Consolidating dispatch operations in Milwaukee County's South Shore

Would an independent consolidated dispatch center better serve the communities of Cudahy, St. Francis, and South Milwaukee?  Our latest report finds that consolidating dispatch could produce substantial operating and equipment savings, as well as operational improvements, which include the ability to better coordinate responses to major incidents. It also indicates, however, that those potential advantages must be weighed against the current benefits for each city of solely controlling its dispatch operations and maintaining those operations at its own police headquarters.

Because dispatch personnel at the three police departments do far more than traditional dispatch activities, with additional duties ranging from parking administration, to background checks for liquor license review, to collecting bail on warrants, the report includes models that take into account the need for each government to cover those non-dispatch tasks.  

Key findings from the analysis include the following:

• By consolidating their dispatch operations into an independent consolidated dispatch center, the three cities could reduce current collective annual operating expenditures by approximately $132,000 to $256,000, and produce equipment savings within the next five years of approximately $400,000 to $600,000.

• If one of the three cities were to perform dispatch services under contract with the other two, or if the three cities contracted with a neighboring jurisdiction for dispatch services, then substantial additional savings could be generated. While the report focuses primarily on creation of an independent consolidated dispatch center, it suggests that contracting for dispatch services could be even more cost efficient because the three cities would not have to lease or purchase space, hire a dispatch center manager, and contract for back office support.

• Potential cost savings must be weighed against loss of local control and the potential loss of 24-hour staffing at each city’s police headquarters. The report notes that the lack of on-site dispatchers may preclude 24-hour staffing at police stations, which some may argue would produce a decline in the level of police protection offered in each community.

• If the three cities do not decide to pursue consolidation of their dispatch operations, then they may wish to at least review whether the administrative tasks assigned to dispatchers might be more appropriately assigned to clerical staff.

In the end, the question of whether to pursue an independent consolidated dispatch center – or to jointly contract for this service with a different jurisdiction – must be considered within the context of each city’s short-term and long-term financial circumstances and public safety needs.  An additional consideration is whether the cities may wish to pursue additional public safety consolidation, which may further dictate the logic of consolidating dispatch services. (Our analysis of the possibilities for shared or consolidated fire and emergency medical services in the South Shore will be released early in 2013.)

The report was funded by the three cities and the Greater Milwaukee Committee, with whom the Forum has partnered to facilitate an Intergovernmental Cooperation Council workgroup that is discussing shared services among Milwaukee County’s 19 municipal governments. In May, the Forum released a report on possible consolidated fire services in the five other southern Milwaukee County municipalities.

Possibilities for shared or consolidated fire services in southern Milwaukee County

A new report released by the Public Policy Forum this morning finds that the five municipal fire departments in the southern part of Milwaukee County work closely together, providing mutual aid in times of high activity and cooperating in areas ranging from training to special rescue teams.  That begs the question: could the five departments do even more to share services, perhaps even following the lead of the North Shore Fire Department to fully consolidate?

In order to assess that question, the Forum worked with administrators and fire chiefs from Franklin, Greendale, Greenfield, Hales Corners and Oak Creek to explore several options for enhanced sharing and coordination, including a model for a consolidated fire department. The project was initiated by a work group formed one year ago by the Intergovernmental Coordinating Council, which has been exploring a range of possibilities for greater service sharing among Milwaukee County’s 19 municipal governments.

A similar fire and dispatch project also is underway in Cudahy, Saint Francis and South Milwaukee.

The new Forum report focuses initially on consideration of enhanced cooperation and sharing in various areas of fire department operations that could occur within existing administrative and operational frameworks.

It then moves on to model three increasingly comprehensive consolidation approaches:

• A Coordinated Support Services model, which involves the creation of unified bureaus to conduct training, vehicle maintenance and fire inspection services for the five departments collectively.
• An Operational Consolidation model, which envisions a unified operations framework under which the “closest unit responds” regardless of municipal boundary, but which retains the five departments as separate entities with independent personnel, vehicles and governance.
• A Full Consolidation model, under which the five departments would merge into a Southern Milwaukee County Fire Department with its own governance structure, budget, personnel, equipment, and operational framework.

The fiscal and operational analysis associated with those models suggests that each holds potential for improving the coordination and efficiency of fire and emergency medical services in the five communities. The analysis also shows, however, that substantial financial savings only would be achieved with the more comprehensive consolidation models.

The full consolidation model, for example, could yield more than $1 million per year in annual operating budget savings and nearly $4 million in vehicle replacement savings over five years, without closing any existing station locations or cutting firefighter positions. Those potential benefits, of course, must be weighed by each municipality against any perceived negative impacts that would result from ceding local control of fire and emergency medical services to a consolidated department.

The report concludes by suggesting that the five municipalities consider the findings within the context of their own financial and operational needs and concerns. As they do so, it says, “they should keep in mind that a phased approach is a viable option, in which enhanced service sharing is implemented first as a possible precursor to operational or full consolidation; and that additional planning and analysis – as well as creation of a framework for an intergovernmental agreement between the five communities – will be needed to definitively project fiscal and operational impacts associated with the operational and full consolidation models.”

The full report – which was sponsored in part by the Helen Bader Foundation and the Greater Milwaukee Committee – can be accessed here.

The Forum's top five research findings of 2011

With the end of the year upon us, it’s time once again for the Forum to unveil its top five research findings of 2011. We started this annual tradition last year with a list that included findings on Milwaukee's skilled workforce, Milwaukee Area Technical College spending habits, and the imbalanced state of Milwaukee County's adult mental health system. This year's list is equally diverse and provocative (or so we hope). Without further ado, here they are in chronological order:

1. Greater Milwaukeeans need to be better educated about how their individual actions impact regional water quality. Our January report detailing results of a survey of 400 area residents on water-related issues revealed that nearly 85% feel "the actions of individuals do not have an impact on water quality and quantity problems," while only 4% feel they "have a responsibility to future generations to protect the region’s water resources." Those responses may be linked to the survey's additional finding that respondents place a relatively low value on water quality as a factor in the regional economy, and suggest that stepped up public education efforts are in order, particularly if the region's status as a freshwater innovator is to be promoted.


2. MMSD's capital spending needs are daunting and may conflict with the capital needs of other local governments. Our comprehensive fiscal assessment of the Metropolitan Milwaukee Sewerage District (MMSD) - released in June - found a local governmental body that is in sound fiscal condition. Nevertheless, despite the completion of deep tunnel expenditures and expiration of stipulation agreements with federal and state regulators, "the types of enormous capital investments that distinguish MMSD from other local governments...may need to continue because fundamental water pollution problems remain." We caution that in light of their enormity, MMSD’s capital priorities may need to be debated in the context of the investment needs faced by other local governments for schools, parks, roads, libraries, etc.


