Noting the seismic impact the COVID-19 pandemic has had on the local economy, Mayor Satya Rhodes-Conway on Monday asked almost all city agencies to brace for 5% funding cuts with possible service reductions and layoffs in 2021.
Rhodes-Conway said agencies will need to help close a projected $20 million to $25 million shortfall next year. The projections anticipate a maximum property tax increase under state levy limits.
“The budget gap for 2021 is significant and probably the worst seen over the past 20 years,” city finance director David Schmiedicke said. “The mayor’s budget message is clear – barring major positive action by either the state or federal government, the city is facing service reductions and possibly layoffs.”
A 5% cut would mean reducing the Police Department budget by $4.2 million, the Fire Department by $3.1 million, the Streets Division by $1.4 million, the Parks Division by $800,000, and the Madison Public Library by $900,000, he said.
The city, which has a $340.7 million operating budget for 2020, is using a series of measures including freezing most hiring and spending on nonessential services and supplies, and redeploying workers rather than furloughing them or hiring temporary help to close a $30 million shortfall for the current year.
The city’s revenues through allowable property tax increases, state aid, hotel room taxes, charges and investment income are expected to drop 0.6%, or $2 million next year, while spending on personnel, debt and other costs will rise 6.7%, or $22.8 million, for 2021, the city’s Finance Department reports.
The falloff in revenue related to the pandemic is expected to more than offset any allowable growth in the property tax under state levy limits, Schmiedicke said. Meanwhile, costs are rising due to labor agreements, other compensation such as health care and pensions, and other items. Many options used to balance the budget under levy limits in the past decade are no longer available, feasible or practical amid the economic depression, such as hotel room tax growth, rising investment income or increasing charges for urban forestry, vehicle registration fees and ambulance fees, he said.
It means tougher measures will be needed for next year, Rhodes-Conway said.
“In areas where we expect revenue to rebound, we can deploy one-time options to help balance the budget,” she said. “But when it comes to the structural budget gap, we will need to enact permanent reductions. Times like these call us to double down on our priorities. We need to ask ourselves serious questions about whether or not we should be in the business of providing certain services.”
All general and library fund agencies, except Public Health Madison & Dane County, must present 5% reduction proposals, with the city likely to implement nearly all recommended reductions, she said. Proposed reductions must be ongoing and not one-time, but ideas for one-time savings, new ways to combine services and other innovations are strongly encouraged, she said.
All enterprise agencies such as the Golf Enterprise and Water Utility must submit budgets consistent with revenue projections for 2021. Those with revenue shortfalls must present a base budget that includes spending cuts to meet available revenue. Enterprise agencies not receiving a general fund subsidy do not need to submit a budget reduction scenario, she said.
In early May, the mayor released instructions for the 2021 capital budget, calling for austerity with a focus on recovery needs.
As the pandemic unfolds, the economic outlook is “volatile,” Schmiedicke stressed. It is unknown if and when the state may reduce local aids. The impact of the economy on health insurance costs and earnings on the Wisconsin Retirement System is uncertain. And there is, as yet, very little actual revenue collection data. Also, some of these effects, such as state aid reductions and lower net new construction values used in the levy limit calculation, may not be felt until the 2022 budget or later, he said.
Photos: Duck Pond Drive-in at Warner Park