We’ve published the 2020 budget, and it was another difficult one – and one that reflects our limited options to deal with rising costs.
Our biggest challenge this year: a hole caused by a more than $400,000 increase in our health insurance premiums due to large, catastrophic claims.
The budget balances and meets that challenge, avoiding service cuts,.
For 2020, after a tax cut in 2019, the city tax levy is proposed to be $11,490,735 for 2020, a 4.62% increase over last year. This means the city portion of most property tax bills will go up by about that amount. (Tax rates will not be set until later in November.)
Why the increase?
State law allows our “base” levy to increase by the amount of our new construction, and for a fully developed city like ours that is usually around 0. This year, that “net new construction” growth number is +0.2%; therefore the city’s base levy can grow by that amount. This is the 12th straight year where the city’s net new construction growth measured 1% or less.
However, there is an important exception to levy limits that allowed us to avoid significant pain in balancing our budget: Debt incurred after 2005 is excluded from our levy limit calculation.
Our debt grew by more than $700,000 in 2019, mostly to fund the recent water and wastewater plant and infrastructure upgrades, and costs related to our tax incremental financing districts.
We are applying some of that flexibility to fund the insurance increase and balance the budget. Without this exception, we would be facing a more than $400,000 shortfall and most certainly be talking about cutting services.
Check out the proposed 2020 budget here. Other budget highlights …
- Expenditures are expected to increase about 5.1% to just over $21 million. Removing debt service and refunded taxes, our expenditures will grow by about 1.75%, allowing us to receive an approximately $360,000 expenditure restraint payment from the state – a state aid that hasn’t increased significantly in more than a decade.
- Revenues are expected to increase 5.65% to more than $9.5 million primarily due to reimbursements from the TIDs and utilities for debt service.
- Other state aids will remain flat: Stated shared revenue is expected to come in at $2.87 million, with transportation aids at $979,008. Recycling aids will come at $82,000.
- The budget reflects the referendum passed in 2017, which has helped us keep funding for public safety stable and will for years. We have again segregated the extra revenue from the referendum to support the sustained funding of our paramedic program and the 2018 hiring of two new police officers. We feel it’s important to segregate the funds this way to ensure taxpayers can see the additional revenue is being spent in exactly the way we said it would. We will continue to deliver this transparency.
- The budget includes a 2% across-the-board salary increase plus step advancement for employees; police and fire union employees are guaranteed this per their contract.
We continue to be responsible stewards of taxpayer money, and we will continue to be. And there is strong data to prove this.
The Wisconsin Policy Forum — the gold standard, in my mind, of independent research on governments — recently released its Municipal Data Tool, and it shows we manage our finances, and live within our means, as well as anyone.
While their most recent data is from 2018, it shows us with the third-lowest property tax levy per capita among the 19 communities in the county. Similarly, we stack up well in their measures of net operating spending per capita (third lowest) and debt (also third lowest).
Check out the chart with this post, and do your own comparisons here.
While we are proud of how we compare, things must change when it comes to flexibility on how we raise revenue.
As I’ve said, we are too reliant on the property tax in Wisconsin, and South Milwaukee. We need alternative funding solutions for government, to ensure we can continue to deliver the services you have come to expect from us, enhance them where possible and maybe add new ones.
The proposed county sales tax legislation is one good option. There are others.
Let’s fix this, and not rely on one-time exceptions – and a system that almost encourages cities to borrow more to soften the impact of levy limits — to fund our budget.
Things only get harder from here. Indeed, this year’s budget – with the levy limit exception we are taking to adequately fund the rising insurance costs — sets us up for a really challenging 2021 budget. Next year, debt service will likely decrease again, putting us in an immediate hole.
As always, we’ll adapt. At the same time, we’ll work to fix our broken system of funding local government, turning to Madison for help.
We welcome your feedback on the budget at the formal public hearing at 6 p.m. on Monday, Nov. 18. The council will consider passage of the document the following night.