Thanks to state law, city has window of opportunity to find efficiencies before cost pressures ramp up
Milwaukee’s 2026 budget proposal shows how far the city has come since 2022, when the Forum
warned that soaring pension costs and a daunting array of fiscal challenges threatened to force
“untenable budget cuts” unless prompt action was taken.
Four years later, an infusion of new revenue from a landmark state law has allowed Milwaukee Mayor
Cavalier Johnson to propose a budget that would increase fees and property taxes, but limit most
impacts to city services outside of the library.
Yet despite the near-term reprieve, concerns remain for the years to come, according to the Wisconsin
Policy Forum’s annual review of the city budget. Inflation has pushed wages for city employees upward,
and growth in the national economy has slowed in recent months, which could affect the city’s new
sales tax. Benefit, pension, and in particular infrastructure costs are likely to keep rising. State caps will
also limit the growth in city property tax revenues for operations to less than the rate of inflation.
“As a result, city leaders will likely have to identify efficiencies, structural changes, or partnerships with
other local governments” to reduce future spending, the report finds.
The review also notes that in the near term, the city is very unlikely to gain any new tools comparable to
those in 2023 Wisconsin Act 12, which enabled adoption of a new city sales tax and boosted the city’s
main form of state aid, shared revenue. That means city leaders may have to lean more on their own
leadership and that of other local partners. Below are five keys the budget brief offers to understand the
2026 budget proposal.
Key #1: Act 12 Revenues Remain a Ray of Light for City
The result of Act 12 has been a growing influx of funds into a city that had previously struggled to raise
revenues. Act 12 has yielded an estimated increase in sales tax and state aid revenues of more than
$240 million in 2026 compared to 2023, a lifeline that has helped preserve key city staff and services.
To be sure, the legislation also required greater city spending in areas such as its pension system. Yet
there is little doubt that without these additional funds, the city would have had to lay off hundreds of
employees, including in critical functions such as police and fire protection.
Key #2: Pension Costs Placing Increasing Load on City Finances
City pension costs are projected to continue their climb in 2026, with contributions to retirement plans
rising to an estimated $209.9 million. That’s an increase of $19.9 million, or 10.5%, over the 2025
budget, and an astonishing $131.9 million increase over 2022. These costs do not reflect enhanced
benefits going to employees but rather efforts to better fund their pensions, as directed by Act 12. In the
coming years, the city is likely to face ongoing cost pressures for these pension payments; they have already exceeded projections made in 2023. But one bright spot is that the city can draw on $92 million
in its pension reserve fund to help make future payments.
Key #3: City Leans on Its Reserves for Second Straight Year
After replenishing its reserves in 2024, the city of Milwaukee can now draw on them – including a
$66.6 million unassigned general fund balance at the end of 2024 — to help manage its budget
pressures. The 2026 proposal calls for tapping a combined $38.3 million from two reserve funds. It
does not touch a source of funds that was used frequently in recent budgets: the city’s strained
transportation fund. This proposal would also avoid tapping the city’s pension reserve fund, which may
serve as a source of stability as the city’s budget challenges grow more difficult in 2027 and beyond.
Key #4: Wheel Tax and Other Fees Would Rise
The mayor’s proposal would continue a longstanding trend by raising a variety of fees, most notably
adding $10 to the city’s vehicle registration fee, raising it from $30 to $40. This proposal has notably
drawn some initial questions from the Common Council. Milwaukee’s reliance on fees for services has
already increased over the years due in part to slow growth in revenue from property taxes and state
aid. The budget also would raise fees for solid waste collection, ice and snow removal, and street
lighting, which would drive projected fee revenue to $161.8 million in 2026. Fee revenue would make
up 20% of the city’s general purposes budget, or $17.2 million more than the city’s property tax levy.
Relying on fees for service and the wheel tax can fill gaps in the budget, but as some city council
members have noted, Milwaukee officials must also balance the need for occasional fee increases
against residents’ ability to pay them.
Key #5: City May Struggle in the Future to Upgrade Infrastructure and Pay Long Term Liabilities
While the city’s current financial position has strengthened, there are still reasons for concern on the
horizon. Chief among these are that the cost of pensions and other employee benefits will likely put
continued pressure on city finances, and the state of the city’s infrastructure is such that it will require
sizable ongoing investments to maintain. A 2024 brief by the Forum found more than one-third of
Milwaukee’s streets were rated as “poor” or “failed” – the worst rating among Wisconsin’s most
populous 25 municipalities. The proposed budget would invest substantially in upgrading streets as well
as replacing lead lateral lines – another major priority. However, the proposal calls for substantial
added borrowing to finance these improvements. This comes as the city over the last decade has had to
put a growing portion of its property tax revenues into repaying debt and funding pension obligations.
These and other ongoing pressures should add to the urgency for city leaders to find whatever
efficiencies they can to control costs without sacrificing service levels. The Forum has attempted to aid
in this work through projects such as a 2023 report on administrative service sharing opportunities for
the city and Milwaukee County and will continue to do so.
“Ultimately,” our report finds, “Milwaukee has an opportunity to use the breathing room it gained from
Act 12 to find these efficiencies and improvements in its system – its future may ultimately depend on
how well it uses this time.”
Click here to read the full budget brief.
The Wisconsin Policy Forum is the state’s leading source of nonpartisan, independent research on state
and local public policy. As a nonprofit, our research is supported by members including hundreds of
corporations, nonprofits, local governments, school districts, and individuals. Visit wispolicyforum.org to
learn more.