3. Milwaukee County was housing or paying for an average of 556 fewer adult and juvenile inmates per day at the end of 2010 than it was at the end of 2008. In a June research brief, we documented the remarkable decline in the county's inmate population and speculated on possible causes. We also calculated related financial savings, estimating the county spent $12 million less on adult and juvenile incarceration in 2010 than it did two years earlier. The brief noted that while some county law enforcement officials disagreed on the public safety impacts of reduced inmate populations, the county's fiscal woes demanded consideration of strategies to sustain the downward trends.


4. Analysis of the budgets of 15 comparable cities shows Milwaukee is the only one funded substantially with intergovernmental revenue. While the Forum has consistently reported on Milwaukee's significant reliance on state government, even we were surprised at the extent of that reliance when compared to other cities. A July report by the Forum's 2010-11 Norman N. Gill fellow found that the 15 comparison cities use intergovernmental revenue to fund about 18% of their budgets, as compared to Milwaukee's 46%. Meanwhile, at least half of every other city’s budget is funded by local tax revenue, with most having access to a local sales or income tax to supplement property tax funding.


5. Strategic economic development planning is a national trend that has not yet taken hold in Milwaukee. "Assembling the Parts," our November report on Milwaukee's economic development landscape, noted that while impressive progress has been made by city and private sector leaders to assemble the right pieces of a comprehensive economic development strategy, the city still could benefit from a strategic vision and plan that ties those pieces together into a "cohesive and strategically organized whole." We cited the existence of such plans in other cities and discussed a new "metropolitan business planning" concept engineered by the Brookings Institute that could provide great value to Milwaukee.

With 20 research reports in 2011, it was not easy for us to narrow down our list of top findings to five. Left off the list this year were important findings related to the readiness of area child care providers for the state's new quality ratings system; the impacts of the state budget repair bill on Milwaukee's city and county budgets; the views of area residents on municipal shared services and consolidation; and the potential for greater collaboration in technology transfer among local universities. Those interested in reviewing those and other findings can check out our full list of research publications here.

Managing local government health care costs: The ambiguous incentives of federal health care reform

Recent local government and school district budget deliberations have honed in on deep and often contentious modifications to health care benefits. Many have asked how far local governments will go in reducing benefits now that they have been given greater flexibility to pare down employee health care costs without having to collectively bargain with most unions. These questions likely will continue and become more dynamic with the phasing in of the federal health care reform law.

In 2014, federal law will require all individuals to have health insurance, with new government-subsidized health care exchanges offering an alternative option for small businesses and individuals who are not eligible for Medicare, Medicaid or affordable employer coverage. States can allow large employers to participate in these exchanges in 2017.

How large employers, both public and private, will react to the federal health care reform law is a big unknown. Besides taking advantage of lower cost plans provided through exchanges, some speculate that employers may also consider dropping coverage altogether.

The wild card is a “play or pay” penalty imposed on large employers for not providing affordable employee health care coverage. Large public and private employers who fail to do so will be subject to a $2,000 annual penalty beginning in 2014 for each of their employees, provided that any of their employees have a household income low enough to qualify for a federal subsidy to help pay for coverage within an exchange. Employers offering coverage that pays less than 60% of expenses would face similar penalties, but only for those employees eligible for the federal subsidy. This applies to even seasonal employees that work full-time hours in any given month, a population that currently does not get health coverage in most local governments.

With many local governments paying annual premiums of $20,000 or more for family plans, and picking up more than 80% of plan costs, a $2,000 penalty would be a bargain. Consequently, some argue that many local governments will drop or significantly reduce employer-based coverage.

A recent Urban Institute report challenges this perspective, arguing that for any large employer such a shift would wrongly ignore market realities and the dynamics of worker preferences. While the Institute's report notes that exchanges could better suit some lower-income individuals because of the subsidies for which they are eligible, employers still need to maintain an edge over competitors to retain and attract highly skilled and higher paid employees. Those individuals would not receive subsidies and their share of the exchange plan costs would be approximately 30%, as compared to the typical 15% in employer-based plans.

The report also argues that market competition will force employers who decide to drop health insurance to fully cover the lost benefit with increased wages. On top of that, the employer would still face the $2,000 penalty for each worker.

Do these considerations hold true for local government employers in particular? One factor that has been downplayed is that local governments and their competitors will likely be pressured to contemplate significant changes to employee compensation. Consequently, the market pressure to maintain health care benefits in order to remain competitive may be diminished as all employers continue to recalibrate compensation. Nevertheless, a key question is how local governments will balance the reality of restricted resources and the need to preserve critical public services with their equally compelling need to attract and retain quality workers.

The Calm before the Storm…

This morning, the Public Policy Forum released its annual evaluation of the mayor's proposed City of Milwaukee budget. The 2012 budget is the city's first since passage of the state budget repair bill that ends collective bargaining for most unions, and a new state budget that severely limits property tax increases and significantly reduces aids to local governments.

We find that the proposed budget manages to provide at least one more year of sustained city services, while also replacing certain areas of lost federal and state grants with reallocated property tax levy, and bolstering the city’s pension reserve fund. All this is accomplished with only a small increase in the property tax levy and relatively modest increases in city fees.

The key for 2012 is the state budget repair bill, which allows the city to reap the benefits of much larger employee contributions to the cost of their health care and pensions, and to engage in a substantial redesign of its health care offerings without the need for collective bargaining. A total of $36.8 million in savings results largely from this new flexibility, but also from changes the city would have pursued regardless. Taking into account the state aid reduction of roughly $13.4 million resulting from the recent state budget, the city was able to derive a net total savings of $23.4 million to put toward city services, build reserves and limit property tax levy growth.

In fact, despite the small increase in property taxes and the reduction in state aids, city departments collectively see expenditure growth similar to that seen in better economic times. General operating expenditures, net of fringe benefits, grow by $27.5 million in 2012, or 6.2%. An increase of that magnitude has not been seen since 2007. Such an occurrence would have been unlikely without employee benefit changes.

This good fortune may only be fleeting, however, as the opportunity for this magnitude of savings subsides and several cost spikes come on line. Beginning in 2013, the city expects to face several successive years of unprecedented pension payments ranging from $58 to $80 million annually, as well as an end to federal stimulus funds that now support 50 police officers. Tough decisions will be required, including whether to continue to balance growing fixed costs, stagnant revenues, and gradually declining reserves with additional reductions to employee compensation.

