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Using billions of emergency pandemic bill dollars to plug gaping holes in their budgets, local governments across Wisconsin and the country are setting themselves up to ask for tax increases or slash services as basic as police and fire protection when the federal funding runs out.
Just how steep this fiscal cliff will be is only beginning to be realized. Early research indicates that at least half of the more than $350 billion in State and Local Fiscal Recovery Funds (SLFRF) allocated in the American Rescue Plan Act is eligible to be used to provide government services, award salary increases or even pay down employee pension debt.
A review of the few progress reports available through the U.S. Department of the Treasury shows that six of the seven Wisconsin cities and counties reporting, including Milwaukee, made SLFRF money available for use in propping up their budgets, more than $700 million of it.
Milwaukee expects to use $245 million of its $394 million SLFRF grant to close gaps in the 2022-24 budgets. After that, without help from the state, city Budget and Management Director Nik Kovac told the Badger Institute, the city will have little choice but to lay off perhaps hundreds of employees “across all departments.”
“This fiscal cliff, precipice, whatever you want to call it, we want to put it front and center,” Kovac said in an interview. “Using ARPA funds for this purpose is not a best practice, but the alternative is worse.”
In an issue paper released in April, Beverly Bunch, a public management and policy professor at the University of Illinois-Springfield, said poor documentation of the ground-level spending was obscuring what could be a significant problem for local governments.
“The fiscal cliff is real,” Bunch told the Badger Institute. “State officials need to be concerned about it.”
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