The City of Milwaukee is facing a substantial budget challenge for 2025, even after implementing a 2% sales tax and receiving additional state revenue. The 2024 budget, buoyed by the final year of federal pandemic aid and new revenue from the sales tax, temporarily avoided cuts to city services. However, this financial respite has proven short-lived as the city now confronts an $87.3 million budget gap for the upcoming year.

Mayor Cavalier Johnson and Budget Director Nik Kovac have cited several factors contributing to this shortfall, particularly mandates from Act 12, a state law that has significantly increased the city’s financial obligations. This includes a $50 million rise in pension costs compared to the previous year and requirements to maintain or increase staffing levels in the police and fire departments, which are the city’s largest salary expenses, according to the Milwaukee Journal Sentinel.

The city is also contending with increased salaries and wages across most other departments, driven by the need to remain competitive in the job market and address an ongoing “attrition crisis.” These rising costs come at a time when the city’s options for cutting expenses are increasingly limited.

Extraneous spending has further complicated the city’s financial situation. While the new revenue streams from the sales tax and state funds were intended to stabilize the budget, the complexity and restrictions tied to these funds have created additional challenges. The city must navigate these constraints while managing ongoing capital projects and increasing its borrowing for major infrastructure initiatives, further straining its financial resources.

To close the budget gap, the city will likely need to implement a combination of spending reductions, revenue increases, and withdrawals from reserves. However, even with a 5% reduction in expenditures across most departments, excluding police and fire due to Act 12, the gap would only be reduced by $15 million, far short of what is needed.

As Milwaukee approaches its 2025 budget deliberations, the city’s financial struggles are increasingly seen as a failure of money management by Mayor Johnson and the Democratic leadership. Despite increased taxes and revenue, their inability to effectively manage these funds has left the city on the brink of severe cuts and further financial instability.