The 2012 City of Milwaukee Budget Brief can be accessed here. A similar report on Milwaukee County's 2012 budget will be released Monday.

Public sector labor relations in the "new normal"

Given how recent legislative events in Madison have transformed the lives of local government administrators in Wisconsin, it is ironic that hundreds of county and municipal managers from across the country have descended on Milwaukee this week for the annual conference of the International City/County Management Association (ICMA).

The conference, which began Sunday and lasts through today, includes seminars on a variety of public administration topics, such as performance measurement, citizen engagement and priority-based budgeting. Not surprisingly, another seminar topic was "Labor Relations in the Age of the New Normal," which I had the privilege to moderate.

My mission was to launch the discussion by bringing the audience up to speed on what exactly occurred here in Wisconsin, which I did by laying out the core components of the state budget repair bill and 2011-13 state budget (my PowerPoint can be accessed here). Then, I turned the stage over to two municipal managers from Wisconsin and one from Michigan (where legislative initiatives are similarly transforming public sector labor relations) to discuss how they were managing their labor challenges in this "new normal."

Those leaders expressed several interesting insights, including the following:

• One of the participants argued that whether or not the demands for changes in public sector collective bargaining and employee cost-sharing are politically motivated, the "evidence supported the premise." In other words, the failure of many local governments to respond to changing economic conditions and the changed political environment, and their reliance instead on continuing to negotiate labor contracts on a "business as usual" basis, had forced state elected leaders to take labor negotiations "out of their hands."


• Another panelist was more critical of the tactics adopted by many legislatures and governors, calling those tactics a "Neanderthal" approach to managing employee relations that "presumes that employee morale doesn't matter and that we can incent superior performance even when putting the squeeze on public servants."


• Several panelists noted that the decision by elected officials to exempt public safety employees from collective bargaining changes had made their jobs as managers even more difficult, as the existence of two distinct classes of employees (public safety and non-public safety) had generated both morale and logistical concerns.


• Each of the participants agreed that direct employee engagement about the political and fiscal issues facing their governments was more important than ever. In addition, all agreed that communication with employees should continue "as if the balance of power in labor relations hasn't shifted" and that opportunities for labor-management collaboration on ideas for improving efficiency and cutting costs should be pursued aggressively.


• One panelist suggested that the new normal will cause "managers to manage more" and "leaders to lead more." By that he meant that the existence of labor contracts and strong unions often was used as a crutch by municipal managers to avoid making difficult decisions or seeking efficiencies that would negatively impact their employees.

The discussion by the three panelists - as well as 45 minutes of questions and comments from colleagues - revealed the difficult position in which many local government administrators find themselves. Fully cognizant of their fiscal challenges and public demands to "do more with less," yet sympathetic to the livelihoods and morale of their often under-appreciated employees, they are torn between optimizing both their new tools and the performance of their workforce.

How appropriate that these lofty issues would surface here in Wisconsin, the ground zero for a new approach to public sector labor-management relations.

Time to consider a countywide comptroller in Milwaukee?

The announcement earlier this week by longtime City of Milwaukee Comptroller Wally Morics that he will not run for re-election in 2012 creates a vacancy in one of our region's most important, but least understood, elected public offices.

The comptroller essentially functions as the chief financial officer for city government, exercising fiscal control, per the city Web site, "over the activities of approximately 40 city departments and agencies." Perhaps most important, the comptroller's office sets the tone for fiscal responsibility and accountability in city government. It does so by establishing accounting policies and procedures for all city departments; overseeing the city's debt portfolio (which exceeds $750 million); administering all federal and state grants; reviewing all proposed development projects involving city economic development tools; conducting audits of internal city functions; and certifying all revenue figures used in the annual city budget.

In an August 2009 report, the Public Policy Forum found that despite serious fiscal challenges, the city "by most any standard...is financially well run." In many respects, that is attributable to a chief financial officer position that not only is specifically charged with ensuring that the city's finances are responsibly, accurately, and transparently managed, but also one that, because of its independently elected status, can do so without fear of recrimination from other city leaders.

The Forum also has opined, in several of its recent reports on the finances of Milwaukee County government, that the absence of a similarly charged independent controller's office in that government has contributed to its financial difficulties. Consequently, in light of Mr. Morics' impending retirement, is it worth considering whether the elected city comptroller should be transformed into an elected countywide position that would fulfill the same fiscal oversight functions for both city and county government?

Admittedly, questions of home rule, statutory and logistical issues, and turf concerns would make such a proposition difficult to implement, particularly in time for the April 2012 election cycle. But among the potential benefits of such a move - in addition to giving the county the type of independent fiscal oversight it has long needed - would be the following:

• Combining certain city and county accounting and internal audit functions within one office could promote greater quality and efficiency, and perhaps save money by allowing for staff reductions and/or merged financial management and payroll systems.


• An independent office overseeing the financial affairs of both governments would be able to provide greater perspective on regional infrastructure needs and priorities, and how they should be funded. This is counter to the existing state of affairs, in which each government issues long-term debt for capital projects without knowledge or concern about the other's borrowing decisions.


• This could be a significant initial step toward far greater city-county cooperation, as having common fiscal policies and procedures and a unified set of accountants could make it much easier to consolidate other services down the road. The professionals working in a consolidated comptroller's office also could be a source for new ideas on how to consolidate other "back office" functions, such as information technology, human resources, health care administration, procurement, etc.


• A joint city-county comptroller's office might even be able to provide accounting, audit, payroll or financial management services to other Milwaukee County municipalities at a price that would save money for the municipalities.

Again, while this idea would require substantial additional research and deliberation, doing so would be consistent with the shared services and consolidation discussions that are occurring with increasing frequency among the new county executive and local municipal leaders. If ever there were a time when such an idea should be considered, it would appear to be now.

Anchor institutions may be called on to do more

A New York Times article yesterday noted that financially-challenged municipalities across the country are calling on land-holding non-profit/tax-exempt organizations to make larger contributions in lieu of property taxes. These organizations, usually college campuses or hospital facilities, might represent a significant portion of a municipality’s property tax base. These “eds and meds” thus represent a potential drag on city government finances by requiring considerable city services but paying no property taxes.

Viewing education and medical campuses as drains on the tax base is hard to resist during tough budget times, and Milwaukee itself budgeted an 8.4% increase in payments in lieu of taxes for 2011. Yet some are able to see these organizations as assets in economic development. From that lens, the eds and meds are “anchor institutions” serving as resources for local economic development. These institutions are neighborhood anchors due both to their size and resources. They are often among a city’s largest employers, but unlike a private business, they are unlikely to relocate.

