Five Take-Aways From First Budget Exploration Session

My first Budget Exploration Session was held at the Oakwood Village Auditorium last Wednesday evening, September 18. We looked closely at the interaction between the capital and operating budgets, the net impact of BRT, and whether the city has become “bloated”. I want to express my gratitude to all of the attendees. You provided truly helpful comments and questions. Here are five take-aways from the first session.

1. The real driver of Madison’s budget deficit is the Wisconsin legislature’s stinginess in sharing revenue and sales tax authority. Wisconsin municipalities are forced to rely more heavily on property taxes than other Midwest states, and the revenue sharing formula hurts Madison the most. If Madison’s shared revenue per capita matched the state average, there would be no deficit.

2. The connection between the capital budget (long-lived infrastructure) and the operating budget is not easy to grasp. The law requiring a referendum limits the portion of the tax levy that is generated by operating expenses not covered by fees and grants. The portion of the tax levy that is generated by debt service on borrowings for the capital budget is not regulated. We looked at how this works for 2024 with the following chart.

   

   Image credit: Ald John Guequierre

3. With a better understanding of the relationship of the capital and operating budgets we looked at the incremental impact of the East-West Bus Rapid Transit (BRT) project, that is, the impact on our 2025 property tax of BRT capital and operating costs over what would be spent anyway for the “A” bus route. It turns out that the net impact comes from the net increase in borrowing to build the BRT infrastructure after federal grants and TIF borrowing. There is no increase in operating costs. As shown in the following chart, the average property taxpayer will pay $9.55 for Madison’s investment in the East-West BRT.

   

   Image credit: Ald John Guequierre

4. The number of Madison employees is growing more slowly than the City’s population, a sign of increasing efficiencies generated by our investment in technology. Madison would employ an additional 217 people if their productivity was the same as in 2014.

   

   Image credit: Madison Finance Department

5. The just-released executive capital budget will probably be amended before it is finally adopted, but if the general approach survives, borrowings will decrease in coming years, lowering the average property tax bill. The focus on efficiency-generating infrastructure will help constrain operating expenses too.

   

   Image credit: Madison Finance Department

Each of our three budget exploration sessions concludes with instructions on how Madisonian’s can take a survey to show me their preferences for where we might cut services to balance the budget. Service cuts may be necessary eventually even if the referendum is successful. At the October 3 in-person session we will lake a deeper dive into the operations of the Community Development Department and its focus on affordable housing. The October 16 virtual session include Q&A with executive staff from our biggest departments and their proposals for service cuts.