Tommy Washbush
A graph laid over the Madison skyline.
You know that city of Madison budget crisis you’ve been hearing so much about? Yeah, well, maybe not so much. Last week we got a report that suggests things might be less dire than had been thought.
A city budget is a compilation of educated guesses. In fact, in some cities the finance committee is called the Board of Estimates, and for good reason. How much will it snow next year? How much will fuel cost? What about utility bills for street lights and city buildings? How much will we pay for employee health insurance? How many better paid veteran city employees will retire or quit and be replaced by lower paid rookies? How well will the city do on its investments? There are dozens of questions like that.
Usually those estimates turn out to be pretty close to what actually happens as the year plays out. But not last year in Madison. When the city’s books were closed out for 2023 it turned out we were about $31 million in the black. You can thank inflation. That’s because the Fed is fighting inflation with high interest rates, so the bond market, where the city parks its cash reserves, did extraordinarily well. The city had estimated it would earn $4 million in 2023, but it turned out to be $24 million instead.
On the other side of the ledger, expenses came in $15 million under budget, mostly due to positions being held open after an employee left or retired. Some other expenses came in a little higher and some other revenues, like fees and tickets, came in lower, so when you true it all up the city was a net $31 million better off than it had projected in the bundle of estimates that was the 2023 budget.
The Wisconsin State Journal’s veteran city hall reporter Dean Mosiman quoted city Finance Director Dave Schmiedicke in the accountant’s version of “Yahoo!” “The magnitude of the variances in 2023 is not typical,” Schmiedicke said. Ya think?
So, the $27 million question is what does this mean for the projected city deficit in that amount for 2025? Schmiedicke’s team is working on that and they promise an answer next month.
That answer has to come in June because the mayor and city council have to decide by then if they want to put a binding referendum question on the November ballot, allowing them to exceed state property tax limits. That would be an unprecedented move. The school board goes to referendum with some frequency and will almost certainly again this November, but the city has never done it before.
The fundamental educated guess that the Finance Department has to make is how much of that $31 million and the performance of the 2024 budget, which of course is still in play, can be counted on to continue into next year. The Fed is suggesting that it will delay lowering interest rates in response to stubborn inflation and that would be good news for the city’s investments. The city workforce expanded rapidly in the 1970s. Are most of those employees now retired or are there more relatively well-compensated veterans still to leave? And what about all of those other dozens of estimates that need to be made?
My own guess is that this makes the referendum only a 50% possibility whereas a few weeks ago I would have said (and did say) that it was all but a sure thing. Yes, of course, if you could take that $31 million from 2023 and project all it onto 2025 it would wipe out that $27 million deficit and then some. But you can’t do that because there’s just too much uncertainty.
What we probably can do is nudge up the estimates for investment income and salary savings while taking a little more out of the rainy day fund, which is now projected to be 23% of the city budget, well above the city’s target of 15%.
Will that be enough to stave off the need for a referendum? Maybe. Maybe not. We’ll know next month.
Dave Cieslewicz is a Madison- and Upper Peninsula-based writer who served as mayor of Madison from 2003 to 2011. You can read more of his work at Yellow Stripes & Dead Armadillos.
