Director Hawkins, the city finance director, told the City of La Crosse Budget and Parameter Committee on June 24 that preliminary 2026 figures show roughly $3,200,000 in increased expenses and warned that keeping the city eligible for the state Expenditure Restraint Program (ERP) payment for 2027 will likely require about $1,000,000 to $1,200,000 in reductions this year. "If we are looking to keep our expenditure restraint payment in 2027, we would need to look at roughly $1,000,000 to $1,200,000 of reductions off of this this year," Hawkins said.

Why it matters: the ERP payment has been a recurring revenue source for La Crosse; losing it would add immediate pressure to the operating budget and require either deeper service or staffing cuts or identification of new revenue. Hawkins said one-time federal pandemic-era funds are gone and shared revenue increases are minimal, limiting near-term offsets.

Hawkins presented a set of preliminary estimates and asked the committee to give parameters for staff, the mayor and department heads as they prepare a proposed 2026 operating budget for later public hearings and for the Board of Estimates. He described the numbers as "educated guesses" but said the trends are clear: one-time revenues such as ARPA have ended, shared revenue growth is minimal, and the city is seeing rising costs in health insurance, retirement and debt service. He noted last year's net new construction figure was $368,000 and cautioned that such amounts do not keep pace with inflation.

Committee members pressed on possible responses. Council Member Barb Janssen said, "Well, it's pretty clear from my perspective, that it's time to start making some tough choices and making some cuts of things that are not necessities," and urged department heads to review nonessential programs. Council Member Mikayla said she also favored remaining within the ERP to avoid losing the roughly $1.1 million the program provided last year. Council Member Goggins urged outreach to taxpayers so residents can voice priorities before cuts are finalized.

Hawkins reviewed likely cost drivers: a multi-million-dollar rise in health insurance costs, potential changes to Wisconsin Retirement System (WRS) contributions (staff said current indications are the WRS rate will hold near 6.9%), and continued increases in debt-service obligations if borrowing rises. He illustrated debt-service impact with a rule-of-thumb: roughly $100,000 annually in principal and interest for each additional $1 million borrowed on a 10-year schedule. "For every million dollars extra that we're borrowing and we have to pay $100,000," he said, "that $3.68 is now $2.68," noting the effect on funds available for wages and services.

Options discussed included: across-the-board percentage reductions (Hawkins said a 3% cut is a reasonable minimum target given current estimates), targeted program reductions, hiring freezes, attrition and revisiting employee benefits contributions. Hawkins cautioned that some costs and contractual limits (union agreements, MOUs) constrain how quickly benefit changes can be implemented.

Several members emphasized equity and service impacts. Council Member Schlegels asked for a specific percent; Hawkins said, "Right now, just where the general operating is and, where we need to cut 3%, I mean, that's a minimum." Council Member O'Neil suggested examining the benefits package because changes there could affect many employees while avoiding immediate layoffs.

Hawkins said staff will return with options and scenarios and asked for directional guidance from the committee and mayor about whether to prioritize staying within ERP eligibility or present budgets that might forego that payment. There was no formal vote on any budget proposal at the meeting; the exchange was framed as a parameter-setting discussion to guide later drafts.

Ending: Hawkins and the mayor will work with department heads to prepare detailed budget options for review at future Budget and Board of Estimates meetings, including scenarios that target the approximate $1 million–$1.2 million in reductions needed to retain the ERP payment for 2027.