Milwaukee Mayor Johnson and County Executive Crowley won big Tuesday. Challenges lie ahead

Milwaukee Mayor Cavalier Johnson and County Executive David Crowley each easily won second terms in Tuesday's election, setting the trailblazers up for four more years in which they're facing far less dire challenges than they've already overcome.

"Our journey, it's only just begun," Johnson said in his victory speech Tuesday night. "As we look on the horizon, there's still so much more to accomplish, so many more dreams to realize."

Behind them are looming fiscal crises that posed an existential threat to each of the local governments' public services, not to mention the coronavirus pandemic that upended communities and government finances just as Crowley and Johnson were ascending to the positions they hold today.

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But that doesn't mean there aren't also hard decisions to be made in this next term, particularly when it comes to the annual budgets.

"Without question, fiscal challenges will remain at the top of the list in terms of the challenges that are going to present themselves to both chief executives," said Rob Henken, president of the nonpartisan Wisconsin Policy Forum that has long analyzed the city and county finances.

He added: "I very deliberately did not use the word 'fiscal crises,' and so, in many respects, that's a positive change."

Each government's 2024 budget served as a bridge in which they found themselves with unexpected opportunities to prepare for some more difficult years to come, he said.

Whatever funding is available is a deciding factor in the kinds of services the city and county can — or cannot — provide to residents, commuters and visitors.

Particularly at City of Milwaukee, 2025 budget likely to see return to tough calls

In an ideal world, Johnson and Crowley would be able to begin their 2025 budget process thinking about where they'd like to invest, reinvest and boost services, Henken said.

The city, in particular, is instead likely to begin that process considering where cuts may be needed and efficiencies found, he said. Still, he said, those would be nothing of the magnitude of cuts contemplated before a new local government funding law known as Act 12 went into place last year.

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At Milwaukee County, things are not looking as challenging next year as at the city.

While it's likely to still be a very manageable situation, it's also unlikely the county will be able to offer a significant property tax cut, Henken said. He predicted the budget would focus more on preservation than investments.

Act 12 reshaped Milwaukee, Milwaukee County finances but challenges are not over

Milwaukee and Milwaukee County's prognoses shifted with the summer's passage of Act 12, a state law that boosted funding to local governments across the state. It also allowed the city and county to create and raise local sales taxes.

That funding helped stave off deep service cuts, particularly at the city, though it also came with fiscal and non-fiscal restrictions targeting the city.

Henken will be keeping an eye on sales tax collections for the city this year to get a sense for what 2025 may hold. If sales tax collections beat projections by many millions of dollars, that would lessen the challenges in 2025, he said. Conversely, if the collections fall well below projections, that could amplify the challenges.

For now, it's too soon to tell how profitable the sales tax collections have been since Jan. 1, when the city's 2% sales tax went into effect and the county's local sales tax rose from 0.5% to 0.9%.

In early May, the state Department of Revenue is expected to release the amount the local governments brought in from the sales taxes in the first quarter of the year, according to a department spokesperson.

The city has estimated the new tax would bring in about $184 million in 2024, though the state previously projected $193.6 million in additional revenue from the 2% sales tax.

Following the 0.4% sales tax hike at the county, the projected surplus was $31.6 million for 2024, according to the county's July five-year fiscal forecast. For 2025, the surplus would drop to $2.68 million, and then between 2026 and 2028 it would switch to a structural deficit, reaching $36.2 million in 2028.

Johnson and Crowley have each issued sobering reminders of the challenges that lie ahead.

In his March 4 State of the City address, Johnson said that Act 12 created some financial stability for Milwaukee's government but that the city still faced difficult future budgets.

Crowley, too, has emphasized that Milwaukee County is not out of the woods.

"I am not na?ve. We must remain committed to the work that is ahead of us," said at his annual State of the County address last month. "While our outlook has dramatically improved, Act 12 and the sales tax have not resolved all of our fiscal challenges, and we are mindful that there will be budget deficits again in future years."

County must still face continuing challenges of transit, capital backlog

The county is faring better than the city in some ways.

"They have such a healthy debt service reserve, which can be a bridge for them, and if they can get to 2030 in reasonably good shape, the pension obligation bond debt will start to fall off their books," Henken said.

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However, the county continues to face old challenges in the form of transit's lagging ridership and its ongoing capital backlog.

The Milwaukee County Transit System has struggled to rebound to pre-pandemic ridership levels, despite the introduction of the Bus Rapid Transit East-West corridor and recently announced north-south route.

The county’s dilapidated Safety Building, which requires a pricey makeover, is also one of the major issues Crowley’s administration faces. The building is a part of a long list of backlogged capital improvements that officials have delayed tackling over the years.

"They are running out of time in terms of figuring out what to do about the Safety Building, which has been delayed for years, because the county just has not had the resources," Henken said. "They're reaching the point where something has to give there ... and even though they're in better shape, it's hard to see how they're going to be able to afford all of this without really having to have an explosion of debt, which could have some real serious impacts on property taxpayers."

Alison Dirr can be reached at [email protected]. Contact Vanessa Swales at 414-308-5881 or [email protected]. Follow her on X @Vanessa_Swales.

This article originally appeared on Milwaukee Journal Sentinel: After big wins, challenges await Cavalier Johnson and David Crowley