Wednesday, October 13, 2010

A temporary reprieve in the City of Milwaukee's budget challenges

In our annual analysis of the City of Milwaukee's proposed budget - released this morning - the Public Policy Forum discusses the "remarkable reversal" in the city's required pension fund contribution, which significantly eases the financial pressures that have characterized most city budgets this decade. We point out, however, that this is only a temporary reprieve from the city's difficult structural issues.

The Forum documented the city's long-term fiscal challenges in an August 2009 report entitled "Between a Rock and a Hard Place." Those challenges stem largely from the city's significant reliance on stagnant shared revenue payments from the state, combined with difficult-to-control expenditure drivers (such as health care costs) that are exceeding the rate of inflation.

For 2011, the city's structural problem essentially is erased by an unexpected $49 million reduction in its required pension fund contribution. That's the good news. The bad news is that half of the pension reduction is eaten up by health care increases, and that the contribution is expected to go back up to more than $60 million in 2013.

Commendably, the proposed budget puts away $17.4 million of the pension savings in a reserve in order to help prepare for future pension contribution increases. Otherwise, the budget is remarkably status quo, with federal stimulus dollars helping to boost spending on city infrastructure and select departments, and significant service reductions and tax and fee increases averted.

The 2011 City of Milwaukee Budget Brief can be accessed here. A similar report on Milwaukee County's 2011 budget will be released in the near future.

1 comment: said...

One way to decrease health care costs is to invest in the health of the workers and retirees. This might include negotiating physical fitness and health assessments with co-payment incentives for staffers who meet reasonable health goals.

Want to smoke? No problem; you pay full rates. Your no-smoke co-worker pays 20% less.

Eighty pounds overweight? That's ok, just pay full price while the guy next to you with the good BMI saves $2000 a year in co-pays and premiums.

Extend breaks to include organized fitness activities and reconfigure all those high-fat vending machines into good food convenience.

The focus has to be on health improvement, though, and not on punishment.