It is obvious how these institutions can assist in economic development: by employing significant numbers of resident workers, investing in neighborhood infrastructure, and purchasing goods and services from local vendors. What is less obvious is why they may wish to do so. Lacking a mission to serve local residents, why should an institution implement preferences for local employees, goods, or services?

A report from Chapin Hall at the University of Chicago analyzes the costs versus the benefits of local investments by anchor institutions and concludes that, while it will differ by institution, in general the benefits to the institution will outweigh the costs. For example, investing in streetscaping and lighting beyond the campus may bring about a measurable decrease in crime or vandalism on campus. But more often, these benefits can be somewhat intangible, arising from the goodwill, trust, and knowledge gained by partnering with local government and/or community organizations.

Many of the anchor institutions in Milwaukee practice local investing. Marquette University, for example, has helped lead the redevelopment of the neighborhoods on the city’s near West Side. UWM and Aurora Health Care have “walk to work” programs that provide faculty and staff with home-buying assistance when purchasing homes in the neighborhood.

Never the less, while it is likely that these investments have improved property values in the neighborhood, when a local government is faced with an unsustainable structural deficit, the tax-exempt property owned by an anchor institution may feel more like an anchor around the neck.

Are the right tools in the toolbox?

As the Public Policy Forum’s 2010-2011 Norman N. Gill Civic Engagement Fellow, I am working on a year-long project examining how local governments raise revenues. An earlier blog post on the project discussed alternatives to financing local governments, including a local sales tax. Overall, 33 of the 45 states that have a sales tax also allow their local governments to levy one. In addition, 43 of the 67 largest cities in the country have a local sales tax.

Under the governor’s proposed 2011-2013 state biennial budget, the city of Milwaukee stands to lose $10.3 million of state shared revenue. Shared revenue currently is a $271.6 million line item in the city budget and represents an unusually large portion when compared to other cities.

In return, the state would give local governments “tools” to help control costs, such as greater flexibility to impose higher health care and pension contributions on public sector employees. Yet, one tool that has been left out of the tool box is the ability for local governments to establish new revenue streams.

Milwaukee has no city sales tax and, by law, it is prohibited from implementing one. If the city could respond to state budget pressures by levying a sales tax, however, what might it look like? Assuming that the city’s tax would bring in revenue proportional to Milwaukee County’s sales tax, a 0.5% tax would generate estimated revenue of $40.3 million. This figure is consistent with economic studies about the city that show a 0.5% sales tax in Milwaukee would raise about $45 million. Therefore, a 0.5% sales tax would more than offset the cut in state shared revenue. In fact, a 0.1% sales tax would almost be enough.

There are several issues, however, that may limit the effectiveness of a local sales tax in Milwaukee. First, it makes sense that cities levying a sales tax should have a large tax base of retail sales. Oklahoma City, which has a 3.875% city sales tax, has more than $6.25 billion of retail sales per year. When measured on the basis of its population of 537,734, Oklahoma City’s retail sales per capita equals $12,057. On the other hand, Milwaukee, with a similar population, has far fewer retail sales. In 2002, Milwaukee saw $3.5 billion of goods sold, which is about $6,094 in retail sales per capita. Moreover, as the chart below indicates, Milwaukee’s retail tax base compares very poorly to similar cities with a city sales tax.


Another big hurdle is that unless a sales tax also is adopted by neighboring cities and towns, a sales tax in the city might put local retailers at a competitive disadvantage by providing even less of an incentive to shop in Milwaukee. For example, if Milwaukee were to impose a 0.5% sales tax to offset a cut in state shared revenue and meet other needs, then goods sold in Milwaukee would be subjected to an overall 6.1% sales tax rate, compared to a 5.6% rate elsewhere in the county. Furthermore, the difference would be even greater when compared to Waukesha County, which has a 5.1% rate. Lastly, the sales tax could disproportionately harm those Milwaukee residents without the means to shop elsewhere.

In return for less state shared revenue, municipal leaders might logically argue that Madison should equip cities with as many tools as possible to fix their budget woes. Were that to occur, however, Milwaukee policymakers would need to carefully consider the tools they use; what’s appropriate for Oklahoma City is not necessarily appropriate for Milwaukee.

The Forum is now accepting applications for the 2011-2012 fellowship year. For more information, go to the Norman N. Gill Civic Engagement Fellowship website. Applications are due April 30, 2011.

The cruel world of local government finance

In the weeks since release of the governor's proposed 2011-13 state budget, much has been spoken and written about the potential impacts of cuts in state aids on local government budgets and services. Yet, while much of the discussion has focused on high-profile cuts to shared revenues, municipal recycling grants and general transportation aids, buried within the budget are dozens of less-publicized, complicated provisions that also may have far-reaching impacts.

One of those relatively obscure provisions is related to the new property tax levy limit on municipal and county governments. The limit itself has received considerable attention, as instead of having their annual allowable property tax growth capped at no lower than 3%, counties and municipalities would be capped at the greater of 0% or the percentage growth in equalized value resulting from new construction. Because the change in new construction is projected to be less than 1% in many counties and municipalities, that's a significant reduction.

But perhaps equally noteworthy is a provision that would require counties and municipalities to decrease their allowable levy in any year in which they experience a decrease in debt service on debt issued before July 1, 2005, by an amount equal to the decrease. In other words, if a local government is fortunate enough to experience a lower overall debt service payment from one year to the next, then instead of having the discretion to do as it pleases with those savings, it may be required to pass the savings back to its property taxpayers.

Without taking up the issue of whether the new provision is good or bad for those taxpayers, it does throw a curveball at those local governments that have consciously tried to keep a lid on their debt issuances as a strategy for obtaining long-term operating budget relief.

One such government is Milwaukee County. Despite the county's overall budget woes (as documented in several reports by the Public Policy Forum and others), one of its true fiscal success stories has been in the area of debt management. Just last month, for example, the Standard & Poor's ratings agency praised the county for its "moderate debt burden with rapid debt amortization."

As we explained in our recent Milwaukee County Executive Election Brief, after it decided to refinance a major portion of its debt in 2003, the county made a concerted and deliberate effort to keep a lid on annual borrowing. In fact, its discipline in adhering to self-imposed caps on general obligation bonding, while arguably contributing to its vast backlog of infrastructure needs, has positioned the county to benefit from a significant decrease in annual debt service payments by 2015. In that year, according to the county's 2011 budget, the annual debt service payment could drop from $63 million to $47 million.

Until recently, county fiscal officials viewed the funds freed up from potential reduced debt payments as a critical piece of a long-term approach to dissolving the county's structural deficit. In fact, given the painful nature of all other potential strategies, this was one of the few bright spots in the county's long-term fiscal picture.

