Disagreements over budget numbers at City Hall

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Last week Mayor Dave discussed his budget proposal in a blog post. He explained the need for modest tax increases to make up for the decreased tax receipts this year.

My operating budget proposal came in with an increase in taxes on the average $245,000 house of 3.85%. I understand that’s a tough increase this year even though it’s well below the 15 year average of 4.3%. I’ve asked the City Council to keep the increase below 4%.

However, he emphasized optimism by highlighting some of the advantages to Madison’s fiscal governance:

I’ve asked the Council not to do what I was tempted to do but resisted: dip into our long-term cash reserve or “fund balance.” We’re unique among Wisconsin governments in that we’ve budgeted for a reserve. The City of Madison’s unrestricted cash reserve stands at about $30 million. It’s one of the key reasons that Madison retained its Aaa bond rating this year while Dane County lost its Aaa rating.

However, according to Dean Brasser, the city comptroller, Madison’s situation is not that much better than other cities. I omitted some of the details. Anybody interested in a full copy of the email can contact me.

I enjoyed reading your October 21st blog post entitled “4 & 0” and agree with virtually everything you said.  I do want to follow up, though, on your statement that, “We’re unique among Wisconsin governments in that we’ve budgeted for a reserve.”

Simply stated, Madison is not unique among Wisconsin governments when it comes to maintaining an adequate “reserve,” or fund balance.  Most other municipal governments try to do so, as well.  It’s a matter of fundamental fiscal responsibility.  Fortunately, the Wisconsin governments that do not keep a reasonable reserve are the ones that are unique.

Our auditors reported that, in their experience, it is common for Wisconsin governments to maintain fund balances from 15% to 25% or higher, depending on local factors and policies.

The City of Madison’s stated available General Fund balance goal is 15% of the subsequent year’s budgeted expenditures.  We went into 2008 with a $31,000,000 available fund balance, about 14.5% of the 2009 budget.  We ended 2008 with a $29,500,000 or 13% fund balance level.  I’m predicting that, with the tough revenue year we’ve had, we will end 2009 with an available fund balance of $26,300,000, or about 11.5% of the 2010 budget.

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