Report: Madison’s proposed tax increase won’t solve budget woes

(The Center Square) – A new report says even with a $22 million tax hike, Madison’s fiscal troubles will continue.

The Wisconsin Policy Forum released the report that says referendum, which voters will decide next month, would close Madison’s budget gap for 2025. But the report says Madison will once again be looking at a deficit as early as 2026.

“At best, the November referendum represents an opportunity for taxpayers to buy the city some time to work out other solutions. The city, for example, could seek service sharing or other partnerships with neighboring communities or Dane County that could either help to control costs or bring in additional revenue. Aggressive development to help resolve the city’s housing crisis would also bring over time some additional property tax revenue under state limits, but only a very small amount,” the report states.

The Policy Forum report says one of the problems is Madison spends more than most other cities in Wisconsin, and it is struggling to keep up with those costs.

“Madison’s per capita spending is 24.7% more than the statewide average and ranks third among the 10 largest cities in the state. The capital city trails only Milwaukee and Racine – two cities with sizable law enforcement costs. Madison’s spending also ranks third among neighboring Dane County municipalities, falling behind only the wealthy villages of Maple Bluff and Shorewood Hills. Madison spends 5.3% more per capita than the city of Middleton and 12.3% more than Monona, though it is only 1.6% higher than the average of the select communities in the county,” the report explains.

The Policy Forum report also says taxes in Madison are also some of the highest in the state.

Madison’s mayor has said without the new tax money, the city will be forced to make steep cuts to police, the library and Madison’s transit agency.

The report said those cuts may be unavoidable, even if voters approve the tax hike question.

“If the city’s referendum fails, uncertainty awaits. In that case, the mayor proposes cutting spending, tapping reserves, and rolling out an untested infrastructure special charge,” the report notes. “If the referendum succeeds, the city will still have long term challenges. Though it would resolve the city’s $22 million shortfall for 2025, a referendum would still leave Madison with an ongoing mismatch between its revenues and spending that would start to gradually open new budget gaps in 2026 and beyond.”

The Policy Forum said Madison will likely have to look to the state for help either way.

“As we have noted, Madison lags other municipalities in the state in shared revenue payments, perhaps providing city officials with an opening argument to make to lawmakers at the other end of Martin Luther King Jr. Boulevard. Another possibility is to seek the authority to impose a sales tax – most Midwestern cities of Madison’s size have a second form of taxation such as a sales tax,” the report states. “Even if the state does provide additional help, it would probably not take effect until 2027 at the earliest. No one, therefore, should be under any impression that some state rescue is imminent – Madison is currently largely on its own and may remain in that position for years to come.”