Milwaukee County's disappearing budget "deficit"

While elected officials and bloggers pontificate about Milwaukee County's mysteriously disappearing budget deficit (now down to an estimated $650,000 based on a new report by the county auditor and county board fiscal and budget analyst, after earlier being estimated at $14.9 million by executive branch officials), there is a pressing need for some non-emotional context. Here goes:

1. It is far from unusual for early year projections of Milwaukee County budget deficits to be reduced as the year progresses. This circumstance stems primarily from two factors: a) the logical and justifiable impulse for county budget officials to be extra conservative early in the year, recognizing that if action isn't taken to address problem areas by spring or early summer, then the situation can spiral out of control by fall, when it is too late to enact meaningful fixes; and b) county departments are motivated to report projected deficits early in the year so that those may be addressed, but far less motivated to report potential surpluses because of uncertainty as to future problems that those surpluses would be required to cover.


2. Reduction of an early year deficit of $15 million to close to zero within a month is highly unusual. It is critical, however, to read the fine print of the audit/county board staff report to understand how that happened. Of the $14.3 million reduction, $5 million is attributable to assuming the receipt of revenue from UWM by March 2010 for the recently approved county grounds land sale (which the report pointedly notes is highly questionable), and $4.4 million is attributable to specific deficit reduction actions taken by the county as a result of the earlier shortfall projection. If you take those two factors out of the equation, then the swing is $5 million, which is not at all uncommon for this time of year. This swing can be chalked up mainly to new information uncovered since the original projection and reasonable disagreement between administration and audit/county board staff regarding fringe benefit expenditure trends.


3. While it was inevitable that the county would seek to use a healthy chunk of the UWM land sale revenue to address its immediate fiscal problems, it still is not optimal fiscal policy to do so. Use of one-time revenue in this fashion does help alleviate the immediate crisis, but policymakers must recognize that it does nothing to address the county's structural deficit and, in fact, masks that deficit's true size.

Sadly, the political fighting between the two branches of county government over this episode likely has only just begun. And, while it is necessary and appropriate for the two sides to responsibly deliberate whether the depth and scope of the projected 2009 deficit justifies the painful short-term responses proposed by the executive branch (e.g. 35-hour work weeks), the worst outcome would be inattention to the long-term structural budget problems facing county government (as we have warned about here and here).

Indeed, what cannot be lost in this conversation is the fact that those problems are every bit as real for 2010 and beyond with a $650,000 projected deficit in 2009 as they were when the problem was deemed to be $14.9 million just a few days ago.