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Report: Madison budget avoids harsh balancing measures, for now

Report: Madison budget avoids harsh balancing measures, for now

Monona Terrace

Due to the pandemic, the city of Madison has experienced a decline in room tax revenues. The Monona Terrace is projected to lose more than a third of its revenues in 2020. 

Though Madison’s proposed 2021 budget found stable footing amid the challenges posed by the COVID-19 pandemic, a statewide policy research group warns of the high probability of a new shortfall for 2022 given the current proposal and the city’s likely future revenues.

In the independent, nonpartisan Wisconsin Policy Forum’s second analysis of Madison’s spending plans, the group notes that the proposed 2021 budget maintains most of the city of Madison’s core services and has avoided harsher budget-balancing measures. But a longstanding gap between growth in city revenues and rising cost of maintaining services will continue to create challenges.

"For now, the city has focused rightly on making its way through a perilous time for many of its citizens,” the report said. "Going forward, Madison’s leaders will be under increasing pressure to reconcile their outlays with their means."

Madison Mayor Satya Rhodes-Conway proposed a $161.6 million capital budget and $349.1 million operating budget for next year. Both reflect constrained choices due to the coronavirus pandemic.  

Many agencies are seeing less support from the general fund, which causes service reductions in areas like the libraries. Under the budget proposal, Madison libraries would receive $18.8 million in the 2021 budget, down 1.6% from 2020. Three positions would be eliminated and hours and services at some locations would be abbreviated.

Madison relies heavily on the property tax, making up about three-fourths of revenues in the city’s main fund. But increases are limited by state law and would rise by 2.2% in the 2021 proposal, the smallest increase since 2003.

This cannot make up for other budget pressures, including declining interest and fee revenues, lagging state aid and labor contracts that provide pay increases for police and firefighters (a 3.75% pay increase is scheduled for January 2021). Because of these challenges, the city is facing a $16.5 million budget gap in the city’s general fund heading into 2021 budget deliberations.

While the pandemic caused significant revenue declines in areas like the room tax fund, Metro Transit and the Parking Utility, other challenges are structural like the rising cost of services and the state-imposed limitation on local property taxes.

“What was striking was that a lot of the challenges that the city faces were not — and this was also true in the case of Milwaukee — as much about the pandemic,” WPF Research Director Jason Stein said. “Within the general fund of the core city budget, a lot of the challenges are things that were present before the pandemic and, to some extent, would be present after.”

Budget-balancing measures for 2021 include some permanent spending cuts, one-time measures like furloughs and an $8 million draw down of the city’s reserves. The report notes that the city must slowly start to recover and rebuild via “a path that will likely require considering new approaches to its costs and revenues at both the city and state levels.”

“Elected officials and the public should realize that this proposal does not solve all of the problems,” Stein said. “There will be problems that remain, that linger into 2022, and that’s something for everyone to consider.”

[Parking Utility could see layoffs under Madison mayor’s proposed operating budget]

Spotlight on police, fire budgets

There is more pressure on the city to cut funds from the Madison Police Department’s budget following demonstrations around the country after the police killing of George Floyd in Minneapolis. This incident prompted calls locally to defund the MPD.

However, Rhodes-Conway’s proposal would increase general fund spending on police next year from $81.8 million in 2020 to $83.6 million, an increase of 2.1%. The MPD requested $84.3 million.

It also proposes a 3.3% increase in salaries and benefits over the 2020 adopted budget, which is due in large part to the previously negotiated raises in the police and fire union contracts. Rhodes-Conway is hoping to renegotiate these contracts to realize some savings.

Her proposal also includes $350,000 for the creation of a crisis response team, $250,000 for a violence prevention unit and two new positions within the Public Health department, $233,000 for youth restorative justice efforts, $142,000 for early intervention and prevention programming and $450,000 for the the independent police monitor and civilian oversight board.

The Madison Fire Department would see a general fund increase of $3.9 million, or 6.9%, with a majority of that coming from the expected increase in salaries and benefits.

“Taken together, the $5.7 million increase going towards the fire and police departments represents over two-thirds of new general fund spending in 2021,” the report said. “Yet the two agencies make up only 41.4% of the total budget – a sign of the financial pressure they are bringing to bear on the city.”

Up next in the city’s budget process, the Finance Committee will be voting on the mayor’s operating budget proposal and any changes to it at its Oct. 26 meeting.

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