If the new requirement that local governments reduce their levies commensurate with reductions in annual debt service payments is adopted, however, then one of the only promising tools in Milwaukee County's limited deficit-reduction toolbox will be eliminated. Such is the world of local government finance, where even the best laid plans can be wiped out by higher levels of government at a moment's notice.

Diminishing returns to public sector employment

Most local governments in Wisconsin have certainly given their employee compensation packages a closer look over the last few weeks as the budget repair bill receives judicial consideration in Madison. The eventual implementation of what now has passed as Wisconsin Act 10 may soon be approaching, and elements within it are certain to help governments in some respects, but may tie their hands in others.

One knot that has yet to be fully assessed is the effective decline in salary growth for public sector employees resulting from new compensation guidelines. Limited salary growth paired with elevating fringe benefit costs will eat into take home pay. Though this diminished growth may be a fiscal necessity, locking it into perpetuity raises some difficult questions.

Under the budget repair bill, total base wages for all public employees would be prohibited from growing annually beyond the increase of inflation (measured by the national average CPI-U), unless approved by referendum. This measure of inflation has averaged a rate of 2.5% over the last 10 years.

While an annual salary increase of 2.5% does not appear unreasonable, it is important to recognize that most public sector workers also will be asked to pay more for their pension and health care costs year after year. Those costs, incidentally, have grown far faster than the CPI-U. The inability of salary growth to keep pace with the rise of fringe benefit costs may cause public employees to experience successive years of increasingly stagnant compensation.

A quick look at fringe benefit growth historically reveals the potential for diminishing growth in public sector pay. The table below shows five years of pension contributions and health care premiums for general employees working for the State of Wisconsin.

This information shows that the growth in annual pension contributions has been relatively flat, as the contribution to the Wisconsin Retirement System (WRS) has averaged a 1.9% increase annually from 2007 to 2011. This would signify that annual salary increases allowed under the new law could be sufficient to offset the growth in the employee share of pension costs. However, it has been suggested that pension contributions to WRS may need to increase significantly in the future to reflect more realistic interest rate assumptions and other factors. If that development does occur, employees could see pension costs grow more rapidly than inflation, resulting in take-home salary growth that does not keep pace with inflation.

Health care costs pose an even bigger problem for public sector employees, as premiums have steadily climbed far faster than inflation. Premiums for the state’s Tier I family plans, for example, have grown at an average of 8.3% from 2007 to 2011. Because it appears unlikely that health care inflation will be reduced to a level equivalent to general inflation, public employee salary increases are unlikely to keep pace with growing health care contributions.

While a compelling case can be made for the need to require public sector employees to contribute significantly more to their health care and pensions costs, and while many private sector workers face similar salary and benefit pressures, public sector administrators face several important long-term questions.

For example, what tools will administrators have at their disposal to attract and retain valued employees if pension and health care cost increases negatively impact earnings potential? Will the repeal of most collective bargaining rights allow administrators new liberties in shifting salary dollars to ensure they can recruit for priority positions, whether it be through altering salary schedules, adjusting position classifications, or offering bonuses? And if so, what would such a shift mean for the rest of the employees, given that total salary expenditure increases are restricted? In light of the many retirements projected in response to Wisconsin Act 10, state and local government administrators may be seeking answers in the very near future.

UPDATE: It has been correctly pointed out that the inflationary limit on public sector pay increases applies to public sector workers who are subject to collective bargaining agreements only. However, the compensation changes of non-represented employees often mirror those granted to represented employees.

Mixing it up: Exploring hybrid pension systems

The economic downturn has thrown even the most fiscally prudent governments for a loop. Dollars are stretching thin and new approaches to employee compensation are spreading across the nation. In light of the effects of the economic downturn, and as a measure to prevent similar fiscal vulnerability in the future, governments are particularly honing in on the manner in which they provide pension benefits. Everything from employee contributions, to retirement ages, to benefit levels are being reconsidered.

One concept receiving new attention is the use of hybrid pension systems. Hybrid pension systems are not new, but a lack of regulatory guidelines and several legal ambiguities suspended interest. In the last few months, greater clarification of federal guidelines for establishing hybrid plans has taken place. This may be what is needed to reinvigorate the hybrid conversation. Just this week, California’s Little Hoover Commission has suggested such a shift for California’s pension system.

Unlike private sector employers, most governments have stayed loyal to "defined benefit" pension systems. In such a system, regardless of the pension fund’s investment earnings, an employee can have confidence in receiving a certain pension payment upon retirement. This approach shelters government employees from unfavorable economic realities and requires the government to shoulder all the risk. When exposed to the downside of the risk, governments typically reallocate money away from other public service areas to appropriately fund their pension systems.

Most employers in the private sector have responded to market declines by switching to "defined contribution" (usually 401(k)) plans, which put the risk on the employee with benefit levels dependent on investment results. Many governments have contemplated similar moves, yet wrestle with whether or not switching to defined contribution plans will eliminate one of the key attractions to government employment and whether those plans provide for appropriate retirement security for their employees.

With federal regulations now better established for hybrid systems, pension options could be less polarized, a sentiment echoed in this Wall Street Journal article. Hybrid pension systems have gained traction because they remove some of the risk from governments, providing them with more shelter from poor stock market returns. However, unlike 401(k)-style systems, hybrid systems do not transfer the entire burden to employees. The risk is spread, instead, between both the government and its employees. This compromise could serve as a tool to both lessen the impact of market decline and protect an attractive benefit of public sector jobs.

There are various forms, but hybrid systems have the same basic composition – part defined benefit (usually a lower fixed benefit than the prior defined benefit plan) and part defined contribution. Benefits are viewed as hypothetical account balances and the accrued balance is portable, meaning it can be moved when an employee leaves government service to 401(k)s of his/her subsequent employers.

Hybrid plans often differ in the defined benefit formula, employer and employee contributions, and participation (voluntary or mandatory). The degree of shared burden, savings, and appeal depends on plan characteristics in addition to how those components differ from the current or proposed alternative and the subset of employees to which the change will apply. The Little Hoover Commission provided several examples of hybrid plans currently in place at the federal, state and local government levels, including Washington, Utah, and Orange County, California, shown in the table below:

Given that market uncertainty has caused defined benefit pension systems to significantly strain public services, as well as fierce public pressure to put public sector compensation in line with that of the private sector, hybrid plans are likely to continue to attract the attention of policy makers across the country. That attention has not taken shape in Wisconsin, however, with hybrid plans having yet to be picked up in the swirl of discussion surrounding local pension reform.

