Tommy Washbush / Freepik Assets
It could be worse. We could be the town of Merton.
According to a Wisconsin Policy Forum report, only that Waukesha County community does worse than Madison when it comes to the state’s shared revenue formula. Madison gets $29 per person in shared revenues while the statewide average is $195. Milwaukee gets $407 per person. Of 1,848 municipalities, Madison ranks 1,847th. Is it just me or does it feel like the Republican Legislature hates us?
That’s as good a place as any to start a discussion of the city’s projected $27 million deficit for 2025. Because of those low state aid payments our city relies more on the property tax than most other places. In fact, property taxes make up over 70% of Madison’s budget.
In addition to shorting us on shared revenues, the Legislature adds insult to injury by limiting how much we can increase those property taxes that they force us to rely upon. We’re limited to increasing taxes by a formula that runs around 2% per year.
General inflation over the last three years has averaged over 5%. And the largest share of the city’s budget goes to wages. So, if you’re going to keep your employees whole you have to increase your budget by a lot more than the state will allow you to increase your largest revenue source.
Over the last five years we’ve been able to avoid confronting this structural deficit thanks to $47 million from the feds in COVID relief money. About half of that was used to fill the hole created by losses in revenue from room taxes, bus fares, building permits and more caused by the pandemic. Now that money’s going away, but revenues haven’t fully recovered yet. They’re still running about 9% below pre-COVID levels.
So, those who argue that the city shouldn’t have used one-time money to pay for ongoing expenses are off base. That money was always intended to simply make up for lost revenues until the economy recovered. And, in fact, the city was responsible in that it held wage increases below those granted by the school district and the county. It did spend money on a few things I wouldn’t have, but it didn’t go on a spending spree and eliminating these things wouldn’t go very far in filling a $27 million gap.
So, what do we do now?
For starters, we’re likely to discover that the projected $27 million deficit isn’t quite that bad. That number is based on estimates of expenditures and revenues from the city’s budget department and their job is to be conservative. As estimates firm up between now and November, when a budget must be adopted, the numbers are likely to improve a little.
Second, there will be tweaks to revenues and expenditures that won’t be too noticeable. Vacant positions can be held open longer, fees like the wheel tax can be nudged up, and new fees can be created for things like parks.
Those are the kinds of strategies all mayors have used to get their budgets in balance. What’s different this year is that those things can’t possibly be enough. The city will very likely have to do something it has never done before: ask voters in a referendum to go beyond state limits on property tax growth.
If you were to put the whole $27 million gap on the property tax it would mean an increase of $284 on the average house or a 3.7% hike, a little above the current rate of inflation. But let’s say you want to get that under $200. A $195 average increase would yield about $18.5 million, meaning you’d have to rely on more optimistic budget estimates, cuts and some increases in fees to come up with $9.5 million. Solve two-thirds of the problem through a property tax increase and one-third through cuts and fee increases.
But three problems would remain. The first is that the city won’t be alone on the referendum ballot this fall. The Madison school district is likely to advance two referendums, one for operating costs and another for capital improvements to elementary and middle schools.
The second problem is that state law requires the referendum to be for a specific dollar amount, which means it won’t grow over time while the deficit will.
And the third issue is that we’ve already got a problem with affordable housing, and higher property taxes aren’t going to make that any better.
We can’t go on relying so heavily on a revenue stream — property taxes — that is so strictly limited by a Legislature dominated by Republicans who won’t lift a finger to help Madison. New district maps give Democrats a realistic shot at majorities and that gives us some hope for the future.
In the meantime, Madison isn’t the kind of community that will accept deep service cuts. It is the kind of place that will tolerate higher taxes. Just how much higher is something we’re likely to learn from the voters in November.
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.
