaukee budget this morning, following up on our similar analysis of the 2010 recommended Milwaukee County Budget released last week. I wish we had better news.

A recurring theme in both analyses is that expenditure needs largely driven by increasing pension and health care costs have far eclipsed stagnant and inflexible revenue streams, necessitating cuts in services that will be noticeable to citizens. Even more depressing, the problems facing both governments are likely to worsen.

While the general nature of the problem is the same, the severity clearly is far greater for Milwaukee County. We have noted previously that the city stands roughly where the county stood six or seven years ago -- on the precipice of major imbalance but still with some tools to ameliorate the situation.

The 2010 budget proposals from the mayor and county executive reflect that perception. The city can ease the pain of its $49 million increased pension contribution and cuts in state aid by tapping into its tax stabilization fund, pension reserve and parking reserve. Furthermore, it still posesses sufficient vacancies to cut hundreds of positions without forcing layoffs, and it still can resort to administrative restructuring and other departmental tinkering to generate savings that do not produce immediate and highly noticeable service-level impacts.

In contrast, the county has no reserves worth mentioning, and several successive years of bridging $40 million budget holes have left it with little wiggle room to reduce staff or seek efficiency without significantly impacting both employees and services.

The clear disparity in options is perhaps one factor that led the county executive to take an extreme budget risk by counting on huge cuts in employee compensation that have not yet been negotiated with county labor unions. The mayor, meanwhile, has been able to plug in significant yet much smaller savings from a two-year wage freeze and relatively minor health care and pension concessions already ratified by his largest union, while only gambling that other city unions will accept something similar.

Of course, the difference in tactics also is distinguished by the mayor's decision to propose $19 million in property tax and service charge increases, while the county executive has proposed no property tax increase and roughly $5 million in bus fares, zoo admissions and parking fee increases.

As we stated in both analyses, as well as in previous reports (see here and here), it is difficult to imagine how either government can right its fiscal situation in the long term without a combination of new revenue streams (which could include new local taxing authority and/or revenues from the lease or sale of major assets), deep service cuts and/or substantial wage and benefit concessions.

What is most critical is that leaders of both governments plan for the future (and forcefully engage state officials) as soon as the ink is dry on their 2010 budgets, so that they don't end up in the same place next year, facing huge budget holes with fewer available options.