Wither Madison, wither Milwaukee?

As the Public Policy Forum’s 2010-2011 Norman N. Gill Civic Engagement Fellow, I am honored to be working on a year-long project that will examine how municipal governments in Wisconsin raise and spend their tax dollars. Over the next five months, I will be sharing some of my research with the blog. Ultimately, my research will lead to a paper that will discuss alternatives to financing municipal governments.

The Forum previously documented the fiscal problems that arise from the City of Milwaukee’s reliance on shared revenue from the state to fund its general purpose budget. Indeed, intergovernmental revenue represents about 45% of Milwaukee’s general purpose budget, which makes it the largest source of revenue.

The early stages of my research indicate that it is rare for a city to depend so much on intergovernmental revenue. Columbus, Oklahoma City, and Boston, for example, all offer different models that cities use to fund their general budgets without as much dependence on external revenue sources.

Columbus funds its general budget primarily through a city income tax. In Ohio, state law requires all municipalities to impose a flat individual income tax, and the maximum rate that a municipality can impose without voter approval is 1%. Columbus, through voter approval, imposes a 2.5% tax on earned income such as wages, salaries, and net business proceeds generated in the city. As a result, more than 70% of the general budget’s funding comes from the municipal income tax. Milwaukee, of course, has no city income tax.

Oklahoma City, meanwhile, funds its general budget mostly with a sales tax. It levies a tax of 3.87% on sales in the city, and about half of that revenue goes directly into the general budget. In fact, Oklahoma City uses property tax revenue only for capital projects (such as roads) and not for operating expenses. Milwaukee has no city sales tax.

Boston, meanwhile, funds more than 60% of its general budget through the property tax. The property tax rate in Boston is $11.48 per $1,000 of housing value, which is considerably less than Milwaukee’s $27.70. Boston benefits from having more expensive property; in 2010, the total assessed value of Boston’s property was $87.3 billion, compared to $28.9 billion in Milwaukee. This enables Boston to raise more money at a lower rate. Regardless, Boston has at least identified a main, locally-controlled tax base (property) to fund its operating expenses. Milwaukee, where property tax revenue is about 21% of the general budget, has not.

To be sure, these three distinct models to fund municipal budgets each have their own costs and benefits, which will be analyzed and discussed in my report. Yet, it is clear that Columbus, Oklahoma City, and Boston are relatively self-sustaining, while Milwaukee is enormously dependent on Madison for its survival.

The Forum is now accepting applications for the 2011-2012 fellowship year. For more information, go to the Norman N. Gill Civic Engagement Fellowship website. Applications are due April 30, 2011.

Is bankruptcy really an option?

The politicization of a recent disclosure that a leading civic organization has discussed potential bankruptcy for Milwaukee County is not surprising. But putting aside the politics, shouldn't we be asking whether, from a government finance perspective, bankruptcy is a realistic or viable option for the county?

A recent article on the Governing website examined the question of whether we're likely to see a surge in government bankruptcies nationally. It found the answer, generally speaking, to be "no." The article features excerpts from an interview with Robert A. Kurtter, a senior public finance official from Moody's credit rating agency. Among the points in the article that are relevant to Milwaukee County's situation:

• Local governments across the country clearly are being squeezed and facing agonizing decisions regarding whether to cut services, raise taxes, or both. Nevertheless, the specter of bankruptcy typically is tossed around as a rhetorical tool, as opposed to a legal one. As Kurtter puts it, "There may be talk about governments being bankrupt and insolvent when what is meant is 'We don't want to raise taxes and don't want to spend so we have to cut.'"


• Municipal bankruptcies typically occur when governments no longer can afford payments on their debt. Kurtter expects defaults at a higher rate than after previous recessions, but they should continue to be "rare and idiosyncratic," and likely will be linked to huge capital projects (like incinerators or steam plants) that "went bad."


• When the city of Vallejo, California, resorted to bankruptcy three years ago to seek relief from unaffordable union contracts, many thought it would set off a wave of similar filings. That hasn't happened, according to Kurtter, because "municipal bankruptcy is expensive, it's time consuming and the outcome is not at all clear...governments understand they need to figure out how to balance budgets and deliver essential public services now."

The Public Policy Forum has not minced words in our assessment of Milwaukee County's financial situation. In a July report, we cited the county's own projection of a $100 million structural deficit by 2014 and called its long-term budget prognosis "alarming." And, in a March 2009 report, we stated that "while the county enjoys cash solvency and a reasonable debt service level, annual reductions have not achieved financial equilibrium, and the county's fiscal condition remains highly unstable."

Still, we have suggested that despite its deep structural imbalance, the county's fiscal woes stem mostly from a lack of political consensus on how to plan for and manage its financial challenges. That reality - combined with the county's continued strong capital debt management, its huge inventory of physical assets, the fact that it is tens of millions of dollars below its state-imposed property tax levy cap, and the uncertainties regarding bankruptcy's legality and its impacts on critical county services - makes it difficult to imagine a bankruptcy declaration any time soon.

We're far from alone when it comes to fiscal chaos

Every summer, members of the Governmental Research Association (GRA) - an association comprised of organizations devoted to government research from across the United States - get together to exchange research ideas, discuss topical issues and recognize outstanding research products.

It should come as no surprise that at this year's conference, held in New York City last week, a primary topic of discussion was the fiscal difficulties facing state and local governments.

Among the many sessions that focused on those difficulties was a luncheon address by New York Lieutenant Governor Richard Ravitch that described the political dimensions of that state's budget challenges; a panel discussion on state finances with budget officials from New York, New Jersey and Connecticut, as well as an official from the Standard & Poor's bond rating agency and the vice president of the California Taxpayers Association; a panel discussion on city finances with a group of officials and experts from New York City, Philadelphia and Boston; and a session on the "roots of dysfunction" with a panel of researchers from New York, Chicago, Louisiana and New Jersey.

Those sessions and discussion with fellow GRA members revealed several common themes, which might sound familiar to those who have followed recent budget deliberations in Madison and locally:

• Stimulus dollars were enormously important in staving off deep budget cuts and/or tax hikes in 2009, but state and city governments now are alarmingly ill-equipped to deal with the loss of those dollars, especially given that the expected economic recovery has not meaningfully materialized.


• Unfunded pension and retiree health care liabilities are huge problems virtually across the board, yet very little can be done to reduce their fiscal burden in the short-term because of legal protections.


