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Stagnant state fund sharing and constraints on revenue streams, looming financial crisis in Milwaukee

Aerial drone view of a Milwaukee neighborhood on the shoreline of Lake Michigan.
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Residential houses in Milwaukee, Wisconsin.

The City’s finances were scrutinized in a recent report by the Wisconsin Policy Forum, titled “Nearing the Brink.” For more than a decade, the Forum has been warning of the looming financial crisis brought on by steadily decreasing funds by the state and a refusal on the part of the Republican-led legislature to allow Milwaukee control over special taxes that could bring additional money from commuters and vacationers.

Rob Henken, president of the Wisconsin Policy Forum, says the state's funding structure was set up as a top-down system in which the state's legislature controls or constraints most forms of taxation. It also makes up for that lack of control with a generously shared revenue system meant to prop up local governments. But he says that the system is no longer functional.

"The state shared revenue payment is about $230 million. The problem is that that number has not changed since 1995, for all intents and purposes. City leaders like to say that if you adjust that for inflation there’s about a $150 million gap," he explains.

Although the City of Milwaukee has been able to use ARPA (American Rescue Plan Act) funds to stave off some major cuts to city services, that funding is a short-term bandaid to the larger structural problem, Milwaukee was recently criticized by Republican leaders for "defunding police" in its latest budget and despite the city giving an additional $20 million to the department, it will likely have to let go of 17 police officers. But these same leaders haven't proposed legislation to fix the issue facing the city or given it special consideration that is typical for cities of Milwaukee's size.

Henken says that if nothing changes, the City of Milwaukee will see many more painful cuts, to every public agency. "This problem is now so sizable that it can't just be a revenue fix and it can't just be an expenditure fix, there's going to have to be both," Henken explains.

The city and Milwaukee County have proposed a 1% tax, with funds split among the city, county, and property tax relief. The special tax would need to be approved by the Wisconsin Legislature and Henken says it would be just one part of the solution.

"I don't think there's any question that there's going to have to be serious consideration given to every element of city operations and how to potentially make those more efficient with fewer resources," he says.


Joy Powers is a WUWM host and producer for Lake Effect.
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