The Forum's annual analyses of the proposed Milwaukee County and City of Milwaukee budgets - released in mid-October - found that leaders of both governments had done an effective job of crafting strategies to address immediate budget challenges without slashing services or placing too heavy a burden on taxpayers. Both reports warn, however, that the ability to use similar strategies in future years may be limited.
The Forum's city budget brief cited the use of modest property tax and fee increases, draws from reserves, and concerted efforts to hold the line on departmental expenditures as primary budget-balancing tools. Yet, the budget brief also noted "the seemingly unsustainable nature of the City's overall fiscal structure" and suggested that consideration of more comprehensive long-range solutions may be required.
"While it is tempting to pass off the 2015 budget as 'status quo,' doing so would unfairly minimize the challenges City leaders face each year in accomplishing that seemingly simple objective," says Forum Senior Researcher Mike Gavin. "The City is fiercely challenged on the one hand by stagnant major revenue streams over which it has little control, and on the other by fierce expenditure pressures created by vast public safety needs, aging infrastructure, and daunting retirement obligations."
As in previous years, the 2015 proposed budget used changes to health care plan design to reduce the projected growth in health care costs, and it addressed other expenditure pressures with limited fee and property tax increases, contributions from special funds and reserves, and increased borrowing for capital improvements.
The brief points out that reliance on reserves and increased capital bonding - while perfectly appropriate in the 2015 budget because of healthy reserve fund balances and a manageable debt burden - may not be sustainable in future years and should not be viewed as permanent solutions to the City's financial challenges.
"While we raised questions about the long-term efficacy of several elements of the budget's overall approach, that should not be mistaken for concern about the City's fiscal management," says Gavin. "On the contrary, our concern stems from the seemingly unsustainable nature of the City's overall fiscal structure, which continues to be plagued by overreliance on flat state revenue streams, coupled with pressing infrastructure needs and retirement obligations that show little sign of abating."
In light of that concern, the report questions whether City leaders "should continue to use the same strategies they have effectively deployed to meet recent severe challenges year after year; or whether, instead, there is a need for radical changes to the City's fiscal paradigm."
Meanwhile, the Forum's analysis of the county executive's recommended budget cited the budget's emphasis on restructuring and resizing initiatives, as well as a continued demand for sacrifice by County employees, as the key strategies used to plug the County's annual budget gap. While effective in the near-term, the Forum's analysis also noted that the same budget-cutting strategies may not be viable in future years.
"Overall, the budget's effort to hold the line on departmental spending and creatively seek structural savings is fiscally responsible and reflective of the County's ongoing fiscal challenges," says Forum President Rob Henken. "A key question, however, is whether long-term balance can be achieved with a strategy that leans so heavily on annual demands for departments to operate more efficiently with less."
The report praised the sound financial management practices established in the budget and cited notable efforts to create efficiencies by pursuing restructuring initiatives and service-sharing agreements with municipal governments. As in the city budget brief, however, the county brief questions the "shelf life" of certain budget-cutting strategies.
"A question mark is whether the strategies used in the 2015 recommended budget can be repeated in future years as the primary means of balancing the budget," says Henken. "For example, we ask whether the County's infrastructure repair backlog ultimately will be too comprehensive and too critical to defer, whether County employees can continue to absorb cuts in compensation year after year, and whether the County's limited reserves can continue to be tapped to offset the annual budget deficit."
The brief concludes by stating that the recommended budget's ability to "bridge a substantial budget gap without slashing services or raising taxes is a significant feat that should not be understated." It cautions, however, that "because certain longstanding problems continue to linger, the degree of difficulty is likely to increase in future budgets."
The 2015 City of Milwaukee Budget Brief can be accessed here, while the 2015 Milwaukee County Budget Brief can be accessed here.