• Elected officials are maddeningly unwilling and/or incapable of responsibly dealing with their complex and difficult budget challenges. A researcher from Rutgers University, for example, lamented the unwillingness of legislators in his state to acknowledge and use fiscal data, while a New York budget official cited one anonymous legislator who publicly decried the irresponsibility of raising taxes to fill the state's huge budget hole while pushing behind the scenes for pork barrel spending in his district.


• There is a feeling among government insiders in many states (and most notably, California and New York) that the political class has given up - they know the problems they face demand difficult and unpopular solutions, so they have resorted to posturing and kicking the problems down the road for someone else.

Despite the pessimism that permeated these sessions, the "misery loves company" dynamic certainly came into play. Indeed, while we tend to think of our state and some of our local government budgets as hopelessly imbalanced, it was perversely satisfying to realize there are others in worse shape.

California and Connecticut, for example, are being dragged down by immense unfunded retirement liabilities, while Wisconsin's state retirement system is in reasonably good shape. And Philadelphia and New York City are just as dependent on state aids as Milwaukee, yet their capacity to weather continued state cuts is far inferior given the huge reductions in personnel and depletion of reserves they have already implemented.

An interesting perspective also emerged, albeit from an unlikely place. State leaders in New Jersey - widely known as a hotbed of irresponsible budgeting - instituted a strict property tax levy cap as part of an initial package of state budget cuts, which also included sharp reductions in state aids to local governments. Instead of leaving local elected officials to fend for themselves, however, state officials have engaged them to identify the reforms in state law they would need in order to live within the cap without slashing valued services. A scenario in which state and local officials here would attempt to work together in similar fashion certainly would be refreshing.

Overall, it's clear that state and city budgets across the country are in a state of disarray. At the GRA conference, the hope was that strong leadership based on solid data and sound research would emerge to address those challenges.

Never waste a good crisis

Faced with its toughest budget ever, Colorado Springs, Colorado, has made service cuts so severe they've garnered national (and international) media attention from outlets ranging from CNN to the Wall Street Journal. The stories have each been written in one of two ways:

1. If taxpayers refuse to support tax increases, government will be forced to make draconian cuts in service. Colorado Springs is a warning.
2. Quality of life does not have to be dependent on big government; certain services are best provided by the private sector. Colorado Springs is a model.

For those of us here in southeastern Wisconsin who are used to government services such as garbage pick-up, residential street snow plowing, etc., it should be pointed out that the Springs (I'm a Springs native, so I can call it that) has never provided that level of service. The cuts, therefore, are mostly in more basic city services. For instance, a third of the city's street lights have been decommissioned, there is no budget for street repaving, buses no longer run in the evenings or on weekends, firefighters and police have been laid off, city zoning ordinances are not being enforced in residential neighborhoods, and nearly all capital projects are on hold.

When the proposed FY 2010 budget was presented, residents of the Springs debated whether these service cuts were a bluff intended to get voters to pass a proposed increase in the property tax rate or whether there were other, less painful cuts that could be made. After the referendum failed (and sales tax receipts declined more than expected), the basic-service cuts were implemented and joined by additional cuts. The city no longer mows in neighborhood parks nor waters any green spaces; it has removed the parks' garbage cans; the city's museum, pools, and community centers are closed; and neighborhood services such as after-school programs, recreation programs, preschool, and senior lunches have ended as well.

When residents, businesses, churches, and philanthropists came to the rescue of some of these quality of life services (one community center is being operated by a church, grants will keep the museum open another year, volunteers are mowing parks and "adopting" garbage cans, and the U.S. Olympic Training Center is funding the recreation department), the storyline of Colorado Springs as a model of right-sized government was written. The Wall Street Journal quotes a city council member as saying: "We're a model of how cities can creatively adapt to budget adversity. You can have great quality of life without a great big government at the heart of it."

The point that's been missed in the media coverage of this budget crisis, however, is that these cuts are mostly reaping short-term savings only. The opportunity to bring attention to the city's essential role and mission hasn't been seized. Instead of debating whether or not to allow advertising on garbage cans or whether every third or fourth street light should be dark, shouldn't citizens be debating which city services are valuable and essential and which are not? Should the city operate a hospital? Should the city or the regional transportation authority be paving major roads and funding traffic improvement projects? Should the city have its own park system separate from the county's?

These big picture questions must be tackled to result in a sustainable budget over the long term, especially for jurisdictions with limited abilities to increase property taxes. The decision whether to mow, water, or clean-up the parks is not the same as deciding whether the parks are better run by another government entity with another revenue stream. If Colorado Springs is an object lesson for the rest of us, the lesson is neither "death by a thousand cuts," nor "death of big government." The real lesson is about a fundamental failure to balance resources with mission.

Doling out justice more efficiently

Amid all the concern about government budget woes both nationally and locally, good news is emerging about the ability of some governments to respond by pursuing greater efficiencies.

A recent example comes from Philadelphia, where the Inquirer reports the city expects to save $9 million this year in incarceration costs from "what appear to be groundbreaking changes in the way courts and prisons operate."

Admittedly, some of the savings will come from changes in state law that simply shift costs from the city budget to the state corrections budget. A sizable portion, however, comes from relatively simple changes in court processing procedures, as well as from data-driven strategies aimed at reducing the number of prisoners in the city jail who are awaiting hearings and pose little threat to the community.

Indeed, budget crises are forcing state and local governments across the country to take a renewed look at corrections budgets and policies. Last month, the Pew Center on the States reported that the 2010 state prison population declined for the first time in 38 years, in part because "several states have enacted reforms designed to get taxpayers a better return on their public safety dollars."

Of course, strategies to reduce corrections populations as a means of alleviating budget difficulties often are challenged on the grounds that they compromise public safety. That has been the case here in Wisconsin, where an early-release program passed by the Legislature last year continues to stir controversy.

Yet, no matter where one falls on the spectrum of law and order policy, perhaps all can agree that it makes sense to use data-driven tools and analysis to seek efficiencies in all aspects of the criminal justice system, from bail policies to diversion practices to processing procedures.

Just such a bipartisan effort has been initiated locally by the Milwaukee County Community Justice Council, which includes both the county executive and mayor, as well as other key justice officials with different political viewpoints. A new jail population analysis conducted by the Pretrial Justice Institute on the Council's behalf takes a comprehensive look at who is in the Milwaukee County jail, how long they stay there, and how they leave. It is seen by the Council as a critical first step in a larger strategic planning effort geared toward more cost-efficient and effective jail population management.

There's no doubt the economic downturn has caused real pain for government budgets and programs and the citizens who count on them. But if it also has instilled a lasting desire among government officials to work across jurisdictional and political boundaries in search of business practice improvements, then that pain will be a little easier to bear.

Are local governments preparing for their new reality?

