In Milwaukee’s 2023 budget, “There will be cuts everywhere”
Budget Director Nik Kovac tells The Recombobulation Area’s Dan Shafer that budget cuts are coming for the city of Milwaukee, including to police, fire and public works.
The Recombobulation Area is a six-time Milwaukee Press Club award-winning weekly opinion column and online publication written and published by veteran Milwaukee journalist Dan Shafer. Learn more about it here.
Mayor Cavalier Johnson will soon be presenting his first budget to the Milwaukee Common Council. As many have warned, cuts are likely coming.
Nik Kovac, a longtime alderman who was appointed earlier this year to be the budget director in Johnson’s administration, said in an interview with The Recombobulation Area’s Dan Shafer on local news program “Connect MKE” that “There will be cuts everywhere” in the city’s 2023 budget.
This will include cuts to police, fire and public works, he added.
The budget is scheduled be unveiled on Tuesday, Sept. 20.
In preparing this year’s budget, said Kovac, “We've really had to look at long-term structural cuts, given the structural realities that are already facing us this year, and will become even more acute next year and the year after for a couple of big reasons.”
Kovac said there are two primary reasons that the city of Milwaukee is now facing these difficult decisions with its budget. The first is due to cuts in the amount of state shared revenue generated from sales and income tax, which has been happening since the 1990’s.
“For over two decades now, (state shared revenue) has been frozen, if not cut,” he said. “Every year, we’re $150 million short.”
State shared revenue returning from the state to Milwaukee has been slashed for decades by state government, and Republican leadership in the Wisconsin State Legislature has blocked efforts to introduce new locally-controlled revenue sources. The state legislature also controls a state budget surplus of $5 billion.
The second big reason for budget cuts, said Kovac, is because of the city’s pension problem.
As a 2021 Milwaukee Journal Sentinel report detailed, a quarter of the city’s workforce – 1,300 people – could be let go in the coming years due to an anticipated spike in the city’s pension contribution.
Last year, Mayor Tom Barrett said the 2022 budget represented “the calm before the storm.”
Now, as the preparations are being made to introduce the 2023 budget, “We’re in the storm,” said Kovac. What that means, he added, is “major service reductions.”
“We thought there was a chance the ‘calm’ might last a couple more years because of the American Rescue Plan Act money, which was a huge infusion of money, almost $400 million into the city that we got to spread out over three years,” he said. “We thought that might get us through the next two years, namely, the (2023), and the (2024) budget, and then maybe the real cliff would come in (2025). I mean, the bad news is that the real cliff is still coming in 2025. But we're already taking a pretty good step down.”
Regarding the pension problem, Kovac said they are not expecting the same level of returns they’ve seen for the last several decades on their pension fund. This was expected, but now that moment of change is arriving.
“By having to reduce our expectations on what that $6 billion is worth, we're going to owe at least $100 million, maybe more next year. And we had been paying $71 million for the last five years,” said Kovac. “So take the $150 (million) we're short from the state and add in over $100 million that we're going to owe for the pension, and you're really talking about real money. You're talking about almost half our annual operating budget.”
Kovac said the funding coming to the city through the American Rescue Plan Act (ARPA), passed by Democrats in Congress and signed by President Joe Biden in March 2021, had a major impact on the city’s ability to stave off greater cuts. The bill included significant funding for local governments, including $394.2 million for the city of Milwaukee.
Without that funding, said Kovac, “cuts would be unimaginably more steep…It would mean massive layoffs, in all departments.”
Listen to this full interview as a podcast here, or watch the interview below.
Dan Shafer is a journalist from Milwaukee who writes and publishes The Recombobulation Area. His work was recently featured in The New York Times. He previously worked at Seattle Magazine, Seattle Business Magazine, the Milwaukee Business Journal, Milwaukee Magazine, and BizTimes Milwaukee. He’s also written for The Daily Beast, Heartland Signal, Belt Magazine, WisPolitics, and Milwaukee Record. He’s won 13 Milwaukee Press Club Excellence in Journalism Awards. He’s on Twitter at @DanRShafer.
Follow Dan Shafer on Twitter at @DanRShafer.