City of Milwaukee Stalling on Inevitable Fiscal Crisis

The Policy Forum report notes that Milwaukee is facing a fiscal cliff due to stagnant revenues and a ballooning pension payment.

If it weren’t for federal dollars, Milwaukee’s bad 2023 budget would be much worse.

A new report from the Wisconsin Policy Forum makes the case that Milwaukee is simply postponing an inevitable fiscal crisis for another year or so with Mayor Cavalier Johnson’s latest spending proposal.

The mayor is pushing a $1.7 billion spending plan that would raise taxes as well as make cuts to city services and Milwaukee’s head count.

The Policy Forum’s report states that Milwaukee’s left-over American Rescue Plan money is giving the city a “reprieve” from making deep cuts.

“Johnson’s 2023 budget proposal would tap $81.1 million of the city’s total $394.2 million allotment of ARPA funds. Nearly all would go toward operational costs within the Milwaukee Fire Department, supporting 470 sworn fire department positions,” the report explained. “Once the federal funds are spent, the potential need to cut all of those positions or substitute others across all city departments - as well as perhaps cut hundreds more as inflation and pension payments rise - would produce severe reductions in services that a city with Milwaukee’s vast needs arguably cannot afford to endure.”

Johnson has announced plans to cut about 20 police officers from the city’s payroll, and has told the city’s library to prepare to close four branches if his plan is accepted by the city council.

The Policy Forum report notes that Milwaukee is facing a fiscal cliff due to stagnant revenues and a ballooning pension payment.

“[Milwaukee’s pension payment] rises from $71 million in 2022 to $100 million in the proposed budget,” the report states. “As a buffer against this, city leaders have deliberately built up a pension reserve fund, the balance of which currently sits at $80.8 million, thanks in part to a $40 million contribution in the 2022 budget. But the $100 million figure may increase when the final determination of the 2023 contribution amount is made early next year, and it is anticipated that the pension reserve balance will be drawn down rapidly once ARPA funds are exhausted heading into 2025.”

The Policy Forum says Milwaukee’s two biggest income drivers, property taxes and shared state revenues, have remained largely flat.

Mayor Johnson continues to hope that the Republican-controlled legislature will change that and send his city more money.

The Policy Forum report said if not, Milwaukee is looking at a real crisis.

“City policymakers should be relieved that they have the federal resources in hand to delay their day of reckoning,” the report notes. “And area residents and businesses should be aware of the magnitude of the problem that is emerging, as well as what is at stake if state and local policymakers fail to avert worst-case outcomes.”