The severity of our recent recession has forced local governments to respond in ways that they would admit are less than ideal. For example, the need for instant savings has produced furloughs, shortened work weeks, and even truncated school weeks - strategies that may stave off immediate crises but may not be sustainable in the future.

Unfortunately, while the worst of the recession may be behind us, the long-term outlook for government is far from rosey. A recent article from Governing Magazine warns that the next several years will be a “lost decade” for governments, where “revenues probably won’t recover until 2014, and will then take another two years or so to pay for deferred costs for public pensions, health benefits and the like.”

A key question, therefore, is whether the budget cuts seen across the nation are ones that can successfully endure as federal stimulus funds recede and local revenues remain stagnant. The International City/County Management Association (ICMA) cautions governments to choose proactive rather than reactive approaches. A proactive approach aims to stabilize on a long-term basis. A reactive approach, on the other hand aims to maintain the status quo and "often involves across-the-board cuts, ignoring differences in importance and priority, failure to deal with the fundamental sources of inefficiency and instability, denial of fiscal sustainability problems, and an organization-wide sense that simply weathering the storm is appropriate.”

It appears that several governments are realizing the need for large and lasting alterations. A survey conducted by ICMA in late 2009 asked 1,500 local governments whether or not any of the changes they had implemented in reaction to the economic downturn reflected a long-term, new way of doing business. Sixty-seven percent of the respondents answered in the affirmative. In fact, since the recession began, 52 percent of survey respondents have already revised their long-range strategic plans.

A possible silver lining to the recession is that governments have been forced to develop innovative ways of doing more with less. Such innovation takes many forms, including advancing intergovernmental cooperation. A recent forum held in St. Paul, Minnesota, for example, gathered roughly 40 Minneapolis metro cities to contemplate new possibilities for shared services.

Since a recession of this magnitude was thought to be extinct, grasping the severity and duration of its impact is not easy. However, governments have had to learn how to operate with significantly depleted funds and come to terms with new modes of operation. Sustainability lies in those governments that realize their new long-term reality and take the requisite strides to prepare accordingly.

The implications of redefining poverty

How to define and measure poverty in the U.S. has long been an issue of debate. This is not an esoteric argument--most federal and state entitlement and benefit programs tie eligibility to need using the official measure of poverty. Any move to change the definition will have an effect on these programs and the families participating in them.

This week the Commerce Department announced the development of a new measure of poverty designed to be more nuanced than the existing measure. By including factors such as housing, child care, and health care costs, it is argued to be more representative of the actual pressures faced by today's families. However, this new measure has been rolled out as a "supplemental" measure and will not replace the existing poverty definition, which is based solely on food costs. Thus, the new measure will not have an impact on the eligibility rules for the thousands of federal and state programs aimed at low-income families.

What it might do, though, is illuminate just how well those programs are doing at meeting the goal of eradicating poverty. While the Commerce Department does not offer an opinion on whether the new measure will result in more or fewer families being defined as impoverished, a similar supplemental measure used in New York has resulted in higher poverty estimates in that city. Therefore, the new federal measure may well show that despite the passage of nearly 50 years since an American President first declared war on poverty, our poverty-alleviation policies have a larger target than we had assumed.

Increasing the visibility of the gap between who the state and federal governments will serve and who is truly in need might affect local governments in different ways. It might increase the pressure on local governments to fill that gap with locally-funded programs and services, which few local governments are in a position to do in the current budget climate. On the other hand, it might make it easier for the private and non-profit sectors to coordinate efforts with local government. Having a uniform definition of those in need, yet ineligible for certain government benefits, could allow charities and philanthropies to be more confident about stepping in where the need is greatest, without risk of supplanting public funds. A better picture of the gap may also allow for more efficient grant-making.

The first use of the new, supplemental poverty measure will be with the 2010 Census. Wisconsin's local governments would be wise to plan now for the potential impact to their budgets.

Will 2010 bring resolution to difficult state and local budget issues?

While many state and local budget officials undoubtedly were thrilled to see 2009 come to a close, two recent national news articles indicate the outlook for 2010 and beyond isn't much rosier.

The first, from the Wall Street Journal, cites a 7% decline in local and state tax collections in the third quarter of last year and warns that despite indications of economic recovery, the worst may be yet to come for state and local government budgets.

The article notes that rebounds in state and local tax revenues tend to lag upturns in the general economy by several months because tax collections trail increases in store sales and incomes. In addition, while the economic downturn already has produced significant hits to state and local income and sales tax collections, the impact of falling property values has not been fully felt on property tax collections. The bottom line, according to an expert with the Brookings Institution, is that local governments "will be working through the catastrophic drops in revenue for the next 18 months to two years."

Meanwhile, the second article, from the Washington Post, puts a damper on the notion that federal assistance might continue to be a significant source of relief. The Post article cites increasing support from the Obama administration and members of Congress for a new commission to tackle the skyrocketing federal budget deficit. The bipartisan commission would have broad power to recommend both spending cuts and tax increases. Its recommendations would be presented to Congress as an unamendable "take it or leave it" package, thus increasing the odds of passage.

Prospects both for the formation of a new commission and for its ability to agree on a major deficit-reduction strategy are uncertain. What is more certain, however, is that the escalating federal debt no longer can be ignored by the administration and Congress, which spells bad news for state and local policymakers who have relied heavily on stimulus funds and other federal dollars to help alleviate budget pain during the past year.

So what does this mean for state, county and municipal officials in Wisconsin? It means that the fundamental problems that have created persistent and growing structural deficits at the state, Milwaukee County and City of Milwaukee will not magically disappear and must be the subject of equally persistent focus in 2010.

Simply put, the programs, services and spending commitments currently in place at those levels of government cannot be supported by their existing revenue streams. As the Pew Center on the States recently reported, efforts to paper over this reality at the state level with questionable short-term budget tactics have run their course. And, as the Forum has found, the same holds true for Milwaukee County, while the City of Milwaukee is on the verge of needing to revert to similar tactics or face major cuts in core services.

Hopefully, policymakers at all levels will resolve this year to honestly discuss what it costs to provide the government services that are desired by citizens and required by law, and whether the government structures and revenue sources currently in place are the best way to administer and pay for those services. Such a resolution also should include a pledge to provide specifics regarding which programs and services should be cut if increased revenues aren't part of the answer, and just how much new revenue is needed from taxpayers if expenditure cuts are not a big part of the equation.

Whether 2010 will be the year that elected officials openly confront their unpleasant budget realities is questionable given the November elections for governor and many legislative seats. Then again, could there ever be a better time to put these issues on the table and demand that candidates responsibly address them?