Drastic cuts to police, library closures, and filing for bankruptcy: The scenarios Milwaukee could face without lawmakers' lifeline

 

MADISON, Wis. (CBS 58) -- What if the lifeline state lawmakers are willing to give to Milwaukee and Milwaukee County to address their looming financial crisis fails?

The short answer is core services, like police and fire departments, would face drastic cuts, leading to fewer officers on the streets and longer wait times for emergency responders, according to city officials.

That's the grim picture Milwaukee leaders are painting as lawmakers continue to debate a bill that would give more state aid to local governments, known as shared revenue.

Timeline:

There's still time for lawmakers and Governor Tony Evers to reach a deal, even after a top Republican said he's done negotiating. And, if they can get there, there's still another hurdle for Milwaukee: convincing residents why raising their sales tax is worth it.

The massive bill to overhaul funding to local governments also includes a provision for Milwaukee to levy a 2% sales tax while Milwaukee County could add a 0.375% sales tax on top of its current 0.5% tax.

Republicans in the Assembly and Senate are considering two options: Whether the Milwaukee Common Council and county board can vote to raise their sales tax or if voters should have a say.

The nonpartisan Wisconsin Policy Forum has warned that without that additional revenue, a "day of reckoning" for Milwaukee finance is near as declining state aid, along with rising pension obligations, have created the perfect storm.

Could Milwaukee file for bankruptcy?

Currently, no.

Municipalities are unable to declare bankruptcy in Wisconsin because there's no state law that allows them to.

Federal law requires states to authorize municipal bankruptcies. Therefore, the GOP-controlled Legislature could act to pass legislation to allow Milwaukee to file for bankruptcy, as the Milwaukee Journal Sentinel first reported.

It's an option Wisconsin's top Republican leader is not ruling out. Assembly Speaker Robin Vos said Milwaukee "might have to go bankrupt" during an interview with the conservative website Wisconsin Right Now.

Vos added bankruptcy should be a “last resort," but he left the option out there. It comes days after Senate Majority Leader Devin LeMahieu said his members would likely remove a requirement Assembly Republicans passed to require Milwaukee voters to approve a referendum to raise local sales taxes.

Vos said that move could "kill the bill" and threatened to ignore the Senate leader's preferred option of allowing the city and county board to pass a sales tax increase.

What Caused Milwaukee's Financial Crisis?

The city is facing a $156 million budget hole in 2024.

The amount of money the city must put into its pension system each year is the main issue driving its financial challenges. The costs are rising, and it's estimated to grow from about $71 million/per year to $139 million on average over the next five years, starting this year.

That's all happening when inflation is still driving up costs, and federal pandemic aid that provided the city a funding boost is running out.

If action is not taken soon to balance the city's budget, Rob Henken, president of the Wisconsin Policy Forum, said consequences include cuts to police and fire in addition to closures of libraries and delays in road repairs.

Those are all scenarios that go beyond impacting some of the state's most vulnerable residents and communities, Henken said.

"There are things that can have impacts on visitor experience and the commuter experience, so it's not just city residents who would pay the price of having very serious cuts in services," said Henken. "It's anybody in our region and state who has come to enjoy all Milwaukee has to offer."

City officials have estimated cuts could range from 10% to 25% in the upcoming budget for libraries, police, and fire departments, which could mean laying off anywhere from 350 to 890 employees.

Senator LaTonya Johnson, a Milwaukee Democrat, said she knows her work is cut out for her in convincing her constituents raising taxes is one of the only solutions.

"We have the responsibility to educate the people in the community why the sales tax is needed, going door to door and talking to people in the streets," Johnson said. "That's something they still don't know and don't understand."