Operating Budget Update: What to Cut?

2027 Operating Budget Challenge

In a July 6 blog, I explored why Madison's Finance Department staff estimated that continuing all current services required a 2027 operating budget of 483.2 million, and why Wisconsin's Expenditure Restraint Incentive Plan (ERIP) requires approximately $7.2 million in reductions. Finance now estimates that exceeding the ERIP limit would result in Madison losing $7 to $9 million in shared revenue.

Recognizing the ERIP limitation, the Mayor's guidance to agencies in preparing their 2027 operating budget requests included a requirement for proposals to reduce the agency requests by at least 2%.  Agency operating budget requests and savings proposals were due July 17, and have now been published. The agency requests, including savings proposals, are available in multiple formats:

1. A downloadable .pdf (865 pages)
2. An interactive digital book
3. Data file (spreadsheet format)

Agency 2% Reduction Proposals

The 2% reduction proposals are also available as a separate data file (spreadsheet format). This file is in account detail with multiple entries for some agencies. The explanations are rigorous from an accounting perspective, but the implications for services can be difficult to see. For my own understanding, I've compiled a list of the 2% reduction proposals, summarized by agency, with my own interpretation of the impact on current services, which I'm happy to share here.

These lists require some explanation.

• The agency expenditure requests for 2027 are their total requested expenditures, not just those that need to be funded by property taxes. Many agencies have other sources of revenue such as fees and grants.
• That is the reason that many proposed agency reductions are less than 2% of the cost-to-continue estimate or requested amount. 
• Enterprise Agencies, such as the Water Utility, get all of their revenue from service fees, but were still asked to propose reductions in an effort to limit the size of any fee increases.

The Proposed Reductions Would Impact Everyone

I encourage you to take a close look at the savings proposals. Depending on what goes into the final 2027 operating budget, we will all feel some discomfort.

• Some of the proposals are actually efficiencies that preserve the related services but at less cost. They involve taking specific actions which may or may not have the desired results.
• Some proposals come with a little optimism that the services can be maintained, albeit at slower performance, despite lower spending. That might be difficult to achieve.
• The proposals from police and fire may not all be possible. If Madison cannot certify that Wisconsin's “Maintenance of Effort" standards are met, there could be unacceptable penalties in the form of reduced state shared revenue.

What Happens Next?

Between August 12 and 21 there were a series of agency briefings, interactions between agency leadership and the Mayor''s staff and budget staff.

• The Mayor will submit an Executive Operating Budget on or about October 6, which will recommend a budget that does not trigger the ERIP penalties.
• The Executive Budget may include cost and service reductions other than those proposed by the agencies, and could conceivably add new projects which were prohibited in the guidance for agency requests. For instance, the Mayor has publicly committed to funding costs for police body cameras, which are not explicitly covered in the MPD agency requests.
• The Executive Budget could conceivably include a proposal for a new type of fee that would move some costs outside the ERIP cap. The five-year operating budget plan adopted for 2025 and updated for 2026 contemplated the possibility of an infrastructure fee to be implemented at some point.
• The Finance Committee will hold briefings on the Executive Operating Budget on October 12-13.
• The Finance Committee may propose and adopt amendments to the Executive Capital Budget at its October 26 meeting.
• The Common Council will get both the amended capital and operating budgets and discuss any further proposed amendments before final adoption on November 10-12.
• The public will be able to submit comments on the budget or register to speak at the Finance Committee and Common Council budget meetings.