Milwaukee County Executive Walker's 2007 Recommended Budget totals $1.26 billion, a 0.4% increase from 2006. Nearly 60% of that total, or $739 million, is for the state-mandated services of health and human services, the sheriff, and the courts. State-mandated services are three times greater than the property tax levy for 2007 of $232.6 million. For the fifth year in a row, County Executive Walker's proposed levy holds flat the actual levy from the previous year.

As a result of high pension and other fringe benefits, the county is facing a $300 million structural deficit between 2007 and 2011 (the difference between ongoing revenues and expenditures). The gap that needed to be filled for 2007 was $81.2 million. The largest portion of this gap was $29.1 million in post-employment benefits other than pension. Meanwhile, the increase in the pension contribution was $22.6 million. Wage and health care cost increases were also big contributors to the deficit: $13.6 million and $12.4 million respectively.

Those are some pretty dismal numbers. County Executive Walker has been very upfront about informing taxpayers, government officials and journalists about the county's fiscal stress. In fact, he has called his budget presentation his "gloom and doom tour." He has also often suggested what some consider extreme measures to solve the county's fiscal problems. These measures include: outsourcing functions such as courts and health and human services to the state; outsourcing non-state mandated functions to the private sector; and governance changes such as the creation of a separate parks district.

County Executive Walker's 2007 Recommended Budget includes some important initiatives that, if adopted, can help to increase efficiency in the county and can begin to address the unfunded pension liability. For example, initiatives to contract out housekeeping and security services to private vendors are included. Private fund-raising efforts also are utilized to help save some recreation assets. For instance, an Adopt-a Beach Program to have private corporations defray the costs of beach maintenance is proposed. The county executive's budget would also take advantage of the offers from citizen organizations to pay for repairs and upkeep at Hoyt and Grobschmidt Pools.

It is also important that County Executive Walker has pursued his proposal of two years ago to implement a new financing system for the pension. The 2007 Recommended Budget includes a plan to issue debt to fund the pension liability. If it is approved (and state statutes would have to be changed to allow 30-year debt to be issued), a combination of debt instruments would be utilized. It is anticipated that refinancing the debt would change the interest rate from 8% to about 6%, providing roughly $6.25 million in budgetary savings each year. The plan also addresses some of the concerns that were rightly brought up two years ago when the county board rejected the refinancing. For example, the plan does not front-load projected savings into the budget, and a stabilization fund is included in case the market does not perform as well as expected. The county board staff points out that taking out debt is risky, and that the budgetary savings estimates are just projections that may not materialize. Of course, this is true, but the refinancing seems worth the risk. The pension is already a liability; at least this way, it will be funded, and the county will be unable to defer payments as it has in the past.

These initiatives are positive. Unfortunately, these proposals do nothing to fix a government that is bleeding as a result of soaring pension and other fringe benefit costs. Therefore, the county needs County Executive Walker, who clearly understands and articulates the county's problems, to provide leadership in the form of measures necessary to provide fiscal solvency beyond what is contained in this "business-as-usual" budget. The proposed cuts in services, the layoffs, and some new revenue do not adequately address the fiscal imbalance that exists. As it stands, the county cannot afford all the services it provides. Although County Executive Walker has stated it consistently, the budget document does not provide a long-term financial blueprint.

In his budget address, County Executive Walker said his proposed budget "calls for us to tear down the broken pieces from the past and replace them with a new vision of hope for Milwaukee County." A new vision may be needed, but this budget does not clarify that vision; it misses an opportunity to provide a comprehensive plan for how to move forward. More drastic proposals would not have been well-received, but they may need to be proposed by the county executive.

Although County Executive Walker's budget does not adequately address the county's structural deficit, the county board appears reluctant to even acknowledge the severity of the county's financial stress. So far the Finance and Audit Committee, in its budget hearings, seems to have embraced a "business as usual" approach. For example, they have restored many of the cuts to personnel made in the recommended budget. Some of the restorations, such as in the Parks Department, were made without an indication of how they would be paid for. Amendments were also approved to restore the Department of Correction's Farm and Fish Hatchery, and to delete from the budget the privatization of housekeeping and security services in DPW-Facilities Management. The committee also restored cuts to state-mandated departments, such as the courts, the district attorney, and the sheriff. In addition, amendments were approved to bypass the Parks Department's new aquatic plan, which proposed closing multiple pools and providing splash pads instead, despite indications from the county executive and the parks director that, while the cuts were spurred on by the county's financial crisis, the change in philosophy makes sense because the interactive water recreation experience provided by splash pads is more in demand than deep well pools.

