Weekly Fiscal Facts are provided to Wisconsin Newspaper Association members by the Wisconsin Policy Forum, the state’s leading resource for nonpartisan state and local government research and civic education. The Wisconsin Policy Forum logo can be downloaded here.
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City of Milwaukee finances are closer than ever to a long-predicted day of reckoning, threatened by an unsustainable revenue mix, shrinking resources for core functions, diminishing reserves, and escalating long-term liabilities.
For more than a decade, the Forum has warned about what the future holds for the finances of Wisconsin’s largest city – and how it could jeopardize the city’s ability to provide basic services.
These impacts were delayed by outside events, from the passage of Act 10 in 2011 to the more recent infusion of federal pandemic aid. But they are nonetheless approaching, a new, in-depth Forum analysis finds – necessitating an urgent local and state response.
Except for a recent sizable – but onetime — influx of federal pandemic aid, we find the city’s revenue growth has flattened, due largely to shrinking state aid. From 2011 thru 2021, revenues grew by 12.8% in the city’s tax-supported governmental funds — compared to a 20.5% increase in the Consumer Price Index during that period.
Local property tax revenues, meanwhile, increasingly are devoted to long-term obligations. This dynamic is growing worse, and the city has few options to boost revenues, making the challenge more daunting.
The infusion of $394 million in federal pandemic relief aid from the American Rescue Plan Act (ARPA) has helped city leaders build up a pension reserve fund and delay the full impacts of these trends into 2024. Though deep cuts have been avoided for now, federal funds provide only a short-term fix.
From 2011 to 2021, the city held increases in tax-supported governmental fund spending to a sub-inflationary 14.8%. It also reduced FTEs by 12.4% (1,023 positions) since 2000.
Public safety spending continued to outpace overall spending from 2011 to 2021, rising 20.8%. As additional resources will have to go toward the city’s increased pension contribution starting next year, public safety services appear on track to become unaffordable at current service levels.
The city’s unassigned general fund balance – its measure of true reserves – fell from $61.7 million (8.9% of annual operating revenues) to close 2015 to just $9.1 million (1.3% of operating revenues) to end last year.
Meanwhile, the city’s projected $50 million increase in its pension contribution in 2023 constitutes the greatest fiscal challenge it has faced in the 21st century. The city’s OPEB liabilities also continue to grow, rising from $1.21 billion to $1.68 billion in just the past 3 years.
We find this impending crisis will likely require action on several fronts, including both the revenue and expenditure sides of the ledger. It may include expanding the city’s local tax or fee revenues beyond the property tax, reforming its pension and retiree health care benefits, limiting borrowing where possible, and finding new ways to cut spending and increase efficiency, such as consolidating or sharing services with nearby local governments.
This information is a service of the Wisconsin Policy Forum, the state’s leading resource for nonpartisan state and local government research and civic education. Learn more at wispolicyforum.org.
