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Milwaukee's pension crisis could threaten city services

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The City of Milwaukee is no stranger to financial woes. For decades the city has faced budget shortfalls that forced cuts to essential services. Although federal funds gave the city a reprieve in its most recent budget, an emerging pension crisis is once again threatening its fiscal security. Pension payments are projected to have a major increase of $74 million, in just a couple years and the outcome could be devastating to city services.

"City officials haven’t said how these potential cuts in 2023 would be distributed across departments, but they’ve used words like ‘draconian’ and ‘catastrophic.’ They described it as a nightmare," says Alison Dirr, a reporter for the Milwaukee Journal Sentinel who has been covering the pension crisis.

Dirr explains the city could be forced to layoff around 24% of city employees, about 1,300 people, greatly reducing some services and most-likely ending others. The idea of laying off that many people is unpopular among city officials, and there are a variety of plans in the works to increase revenue. Among them is an old proposal that remains popular in Milwaukee: increasing revenue through a sales tax.

This plan would require help from the legislature and a change in law, which Republican legislators have rejected in the past. Dirr says that politicians are split on what the legislature will likely do to help the state's largest municipality survive.

She explains, "Some people say that they remain optimistic that the legislature will ultimately step in and allow either additional ways for the city to raise revenue or that the state would be willing to send additional shared revenue. Others are truly not optimistic about that possibility."

Milwaukee is an anomaly among major U.S. cities in that it doesn't have local control over sales tax or income tax, making it heavily reliant on state funds. According to the Wisconsin Policy Forum, money from the State of Wisconsin to the City of Milwaukee has remained relatively unchanged for decades and even if it had merely kept up with inflation, the city would be getting at least $138 million more than it is today.

Joy is a WUWM host and producer for Lake Effect.
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