Another illustration of the "business as usual" posture of the finance committee is its reaction to amendments that would address the fiscal crisis in the budget. For example, Supervisor Paul Cesarz introduced several strategic amendments, all of which were unanimously defeated by the committee. One amendment would have developed a plan to negotiate the removal of some pension benefits. Another would have hired a contractor to design a new pension plan for new hires of the county. Such plans display an attempt to fix the pension structure. The refinancing proposal in the county executive's budget helps to keep the current pension system funded, yet requires county taxpayers to continue to pay for enhanced pension benefits. Anything that can be done in accordance with existing union contracts to mitigate this burden would help the county's financial situation. Supervisor Cesarz also attempted to address the mounting health care costs of the county with an amendment that would have increased from $500 to $1,000 the cash incentive to non-represented employees who do not enroll in the county's health plan.

Additionally, the county board's staff report on the 2007 recommended budget states that some people "contend that this year is not really that different from previous years, when county government found myriad ways to fix projected fiscal problems and continue to provide services and programs to the citizens of the county." The problem with this statement is that, in previous years, the county's projected fiscal problems were not fixed. The budget was balanced on paper only, replete with one-time revenues, artificially-inflated revenues, and deferred costs. For example…

·	One-time revenues: The sale of the county's power plant several years ago. Similarly, in this year's budget we see a significant increase (from $2.7 million to $7.6 million) in land sales revenue. The county seems to rely too much on selling off its assets as a revenue source. This is not a structural answer.
·	Unrealistic revenue estimates: Before 2007 the county had been receiving $2 million in state aid; this year and in future years, that aid will be less than $400,000. This real reduction in aid is coupled with several adjustments this year to revenue estimates. Unrealistic revenue estimates must be a thing of the past.
·	Deferred costs: The county has routinely deferred capital spending on maintenance in order to free up money for the operating budget-a practice that continues in this budget. And finally, in the past, pension payments were deferred. Balancing a budget today by deferring costs until tomorrow only contributes to the structural imbalance.

The county board should not consider these to be real fixes to the budget. These actions merely put off the problems for future years, when they will only cost more. Board members may feel that they are being good representatives to their constituents when they save their pools and they may feel like they are being good employers when they put a stop to scheduled lay-offs, but the bottom line is that restoration of cuts usually comes through deficit budgeting.

It has been five years since the high pension enhancements came to light. Why, in that time, haven't county leaders been able to put forth a comprehensive strategy that decides what functions the county can afford with its substantial liabilities, what services it can best provide for its taxpayers, and how to give constituents the best deal? County officials in both the executive and legislative branches must provide the leadership that is needed to get past the shadow of the pension deal and into whatever the future holds. In budget hearings, and in the media, the county executive and county board appear to have been talking past each other. They must work together to identify a strategy for eliminating the structural deficit.

In the absence of this cooperative spirit, outside sources are starting to feel it is necessary to step in. Governor Doyle put together a task force to look into the county's budget mess; hopefully, this will lead to the state providing some mandate relief. The Greater Milwaukee Committee issued a report detailing the problems it sees with skyrocketing benefit costs and some possible solutions. One of the key problems the GMC noted is the "mutual distrust and ... lack of civility" evident between the county executive and the board. This distrust is the main reason that so little has been achieved over the past five years. As a result of this impasse, the GMC recommended that if the county cannot solve its fiscal problems during the 2007 budget process, a move should be made to "amend state law to empower a Fiscal Control Board chosen by the Governor and approved by the legislature to take over financial management of Milwaukee County, including budget, contracting, and labor relations."

This would be a drastic move. It has become clear that in order to avoid such actions, county leaders need to cooperate.