Wednesday, August 3, 2011

Milwaukee County's alarming budget prognosis

For those who hoped the changes to collective bargaining or the arrival of a new county executive might finally solve Milwaukee County's longstanding fiscal problems, we are sorry to disappoint. The Public Policy Forum's 2012 Milwaukee County Budget Preview report - released this morning - shows the county's budget prognosis actually has worsened since last year, leaving it with "few remaining strategies outside of deep service cuts and/or sharp revenue increases."

This is our first report analyzing Milwaukee County's finances since the adoption of the state budget repair bill and 2011-13 state budget. Our analysis confirms that the county realizes substantial savings from the budget repair bill's labor provisions, likely exceeding $24 million in 2012. Unfortunately, about $17 million of those savings already were built into the county’s base budget in 2010 and 2011. Thus, while the net savings of $7 million for 2012 are significant, they do not come close to offsetting the nearly $29 million in state aid reductions contained in the latest state budget.

Additional key findings and observations from the report:

  • Our modeling of several approaches for bridging an estimated $38 million 2012 gap shows potentially stark impacts for county employees, services, programs, and/or taxpayers. Those include deep cuts in mass transit and community-based mental health and disabilities services; severe reductions in parks and cultural amenities and exhibits; and additional reductions in health care benefits that could greatly exceed those imposed on other public sector workers in Wisconsin.

  • Because the county may have a one-time opportunity to boost its property tax levy by nearly $10 million in 2012, there is a limited timeframe to include significantly enhanced local revenues as part of the county's deficit-reduction strategy. The only other local broad-based tax or fee available to the county is the vehicle registration fee, which could be used to generate additional revenue for transit or other transportation needs, but which has generated considerable political opposition.

  • A five-year fiscal outlook prepared by the county before adoption of the 2011-13 state budget showed a noticeable improvement over the five-year forecast from a year ago. Once the impacts of state aid reductions from the state budget were plugged into the model, however, the county’s five-year outlook became even worse than that forecasted in 2010, despite the budget repair bill’s provisions giving the county unilateral control over many labor and benefit costs.
The report concludes by noting that because the county now has greater certainty and flexibility with regard to its employee compensation framework, its ability to engage in strategic planning has been greatly enhanced. While that won't make the tough decisions any easier, it does allow county officials to reliably size up their fiscal situation and, ideally, finally reach consensus on a realistic scope of county services going forward.

The full report can be accessed here, and our media release here.


MT said...

So what you're trying not to say out loud is that Milwaukee County has a budget crisis mostly because the state cut a ton of money? Because that's what it sounds like reading this. Just say it already.

Rob Henken said...

No, it's far more nuanced than that. If the county had not already budgeted the savings made possible by the budget repair bill, then the "ton of money" cut by the state could have been mostly offset in 2012. Ironically, state legislative actions saved the county from a fiscal crisis in 2011, but helped precipitate one for 2012. Also, as we have documented in our recent county reports, stagnant or declining state revenue has been a significant contributing factor to the county's structural deficit, but escalating fringe benefit costs have been an even bigger one. Unfortunately for the county, at the same time that it has been given the flexibility needed to control one of those factors, the other has grown considerably worse.