Liam Beran
Madison's Fire Department requested $8.1 million in additional funding in 2026 to rebuild Station Six, which closed on Jan. 9.
As the city starts work on its 2026 budget, Madison officials are preparing for federal funding cuts to potentially hamper infrastructure projects and increase demand for local services.
“A lot of this would be what we might call woodwork effects — where it comes out in more interest in city-based programs or county-funded programs at the local level,” City Finance Director David Schmiedicke told the city’s finance committee Tuesday.
The U.S. House of Representatives on May 22 passed President Donald Trump’s 1,100 page budget package, which will add an estimated $3.8 trillion to the federal deficit, according to a report prepared by the nonpartisan Congressional Budget Office. The bill faces all-but-certain revisions in the Senate.
Its final form could have significant impacts on the city’s operating budget — which primarily funds salaries — and its capital budget, which covers infrastructure and long-term investments.
Around 17% of the 2025 capital budget was federal funds, Schmiedicke says in an email; 6% of the 2025 operating budget was federal funds. Approximately 175 permanent full time positions, largely in Metro Transit, the Community Development Authority, and Public Health Madison and Dane County, are federally funded, he says.
City agencies have requested an additional $62.2 million in new borrowing for capital projects over the next four years, Christine Koh, budget and program evaluation manager, told committee members. Accounting for the added borrowing, the capital budget from 2026-2030 would total $1.19 billion, a 9% increase from 2025. Agency administrators were told to budget as if federal awards would not be cut, Koh said.
“We didn't want to remove something until there's final congressional action,” Koh said.
Among the largest requests were additional funds for two projects in an upcoming redevelopment project on city-owned property at the intersection of South Park Street and West Badger Road: $8.1 million to rebuild the southside Madison Fire Department Station Six and $4.8 million for a clinic Public Health Madison and Dane County is planning to develop.
The city engineering division requested delaying the start of one big project — the reconstruction of Regent Street — and pushing $15.6 million in funding for it to 2027.
The Transportation Department also requested $3.9 million in funding for the north-south bus rapid transit (BRT) route, a project whose future is still up in the air. The requested funding would increase “project implementation flexibility” with funding sources still uncertain, according to the agency’s budget request.
Funding for the grant program supporting the route was included in the budget stopgap measure Trump signed on March 15, though it is still unclear whether the Federal Transit Administration will award $118 million in funds slated for the route. Metro Transit’s outgoing general manager earlier this month said he’s “relatively confident” the funds would be approved.
In a first-time measure, directors of agencies that receive federal funding were instructed to include a risk assessment for that funding in their capital budget request, says Schmiedicke. Former Transportation Department Director Tom Lynch wrote in the agency’s budget request that the risk of losing the north-south route’s funds is still “moderate to high,” noting that the city has yet to obtain a signed funding agreement with the Federal Transit Administration.
“It is unclear whether this funding agreement can or will be executed,” wrote Lynch.
Significant questions remain about the degree to which cuts in the federal budget would affect local governments and their finances. The Senate will soon be debating whether to preserve a crucial tool for local financing: the federal income tax exemption for municipal bonds, which local governments rely on to fund infrastructure, buildings and affordable housing.
The U.S. House kept the measure in its adopted budget, but the Senate could remove the exemption when looking for cuts or additional money to fund other projects. Some Republican senators, like U.S. Sen. Ron Johnson, are demanding steeper cuts before they’ll vote for the bill.
“The municipal bond tax exemption costs a hefty $400 billion [over 10 years],” said Emily Brock, director of federal policy for the Government Finance Officer Association, a group that is lobbying for the municipal bond exemption to stay in place. Brock addressed the committee Tuesday to provide an update on the exemption’s status. “That’s a top 10 tax expenditure.”
Were the exemption removed, the city would likely face higher rates for its borrowing. As a result, capital investments would likely have to be reduced, or residents would have to pay more for new construction. The committee approved a resolution supporting preservation of the exemption Tuesday.
Strain on city services could also increase under the eventually adopted federal budget. The bill approved by the House calls for $700 billion in cuts to Medicaid and $300 billion in cuts to the Supplemental Nutrition Assistance Program. One in five Wisconsin residents receive Medicaid benefits, according to Schmiedicke, and 147,000 could lose coverage by 2034 under the House’s proposal. Around one in eight residents receive SNAP benefits, at an average of $161 per month.
Reductions to Medicaid and SNAP would increase demand for city services, Council President Regina Vidaver told finance committee members.
“There'll be fewer people who can access services. If they're not accessing, for example, mental health services, they're going to potentially commit crimes,” said Vidaver. “Then we'll have more stress on our police department, more impact on the jail, potentially more impact on services for those experiencing homelessness.”
Numerous studies have linked disenrollment from Medicaid to significant increases in violent and non-violent crime, with particularly notable effects for those with histories of mental illness.
Agencies’ capital budget requests can be viewed here; agency requests for operating funds are due July 18. The city is hosting five engagement meetings on the budget in June.
